Fortis Inc. (FTS.TO)

A great name. It has very visible growth at 8% between now and 2018. Has big US exposure. There is an LNG project which is probably going to go ahead in Squamish BC, that they are going to benefit from. Nice dividend. 56% payout ratio. Trading below its five-year average, pretty cheap relative to its peers at around 18 times. However, this is a yield proxy, and rising bond yields are going to hurt it a little. However, it is trading low enough and its growth is good enough that you could just hold onto this and look to accumulate on weakness.

If you have some patience, and are not rushing to buy this, perhaps you could wait. At $44, the stock came hard against some pretty impressive technical resistance, and backed off about 10%. He would like it to come back another 10%.

Interest sensitive names have come off here. FTS-T has made a pretty significant transformation in going from Canada to the US. It will play out in his view. It is for income generation. To get to $45 he feels there would have to be a growth driver. Patience is a virtue. Management has done a good job. He does not think there is an issue servicing the debt. If rates went up dramatically, he would look more closely at exiting it.

Fortis (FTS-T) or Algonquin Power (AQN-T)? This is a good time to invest in either. Sharp interest rate increases are a risk, but she doesn’t expect that. In a rising rate environment, you want to buy companies that have the ability to increase their dividends, and hopefully the yields will also increase over time. This is in the midst of closing on a transaction in the US, which is going to broaden their geographic scope. They have indicated that they can grow their dividend in the mid to high single digit range for the next 4 years or so. She likes the visibility. This one would be her preference of the 2, and this is an attractive entry point.

Just made an acquisition in the US. With lower US taxes, they will have more cash available to start to pay off shareholders with higher dividends. They are also benefiting from a lot of coal fired plants turning to natural gas, which is still pretty cheap. As long as they keep drilling and supplying, they should be able to do well with their US operations. In the long run, he is not a big fan of electric utilities, only from the standpoint, in that there is that destructive technology risk. If Elon Musk gets a power pack on the side of every house, then everybody comes off the grid, and suddenly there is no need for transmission lines. His latest idea is having solar powered shingles on houses.

Fortis (FTS-T) or Emera (EMA-T)? This used to be Canada’s growth utility, and is still a growing utility, but Emera seems to have taken its place. Both companies have made major acquisitions in the US. Keep in mind that there is an interest rate risk for utilities. He wouldn’t have a huge percentage of your portfolio as these companies will be hurt by rising interest rates.

$36 model price. All interest bearing securities are overpriced. He thinks the stock will go to $32 which is book value.

One of the biggest regulated utilities in Canada. It doesn’t face a lot of the impacts of worries of pipelines. Has one of the longest track records of dividend increases, and expects you will continue to see more. It just got a US listing. Made a major acquisition in the US of a publicly traded company, and there could be some volatility when the deal closes. A great hold.

Has been buying this and thinks it is a first-rate utility going forward. They’ve done some acquisitions in the US. This provides investors with a clear-cut path to higher dividends.

Now listed on the NYS Exchange, which adds more liquidity. 60% of their earnings going forward are coming from the US. This gives you amplification to the low Cdn$. The stock is trading in line with its five-year average, but is cheaper than its peers. He sees it growing at about 9% over the next couple of years, and then raising their dividend 6% each and every year to 2021.

A fantastic business. They have bought US assets. There are dividend increases. You don’t want to be in this sector right now. The business is going to trade very sensitively to a rate increase in the US.

A utility with operations across Canada and now in the US. Electrical and Nat Gas assets. They came down because there was a sector rotation. They raise their dividend every year so this is a solid company. He thinks we won’t have many rate increases across Canada so he would buy it on this weakness.

It has just under a 4% yield. They acquired a fully regulated US electric transmission company. They expect to close the deal Oct 14^th. Then their shares will trade in New York as well. They increased their dividend for 43 consecutive years and forecast the dividend growth through 2021.

A good name. They have just picked up ITC Corp which is nicely accretive. $0.49 EPS over the next couple of years. Trading at around 18X versus its five-year average of around 19X, versus the peer average of around 21X. The only concern he has is that there is an administrative court decision that is lowering ROE of such facilities as ITC to around 9% or lower. However, he thinks that will be overturned. All in all, this is a nice stock to be owning at this level.

Fortis (FTS-T) versus Enbridge (ENB-T) versus Telus (T-T)? He has just come out with a new portfolio which has 13 infrastructure oriented stocks. All 3 of these are in that portfolio. The major reason is because of the predictability of dividends long-term and excellent management. This one has a dividend growth target of about 6% a year for the next 5 years, which he thinks is fully achievable. It is one of the top 15 utilities in the US.