Fortis (FTS) is an electricity and natural gas distribution utility based in St. John's, Newfoundland and Labrador. It has total assets of about $50 billion, observes global investing expert Gordon Pape, editor of Internet Wealth Builder.
The corporation's 8,800 employees serve utility customers in five Canadian provinces, nine U.S. states, and three Caribbean countries.
Utility stocks have staged a strong comeback. These stocks are interest sensitive and the prospect of continued rate increases was dragging them down.
The company's fourth-quarter and year-end results were solid. For the fourth quarter of 2018, net earnings attributable to common shareholders were $261 million ($0.61 per share), compared to $134 million ($0.32 per share) for the same period in 2017. For the full year, net earnings were $1.1 billion ($2.59 per share) compared to $963 million ($2.32 per share) in 2017.
The increase in annual earnings was driven by growth in both the regulated and non-regulated businesses, as well as a lower income tax expense, primarily related to U.S. tax reform.
These increases were partially offset by a number of other distinct items recognized in 2017, including unrealized mark-to-market derivative gains, an acquisition break fee, an unrealized foreign exchange gain on an affiliate loan, and transmission refunds.
On an adjusted basis, net earnings for 2018 were about $1.1 billion ($2.51 per share), an increase of $0.04 per share compared to 2017.
In January, Fortis announced that it is selling its 51% interest in the Waneta Expansion Hydroelectric Project in British Columbia to Columbia Power Corporation and Columbia Basin Trust. The price is $1 billion.
The buyers are owned by the Government of British Columbia, are the corporation's partners, and together currently own 49% of the Waneta Expansion. Fortis expects the transaction to close in the second quarter following the satisfaction of customary closing conditions.
With its partners, the company constructed the 335-MW hydroelectric generating facility ahead of time and on budget and, through FortisBC Electric, has operated the facility since it went into production in 2015. FortisBC Electric will continue to operate the Waneta Expansion facility and purchase its surplus capacity.
"We have executed a significant part of our capital funding strategy by selling our interest in the Waneta Expansion," said CEO Barry Perry. "The proceeds will help finance the substantial growth occurring in our regulated utility businesses, including growth in British Columbia. The sale of Waneta completes the asset sale portion of our funding strategy."
The stock pays a quarterly dividend of $0.45 per share ($1.80 per year) to yield 3.6% at the current price. The company is targeting annual dividend growth of 6% through 2023. Fortis is an excellent choice for long-term conservative investors.
