Fortis Inc. (FTS.TO)

A company that is well-run and pays a reasonably good dividend. Has a little bit of growth from their US acquisition. A solid name to have. Have the capacity to grow their earnings in the low to mid single digits. Thinks this and the preferred shares are a good bet.

The US is 40% of their asset base. They have the longest record of dividend increases in Canada. 3.5% dividend.

This had been going sideways since 2011, and broke out in the middle of 2014. The recent pullback is probably inspired by overall market volatility. As long as it doesn’t crack the base breakout point of around $35, he would think the stock is in pretty healthy condition.

Owns this in a few accounts for clients that really need income, but got out of most of it when she saw that growth was slowing and they had some regulatory hearings coming up. This is now largely behind them. Have done a couple of acquisitions that will give them more growth. Feels it is a sound investment for someone who needs yield. Given what they have in their backlog, she feels the dividend will be increased every year. Yield of around 3.8%.

What would be the impact if they sell their 23 Canadian hotels off? This is probably a good time to sell their hotels. They are nonstrategic for the company. This is probably 7% of the outstanding assets. Feels this company is very expensive for the return you are getting. He is Short this company.

This one goes in waves. Their last acquisition takes a long time to close. It is a heavily regulated business. He looks at the interest rate risks and they are low now, and he forecasts them to be low for the foreseeable future. He would prefer some of the midstream type pipeline companies, but this one is very conservative and they are never going to cut the dividend. You won’t see a screaming growth come out of this.

Fortis (FTS-T) or Emera (EMA-T)? The real difference between these 2 is that one is Western Canada and the other is eastern Canada. He doesn’t own either. They’re both trading at around 19-20 times earnings, which is a little rich going into a potentially rising rate environment. Between the 2 is preference would be towards Emera.

He sees some upside. You get stable growth in earnings and cash flow. It is reasonably valued. It is interest rate sensitive. People pile into it if they want consistency in dividends and dividend growth. Total return should be 5-8%, including 3.5% dividend.

Thinks there is limited upside, and the dividend growth is not going to be all that meaningful. This company has been doing huge, huge transactions trying to buy assets in the US to add a little bit of growth. You really have to wonder whether it is worth it. This has not gone up because it is a huge growth machine, but because it is a yield machine.

(A Top Pick May 7/14. Up 24.41%.) Continues to like this. Had a couple of acquisitions in the US in the last couple of years that are really coming on stream now from an earnings point of view. Earnings are going to be up 20% plus this year, and it is likely they will be increasing their dividend a little faster.

(A Top Pick March 7/14. Up 30.63%.) Made a big acquisition in the US, which is probably the point where people were having doubts. This was a game changer for them and gave them more exposure to the US. The foreign exchange has certainly worked in their favour. Good management. Thinks the 3.5% dividend is very safe. He continues to hold, but wouldn’t be adding to his position at this price.

Hold off buying it until you see how the rate picture unfolds later this year and see what the impact is on the high PE income stocks will be.

Utilities tend not to perform well at this time of year. They are now starting to come off. As a utility, this is more defensive, so you want to take a more cyclical approach at this time of year. This has a rolled over and is now starting to underperform the market. You want to go more towards this in the summer months. If you own, take your profits here.

A regulated utility, which typically do well when the economy is weak and not growing, because they compete against other fixed incomes or other yield investments. Because it is so expensive to produce electricity, the government has appointed a Public utility commission, which essentially regulates this business. There is very little growth generally speaking with these investments. A wonderful place to hide. If the bank of Canada starts raising rates, then you would want to exit this stock. He thinks that would be towards the back end of this year.

(A Top Pick Jan 3/14. Up 36.5%.) Still likes this. Took half his position off the table at around $40, but still has a huge representation in the utility sector. If this came back down to its trend, he would buy it back, but he doesn’t think that is going to happen.