Fortis (FTS) is an electricity and natural gas distribution utility based in St. John’s, Newfoundland and Labrador, Canada, observes Gordon Pape, Canadian stock expert and editor of Internet Wealth Builder.
The company serves utility customers in five Canadian provinces, nine U.S. states, and three Caribbean countries. It has total assets of about $57 billion and generated revenue of $8.8 billion in 2019.
Despite the pandemic, Fortis reported increases in second-quarter revenue and profits. Fortis says its utilities have regulatory mechanisms that help stabilize cash flow and earnings.
On Sept. 23, the company announced the retirement of CEO Barry Perry, who had held the post since 2015. He will be replaced on Jan. 1 by David Hutchens, currently chief operating officer.
The company recently announced a 5.8% increase in the quarterly dividend to $0.505 per share ($2.02 per year), effective with the December payment.
Fortis also extended its guidance for future annual dividend hikes in the 6% range to 2025. Fortis also said it will reinstate its dividend reinvestment plan on Dec. 1 and offer shareholders who reinvest their dividends a 2% discount on the purchase of new shares.
The company says that despite the effect of the pandemic, its long-term outlook remains unchanged. It announced a new five-year capital investment plan of $19.6 billion for the period 2021 to 2025, up $800 million from the prior year's plan.
Consolidated rate base is projected to increase from $30.2 billion in 2020 to $36.4 billion in 2023 and $40.3 billion in 2025, translating into three and five-year compound annual growth rates of 6.5% and 6%, respectively.
This will support continuing growth in earnings and dividends. In addition, Fortis has pledged to reduce its carbon emissions by 75% compared to 2019 by 2035.
Action now: Buy for income and long-term growth. The company is in good financial shape, revenue and profits are increasing despite the drag of the coronavirus, and the long-term history of annual dividend increases remains intact.
