Fortis Inc. (FTS.TO)

A utility based in St. John’s Newfoundland. 2014, with operations in Alberta and BC. Gas transmissions. 2014 will be a transition year. As we get to 2015, they should have hopefully closed their Arizona utility acquisition and he expects some decent EBITDA and cash flow growth. To finance the Arizona deal, they sold some innovative convertible debentures. Have a record of dividend increases on the TSX, which he likes.

Announced a relatively large US acquisition in December that they were trying to fund with a hybrid security that looked somewhat like a convertible debenture. That security had not sold very well. This is now out of the way and you should start to see the shares perk up a little. Their acquisition should be very modestly accretive. Always remember, this is a regulated utility, so it won’t be a high growth vehicle. If you buy this, it is really for the dividend and gradual dividend growth and gradual earnings growth.

Switch this to Pembina Pipeline (PPL-T)? That would be a good switch. Looking at his performance in 2013, the one sector that hit him hard was the electrical utilities. The sector is very safe and not bad dividends, but produced negative returns as a group in 2013. Likes Pembina as well as Inter Pipeline (IPL-T). There is a big need to expand the small pipeline infrastructure in Alberta. He can see real growth going on for the foreseeable future.

Recently acquired UNS Energy (UNS-N), a very big purchase for them. He is not very positive on the company. He would typically consider this as a Short position because it does not have a lot of growth in its business model. They use a lot of their free cash flow to fund their dividend. When they make acquisitions, they have to raise capital in the market, which makes it very unpredictable.

(Market Call Minute.) Big utility company. Stock hasn’t done very much for a long time. Not an unreasonable Buy, but he favours Canadian Utilities (CU-T) over this.

Has a really good book of business, 2 million customers in North America. If it broke below $30, it would cause him to have some bigger issues such as are rates going up higher or is the line in the sand of 3%-3.5% around the 10 year bonds, really going to hold. Very good risk/reward.

(Market Call Minute) Held flat and then investors got tired of it. It did not have enough yield to keep it up there.

Sold it because PE got too high relative to yield. Moved to REITs. Would not look at it now.

Track record is amazing. Longest track record of dividend increases in Canada. His problem is that their last acquisition did not have anything to the bottom line. He doesn’t trust management that this latest acquisition will add anything either. Doesn’t see synergies in acquiring a utility in Tucson, Arizona versus the utilities that they have now in Canada. Sold his holdings just before the last acquisition.

Big potential acquisition of utility in AZ. Probably a cap on this stock. It might get weak. He heard it wasn’t going that well.

Convertible debentures. (Market Call Minute) Thinks there are a lot of bells and whistles on the shares. Nice yield but you are levered up 3 times.

Financing their Arizona acquisition by convertible debentures. He is still looking at this. His concern is that it is a big bite. He is not totally familiar with the Arizona area. Hasn’t decided how he feels about this yet.

(Market Call Minute) Nothing wrong except it is defensive and sensitive to interest rates.

Just sold his holdings because earnings are going nowhere, PE is very high and interest rates are going higher. Doesn’t see that they can raise the dividends much higher since earnings are not growing.

Has owned this for years and still likes it. A slow dividend grower but a solid company. Share price has been held back because they bought US assets and the return on them will take a couple of years longer because regulators put a cap on this.