If there’s one company that Canadians come back to time and again for dividends, it’s Fortis (TSX:FTS). It’s been that way for years, and especially now that it’s a Dividend King. That means the company has increased its dividend each year for the last 50 years!
But has that been enough in the last decade? If you had invested $5,000 in 2014 for about 167 shares, your portfolio would be worth about $8,833.51 today. Certainly, that’s pretty good, especially when you consider that dividends in that time totalled about $3,533.54! That’s a total portfolio worth $12,367.05!
Can Fortis stock keep it up? Let’s take a look.
Why Fortis?
Fortis is a leading North American utility established in 1987. It operates a diversified portfolio of electric and gas utility businesses in Canada, the United States, and the Caribbean. The company’s operations include power generation, transmission, and distribution, serving over three million customers across its regions. Fortis is known for its steady performance, conservative management, and a focus on regulated utility operations, which provide stable and predictable cash flows.
One of the key strengths of Fortis is its commitment to growth through strategic acquisitions and capital investments. Over the years, Fortis has expanded its footprint through significant acquisitions. Furthermore, the company continues to invest in its infrastructure, focusing on enhancing the reliability and efficiency of its services, integrating renewable energy sources, and modernizing its grid.
Recent performance
As to recent performance, Fortis stock reported strong second-quarter earnings for 2024. The company achieved a net income of $0.49 per share, surpassing analysts’ estimates of $0.47 per share. Revenue for the second quarter was reported at $2.35 billion. While this was slightly below the market expectations of $2.42 billion, the company’s overall profitability remained robust.
Furthermore, Fortis emphasized its commitment to sustainability and long-term growth. The company highlighted ongoing investments in renewable energy projects and grid modernization as part of its strategy to reduce carbon emissions and support a cleaner energy future. Fortis aims to achieve a 75% reduction in greenhouse gas emissions by 2035. While this should attract environmentally conscious investors, it’s also a future opportunity for further growth.
Is value there?
That’s the big question. And here, Fortis stock appears to hold value based on its historical performance and future potential. Historically, Fortis has shown strong stock price appreciation and consistent dividend growth. As we saw, a $5,000 investment in 2014 would be worth approximately $12,367.05 today, indicating substantial returns over the past decade.
From a valuation perspective, Fortis stock also looks appealing. The stock is trading at a trailing price-to-earnings (P/E) ratio of 18.15 and a forward P/E of 18.08, suggesting that the market has consistent expectations for its earnings. The price-to-book (P/B) ratio of 1.36 indicates that the stock is reasonably priced relative to its book value.
Furthermore, Fortis’s enterprise value/earnings before interest, taxes, depreciation, and amortization (EBITDA) ratio of 11.48 suggests a solid profitability profile. Despite a lower beta of 0.19, indicating lower volatility compared to the market, Fortis has managed a respectable 52-week change of 7.74%. However, this is below the S&P500’s 21.63% change.
Bottom line
The question comes down to whether today’s value can mean future growth. And in this case, it looks like it does. Future value prospects for Fortis stock are reinforced by its strong dividend yield of 4.13%, higher than its five-year average dividend yield of 3.74%. The company’s payout ratio of 73.80% also shows a commitment to returning earnings to shareholders while retaining enough capital for growth investments. All in all, if you’re hoping for a similar situation over the next decade, Fortis stock could be for you.
