High dividend paying stock Fortis Inc. rated ‘Best Buy’

Analysts follow as many as 20 stocks, most of which are rated “buys”. Of those buys, an analyst has one or two special favorites seen as most suitable for new buying. Elvis Picardo, portfolio manager and vice president, research, for Global Securities in Vancouver rates high dividend paying stock Fortis Inc. a ‘best buy’.

Fortis Inc. (TSX─FTS) is based in St. John’s, Nfld. But its electric power utilities stretch from Newfoundland to British Columbia and from New York State to the Cayman Islands, Belize and the Turks and Caicos.

So does the company find it hard to squeeze out good returns from such a far-flung empire? Elvis Picardo, vice president, research, as well as portfolio manager for Global Securities in Vancouver would say no.

And over the past 12 months, he notes, Fortis posted total returns of 11.9 per cent. By contrast, the S&P/TSX Composite Index limped in at negative 5.5 per cent, while the utilities sub-index on the Composite inched up just 1.4 per cent.

The company also did well over the longer term, pulling in total returns over the last five years of 80.3 per cent. By comparison, the Composite and the sub-index finished up at 56 and 64.8 per cent, respectively.

Buy this dividend paying Canadian utility stock

But Fortis’ strong showing is just one reason Mr. Picardo likes its shares. He also appreciates its commitment to stockholders, given that it’s a dividend aristocrat that has raised its annual dividend for 42 years running — likely a record, he says, for any Canadian company. Indeed over the past decade, Fortis’ dividends have increased by nine per cent a year.

Moreover, it’s a good bet those payouts will continue to grow, given that 93 per cent of its assets are regulated. So, its cash flow is both stable and predictable, Mr. Picardo says.

In the meantime, Fortis continues to expand through acquisitions, having made three big ones, all in the utilities sector, over the past 10 years alone.

And because the company will get roughly $800 million from the non-core assets it’s now selling, it will likely be able to make more acquisitions, as well as pay down its debt.

For Mr. Picardo, Fortis is a ‘best buy’ — one with a 12-month price target of $40, as well as a 2015 net income estimate of $2.25 a share.

Q1 revenue, earnings, cash flow all up

For the three months ended March 31, Fortis’ net earnings jumped to $220 million or $0.71 a share, from $159 million, or $0.66 a share, for the similar period in 2014.

Revenue, not surprisingly, was also higher, rising to $1.9 billion from $1.5 billion, while cash flow from operating activities increased to $450 million from $265 million.

 

Investor’s Digest of Canada, MPL Communications Inc.
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