FORTIS INC. $33 (Toronto symbol FTS; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 191.6 million; Market cap: $6.3 billion; Price-to-sales ratio: 1.7; Dividend yield 3.8%; TSINetwork Rating: Above Average; www.fortis.ca) is the main electricity supplier in Newfoundland and Prince Edward Island. It also operates power plants in other parts of Canada, the U.S. and the Cayman Islands. In addition, wholly owned FortisBC Energy distributes natural gas in B.C.
Fortis should complete its takeover of CH Energy Group (New York symbol CHG) in the second quarter of 2013. CH supplies gas and power to 375,000 customers in New York State’s Mid-Hudson River Valley. Fortis will pay $1.5 billion U.S. for CH Energy, including assuming $500 million U.S. of debt.
In 2012, Fortis’s earnings rose 7.5%, to $322.5 million from $300.0 million in 2011. Earnings per share rose just 3.0%, to $1.70 from $1.65, on more shares outstanding. During the year, Fortis spent $400 million to expand its power transmission operations in Alberta. That was the main reason for the higher earnings. However, revenue fell 2.2%, to $3.65 billion from $3.74 billion. That’s mainly because warmer winter weather cut natural gas demand.
Fortis trades at 18.4 times the $1.79 a share that it should earn in 2013. The $1.24 dividend yields 3.8%.
Fortis is still a hold.
