# Fortis



## undersc0re (Oct 7, 2017)

Looking for some input on Fortis, it looks like a deal right now, is there any bad news or anything that jumps out that is bad about this, such as the debt/liabilities? Would this be a good stock to get for a 10-14 year hold....


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## newfoundlander61 (Feb 6, 2011)

I am not an expert but I purchased Fortis for the first time on 12 Feb 2019 @$47.25 per share and have collected $540.00 in dividends. My reason for buying as a steady stock to hold long term with no plans on selling for years to come. My call is that for a 10-14 year hold unless something major happens you should be good to go. A steady eddie stock for the most part. As long as interest rates stay low and do not go up which is not likely to happen any time soon the stock should just be fine. Even if interest rates ever go up it may correct a bit but nothing major and the dividends will keep flowing. My guess is most of the stock increases we have seen over the past year is slowing down a bit same with AQN.


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## jargey3000 (Jan 25, 2011)

here's the Fortis thread......FWIW... I've owned it ...forever.....
https://www.canadianmoneyforum.com/showthread.php/7611-Fortis-(FTS-TO)?highlight=Fortis


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## undersc0re (Oct 7, 2017)

Thanks for the link, this looks great....looking to throw 100 shares in my tfsa, not ideal place to put it but I hate to take a chance at a big loss in my tfsa...


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## cainvest (May 1, 2013)

They are on a pretty steep decline since Oct 7th, wonder how much lower it's going to fall.


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## james4beach (Nov 15, 2012)

cainvest said:


> They are on a pretty steep decline since Oct 7th, wonder how much lower it's going to fall.


Fortis reacts like a bond. A big reason for FTS strength up to August was that bonds were rallying hard (and interest rates were falling).

Fortis and bonds are very highly correlated, as seen in this 3 year chart: http://schrts.co/MPiTXKeS

This shows FTS in green and XBB (bonds) in black. When bonds are strong, FTS is strong. When bonds weaken, FTS weakens.


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## undersc0re (Oct 7, 2017)

Just one more thing...do you guys think the debt is way too high for this compared to others in the sector or utilities? My only hesitation is the debt it carries....seems like everyone carries debt nowadays and the bar keeps getting higher for it! Telus seems a little better....but I would imagine stability and constant growth should go to fortis...


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## cainvest (May 1, 2013)

The debt ratio is within line for their recent history, a little below their median.
You need to compare their debt ratio values against others in the same sector.


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## AltaRed (Jun 8, 2009)

As Cavest said, compare capital intensive companies with their like competitors. FTS is better than EMA on that scale. https://ycharts.com/companies/FTS.TO/debt_equity_ratio and https://ycharts.com/companies/EMA.TO/debt_equity_ratio Capital intensive stocks do get punished when they stray too far into debt.


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## doctrine (Sep 30, 2011)

FTS is an outstanding company and always a buy on a pullback. A little expensive at $56 but better value at $52. Normally trades with about a 3.5% yield; expensive at 3% and people get interested at 4%. A great hedge to interest rates as pointed out above. Investing 50-50 in something like FTS and Manulife is a great way to offset interest rate risk and just make money.

FTS owns the #1 largest independent electrical distribution utility in the United States and likely to continue expanding it and perhaps making acquisitions in the future to expand scale.


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## Rising Tide (Jun 5, 2019)

I saw in Fortis's most recent press release that they are cancelling the 2% DRIP discount! Sad to see that go... it was nice to get a few cheaper shares every quarter. It seems like a lot of companies are putting an end to the DRIP discounts.

https://www.fortisinc.com/news-and-...00-million-offering-to-institutional-investor


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## AltaRed (Jun 8, 2009)

Rising Tide said:


> I saw in Fortis's most recent press release that they are cancelling the 2% DRIP discount! Sad to see that go... it was nice to get a few cheaper shares every quarter. It seems like a lot of companies are putting an end to the DRIP discounts.
> 
> https://www.fortisinc.com/news-and-...00-million-offering-to-institutional-investor


Thank goodness those discounts are going the way of the dodo. It is counter-productive to the balance sheet and psychologically suggests the company is short of earnings to pay out cash dividends. I'd like to see the practice outlawed simply because most retail investors misunderstand them.

P.S. This principle is similar to companies who do not buy up dilution on an annual basis caused by executive compensation. It's share creep.


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## Rising Tide (Jun 5, 2019)

I do realize the dilution aspect, too much dilution is never a good thing. Wasn't another reason for the DRIP discount so that companies could use the cash that they would have had to pay as cash dividends for other (hopefully productive) uses?

I'm no accountant so I don't know a lot about it. Just curious.


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## AltaRed (Jun 8, 2009)

Rising Tide said:


> I do realize the dilution aspect, too much dilution is never a good thing. Wasn't another reason for the DRIP discount so that companies could use the cash that they would have had to pay as cash dividends for other (hopefully productive) uses?


It incentivizes shareholders to DRIP, but that is really a false pretense. Why have a 5% dividend in the first place if that isn't a prudent use of cash? It's really designed to snooker the retail investor into believing they are getting more valuation than they really are. 

It isn't much different than one of those managed payout mutual funds promising 5, 6 or 7% payouts but when the T3 tax slop comes int, it contains a bunch of ROC, i.e. giving the shareholder back some of their own capital rather than putting it back to work.

I simply dislike financial engineering in all its forms. Entities should be straight up with their shareholders.

Added: Disclosure... I am a happy owner of Fortis shares, but I am even happier now that the shenanigans on DRIP discount are gone.


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## james4beach (Nov 15, 2012)

There are actually people out there (quite a few I think) who go chasing high yields like FTS and BCE, only to DRIP it back into shares! It's funny because it accomplishes nothing.

This practice stems from the misconception that "dividends are free money". Because investors believe the cash is free/new money, they think they are compounding returns by DRIP'ing it. In fact, they are doing nothing at all. In reality, the cash leaves the company, then the cash re-enters the company. No wealth is created by this process. No compounding, no boost in returns.

The practice simply converts FTS into a non dividend paying stock. Which is fine, it makes no difference. I own FTS and am indifferent to whether or not it pays dividends. Since dividends aren't free money, it makes no difference.

But the large dividends act as a marketing tool which draws in new investors which makes me concerned that all large dividend stocks have been inflated in value due to an irrational dividend mania.


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## AltaRed (Jun 8, 2009)

Academically I agree, but in practice, it tends to keep companies more honest and careful with their re-investment opportunities. The re-invested capital portion, i.e. retained earnings, is more precious and has to be re-invested more effectively so as to continue to deliver sustained earnings to pay the dividend! IOW, more good projects get done as compared to simply more projects and/or bad acquisitions.

At the risk of over generalization, I consider dividend paying companies to be more disciplined and shareholder friendly accordingly than their growth counterparts. There are exceptions like ATD.b that keep most of their retained earnings and have been a very successful growth company (so far). Then there are miners who, when times are good, blow their retained earnings on some awful projects destroying shareholder value. IOW.....it depends.


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## james4beach (Nov 15, 2012)

I agree with you there. The requirement to pay a dividend is kind of like a cashflow stress test, and it does force some (good) things to happen, on discipline and management.

By the way, just about every company in XIU pays a dividend. I'm not opposed to dividends... but I don't need to go out of my way to find them. My core equity positions (TSX 60 and S&P 500) are virtually all dividend payers.

I do have a few low dividend stocks in my Growth strategy, and I do have to monitor these much more carefully. Next review in December. Currently outperforming TSX for the trailing 1 year and 3 years even after some hiccups like KL recently plummeting.


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## Rising Tide (Jun 5, 2019)

Good information, thanks for the perspective.


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## Eder (Feb 16, 2011)

My daughters dividend 6 pack is up 32 % in last 12 months and Fortis is a good chunk of it. Crazy year for blue chips.


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## dubmac (Jan 9, 2011)

There is good article in the G&M Pg B9 on the 32% rally in utility stocks YTD. 
It all seems to point to a move by investors to defensive pf's, and safety.
Utilities are overvalued, says the source quoted in the article.
Fortis is only up 11%, Brookfield Renewable Partners LP is up 75%!
Apparently FTS is in the midst of raising 1.1 Billion in an equity offering that impacted the share price.
I think it's best just to hold - not buy or sell.


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## agent99 (Sep 11, 2013)

I noticed that Morningstar suggested selling FTS recently. I don't hold very much,so will hold.


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## james4beach (Nov 15, 2012)

Eder said:


> My daughters dividend 6 pack is up 32 % in last 12 months and Fortis is a good chunk of it. Crazy year for blue chips.


This is partly because interest rates fell so dramatically. Look at XBB in the same time period ... bonds up a whopping 10%

I posted a chart before which shows how strongly FTS correlates with bonds. Here it is again:
http://schrts.co/MPiTXKeS

If your portfolio is heavy in fixed income and heavy in dividend stocks like FTS, watch out. You actually have a lot of interest rate sensitivity and you're taking a massive bet on the bond market.


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## like_to_retire (Oct 9, 2016)

agent99 said:


> I noticed that Morningstar suggested selling FTS recently. I don't hold very much,so will hold.


I think that sell suggestion was back in October when it had shot up to around $56.

If I look at the Morningstar Quant report today I see they figure it's trading around fair value right now. Attached a quick look image from the report.









ltr


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## agent99 (Sep 11, 2013)

like_to_retire said:


> I think that sell suggestion was back in October when it had shot up to around $56.
> 
> ltr


Just took that off BMOIL - Both have same date?? You are right - Price has not recently been that high.

In looking at BMOIL more closely, I see that it says "All prices as of September 30, 2019" I should have looked more closely, but on other hand why do they still have those dated recommendations a month later??


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## like_to_retire (Oct 9, 2016)

agent99 said:


> Just took that off BMOIL - Both have same date?? You are right - Price has not recently been that high.


Yeah, I remember back in October when FTS was above $56, Morningstar Quant reports had it as a sell. 

When I look at the chart, it did indeed peak in October as shown in the attached chart, but now it's back to it's usual trading range. 

I guess if you were a trader and you thought for some crazy reason that FTS was a 'trader stock', then it would have been a sell, but to me this is a stock I own forever and clip the coupon. 

Does anyone in their right mind actually sell this when it gets high? 









ltr


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## Eder (Feb 16, 2011)

dubmac said:


> There is good article in the G&M Pg B9 on the 32% rally in utility stocks YTD.
> It all seems to point to a move by investors to defensive pf's, and safety.
> Utilities are overvalued, says the source quoted in the article.
> Fortis is only up 11%, Brookfield Renewable Partners LP is up 75%!
> ...


I recently added more Fortis to my own portfolio...under $50 is a better buy but I hate cash in my TSFA doing nothing.

Bookfield Renewable Partners is one of her holdings and a large reason for the astonishing gain. That one is fueled by hope & prayer imo...should be about $45 but I told her to hold another 30 years if nothing changes, their managers are without peer.


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## dubmac (Jan 9, 2011)

james4beach said:


> If your portfolio is heavy in fixed income and heavy in dividend stocks like FTS, watch out. You actually have a lot of interest rate sensitivity and you're taking a massive bet on the bond market.


perhaps. But all stocks I own are dividend stocks - banks, utilities, energy co's, insurance and telcos with high caps 15B+.
It's been like that for the past 15 years - and it hasn't lead to any problems for me. Some years better than others, but steady. XIU 1 yr return is around 13.5% - similar to most of what I have. My dividend payers are about as big a bet as XIU is - and XIU is the index! I don't consider it to be a massive bet. When Interest rates go up, the XIU and most of the index goes down.


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## james4beach (Nov 15, 2012)

dubmac said:


> perhaps. But all stocks I own are dividend stocks - banks, utilities, energy co's, insurance and telcos with high caps 15B+.
> It's been like that for the past 15 years - and it hasn't lead to any problems for me. Some years better than others, but steady. XIU 1 yr return is around 13.5% - similar to most of what I have. My dividend payers are about as big a bet as XIU is - and XIU is the index! I don't consider it to be a massive bet. When Interest rates go up, the XIU and most of the index goes down.


It's true that when interest rates go up, most of XIU will go down.

Still I think one should keep in mind that banks and utilities are interest rate sensitive. They both benefit from a cheap borrowing environment and yeah, the last 15 years (and especially the last 10) have been an amazingly good environment for these. Interest rates keep heading lower.

Now if we get to zero rates and then negative, you're really be laughing. So will bond investors, especially something like ZFL (long bonds)


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## agent99 (Sep 11, 2013)

james4beach said:


> Still I think one should keep in mind that banks and utilities are interest rate sensitive.


Certainly utilities are, but banks? I recall being shot down by financial forum pundits once, because I thought banks should do well in rising interest environment. That piqued my interest and I noticed others that knew a lot more about it than those pundits did, agreed with uneducated view. For example:



> Boasting margins that actually expand as rates climb, financial entities like banks, insurance companies, brokerage firms and money managers generally benefit from higher interest rates. Rising rates tend to point to a strengthening economy. ...


https://www.fool.com/investing/2017/11/09/why-higher-interest-rates-are-good-for-bank-stocks.aspx

https://www.researchgate.net/public...lity_and_risk-taking_under_low_interest_rates


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## Ponderling (Mar 1, 2013)

well, I owned this one for a while, in a non registered account. I sold today with the aim of getting back in in the future, but to allow the capital gains that have accrued to be crystalized in 2020. Whether that will allow gains to be taxed at a 50% rate for taxation on my 2020 tax return remains to be seen. But I am pretty sure capital gains will be taxed more onerously down the path n 2021.


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## Ponderling (Mar 1, 2013)

Back in this time in wife's non reg account 47 days after I sold out of my non reg.

FTS may not shoot for the moon, but have cranked the div for a lot of years. 

I bought a bit less when I got back in since my 9%aim part of utilities in our overall portfolio had otherwise moved to 10.5%. Still own positions in cu, cap power, aco.x, ala, and the quebec gas utility whose name escapes me at the moment. So FTS is just one of our fingers in utility sub index pie.


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## Ponderling (Mar 1, 2013)

Ah, yes, EMA.


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## Retiredguy (Jul 24, 2013)

Thinking as long term hold.

Thoughts on buying FTS with the recent pull back. Now in the 49.50 range? Comments on why its pulled back in recent weeks? Interest rates?

Is EMA better or good to hold both?


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## Eder (Feb 16, 2011)

I'd find it hard to find an equity more suitable for a set it forget it strategy. Yielding over 4% is usually buy time. I think anticipation of higher rates is affecting the price, but price is what you pay, the business and it's endless string of dividend increases is what you get.


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## MrBlackhill (Jun 10, 2020)

Retiredguy said:


> Thinking as long term hold.


Other long term hold ideas :

CNR
BAM
TIH
MRU


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## londoncalling (Sep 17, 2011)

Retiredguy said:


> Thinking as long term hold.
> 
> Thoughts on buying FTS with the recent pull back. Now in the 49.50 range? Comments on why its pulled back in recent weeks? Interest rates?
> 
> Is EMA better or good to hold both?


I did a similar comparison this week on EMA and FTS to add to my utilities allocation.

Based on Reuters info I found EMA to be the better deal right now. I think either is currently good value and will result in a great long term hold.

EMA.TO - Emera Inc Key Metrics | Reuters
FTS.TO - Fortis Inc Key Metrics | Reuters


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## dubmac (Jan 9, 2011)

I checked the chart for FTS. it looks kinda gross. 
I need one more dividend stock to add some income to one account. FTS might work out - I've been watching it - but it keeps dropping! Apparently, the Motley fool wrote "Investors who buy now can pick up a 4% dividend yield. The board intends to raise the dividend by 6% per year over the next four years. Fortis increased the payout in each of the past 47 years, so the guidance should be reliable." hmmmm


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## Synergy (Mar 18, 2013)

I decided on AQN for the renewables and possibly for being a little less interest rate sensitive. I do like Fortis as well for the long haul. The Biden Trudeau love affair may bode well for green energy...


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## doctrine (Sep 30, 2011)

Retiredguy said:


> Thinking as long term hold.
> 
> Thoughts on buying FTS with the recent pull back. Now in the 49.50 range? Comments on why its pulled back in recent weeks? Interest rates?
> 
> Is EMA better or good to hold both?


FTS is a huge buy for me, especially here. It's down for interest rates exclusively in my opinion. People also forget they own ITC. FTS has a long, long future ahead of it. I sold my FTS at $54 a year ago on the pre-covid dump, but this is literally my next buy on my radar to get back in at a discount. I am also looking at EMA and may consider a half position in both.


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## newfoundlander61 (Feb 6, 2011)

FTS is a stock you can hold for years as a core holding for that sector in just about any portfolio.


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## dubmac (Jan 9, 2011)

I pulled the trigger on this one today. 1/2 position.


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## Retiredguy (Jul 24, 2013)

Bought today @ 49.40


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## undersc0re (Oct 7, 2017)

Sure has not performed well in capital gains, but still paying a decent dividend! I thought I was getting ripped off with CNR stock dividend but it’s capital gain is excellent! Hopefully we see a Fortis growth in stock price over next 10 years.


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## MrMatt (Dec 21, 2011)

undersc0re said:


> Sure has not performed well in capital gains, but still paying a decent dividend! I thought I was getting ripped off with CNR stock dividend but it’s capital gain is excellent! Hopefully we see a Fortis growth in stock price over next 10 years.


I wouldn't be betting on utilities having big growth as interest rates rise. 
I think they'll remain mostly boring, spitting out very reliable cash.


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## newfoundlander61 (Feb 6, 2011)

"I wouldn't be betting on utilities having big growth as interest rates rise.
I think they'll remain mostly boring, spitting out very reliable cash."

Yes agree and solid boring source of dividend income with some capital appreciation going forward.


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## AltaRed (Jun 8, 2009)

Morningstar says it has a 5 year CAGR of 9.96% and a 10 year CAGR of 8.42%. High single digit ROE is about all one can expect from a mature/regulated utility. I'll take it any day in a portfolio where 'go forward' equity returns on a broad market basis are more likely in a 5-8% range. More than what 4% SWR withdrawal methodology needs to keep pace.

Added: The likes of Telus, Bell, Emera, Fortis, TC Energy, Enbridge, et al should all be in the 8-12% range over 5 and 10 year rolling averages. Some of them have failed miserably on a 5 year CAGR basis but still have the 10 year CAGR numbers. Can those laggards bounce out of the doldrums soon? Time will tell but I am beginning to think they will be 'market' in the 5-8% range for some time.


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## MrMatt (Dec 21, 2011)

AltaRed said:


> Morningstar says it has a 5 year CAGR of 9.96% and a 10 year CAGR of 8.42%. High single digit ROE is about all one can expect from a mature/regulated utility. I'll take it any day in a portfolio where 'go forward' equity returns on a broad market basis are more likely in a 5-8% range. More than what 4% SWR withdrawal methodology needs to keep pace.
> 
> Added: The likes of Telus, Bell, Emera, Fortis, TC Energy, Enbridge, et al should all be in the 8-12% range over 5 and 10 year rolling averages. Some of them have failed miserably on a 5 year CAGR basis but still have the 10 year CAGR numbers. Can those laggards bounce out of the doldrums soon? Time will tell but I am beginning to think they will be 'market' in the 5-8% range for some time.


Mid/upper-mid single digit real returns going forward is VERY appealing, which is why I'm overweight in boring industries (+financials)


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## Eder (Feb 16, 2011)

These best of breed just keep cranking the dividends
For old dogs like me that’s all we need
Easy game


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## AltaRed (Jun 8, 2009)

MrMatt said:


> Mid/upper-mid single digit real returns going forward is VERY appealing, which is why I'm overweight in boring industries (+financials)


I was using "nominal" returns in my post.


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