Fortis Inc. (Toronto:FTS)

Fortis Inc. is a Canadian company founded in 1987 and based in St. John's, Newfoundland and Labrador, which has been active primarily in the electricity and natural gas sector since 2003. Its operations are primarily in Canada and the Caribbean. It has 2.1 million customers and also owns hotels and commercial buildings. Fortis Inc. should not be confused with the former Belgian financial company Fortis.

Fortis offers a long-term average annual return generous, of 3.92%. The good performance of the stock since 2006 has slightly lowered the current yield, to 3.6%, which is nevertheless quite correct. The PER of 18.73 is certainly quite high, but remains within the norms of the last five years, and it is especially lower than that of the public services sector.

There annual growth of distributions was carried out at an interesting pace of 9.98%. The dividend was able to be increased for 19 consecutive years, which gives a fairly good idea of the robustness of the Fortis Inc. business model. The distribution ratio is quite high, at 66.59%, but still leaves some margin for the company in case of a difficult passage.

Perhaps the most interesting aspect of Fortis Inc. is its low sensitivity to market variations. There volatility in CHF is not only low, at 9.52%, but above all the beta is only 0.21. We can see in the graph below both the excellent performance of FTS compared to the market since 1995, but also its low correlation with the market, particularly around the year 2000.

Moreover, FTS offers a fairly modest protection against fluctuations in its currency, the Canadian dollar (CAD). This is quite normal for a public service company, especially since Fortis Inc. also has some operations in the Caribbean (the Caribbean dollar is fixed to the USD).

In summary, Fortis Inc. undoubtedly has many of the qualities we look for in a good dividend-growing payer: an attractive yield, consistent and sustained dividend growth, and very reasonable volatility. In particular, Very low beta allows for performance independent of the market. However, its fairly high distribution ratio and its average resistance to CAD/CHF fluctuations mean that for the moment we do not yet consider Fortis Inc. as a buying opportunity. On the other hand, it is a stock to follow...