Fortis Inc. (FTS.TO)

Thinks this goes higher. Has a target of $35. They’ve gone through a number of quarters for years with earnings that have just continued to go down. Thinks they have bottomed here. Sees growth coming from utility expansion of almost $5 billion over the next 3 years. Sees the expiration of rate freezes at their subsidiary CH Energy occurring in the mid-2015. Waneta Dam revenues should start in 2015. Their unregulated businesses he thinks, are going to improve from here or they can be sold.

High-quality business. Taper talks from the fed really hammered all interest sensitive stocks. This found some support and he is looking for it to reach $34-$35 and to get the dividend. Nice boring play.

Top Short. He would not go near utilities and these guys are the biggest outliers in terms of poor growth and bad economics. They have a ton of leverage in these utility models. When the yield curve goes up and they want to refinance their leverage, it is going to be a lot higher. He would be surprised if they ever grow. Trading at 18X earnings right now, which is ridiculous.

Virtually every dividend paying stock, including utilities and telcos, got absolutely hammered when tapering was supposed to come in. This is a good company. Good yield.

Likes this as a utility play. Natural gas utility in BC and have a number of other assets, including real estate and Caribbean utilities as well. They’ll get paid because they generate the power electricity and get paid by contract. They’ll have to fund the acquisition of the New York company but the markets are healthy for equity issues these days. 4% dividend yield. Could flirt with $35 in the next year.

Enbridge (ENB-T) or Fortis (FTS-T)? There is no growth in this from an earnings basis. The last 2 acquisitions they did were not accretive at all. Feels Enbridge has more earnings growth. If he had to pick one of the 2, it would be Enbridge.

Very safe, income producing stock. A great time to buy it. Not high growth and fairly expensive compared to historical trend but that is because interest rates are so low. Longest stream of uninterrupted dividend increases.

(A Top Short June 5/13. Up 1.74%.) Still a Short. Feels it is your classic trap. Trading at 15-16 times earnings and their earnings growth rate is less than 5% a year and could be a lot less than that. Don’t have much of a dividend yield anymore. This was a safety play on its own in a declining interest-rate environment. He believes we are now in an opposite environment.

J series preferred shares? One of his favourites. A perpetual type, a longer-term, and the 1^st redemption date is in 2021. It will wind down from the 1^st call of $26 with a face value of $25, so they could take you over with a $1 premium and then each year thereafter, it will go down by $0.25. In the meantime, you are collecting a $4.75 coupon. Currently trading at roughly $23.50, so on a yield basis, it is a little over 5%. More susceptible to interest-rate movements than a shorter-term one.

Hanging on to it. Stable, good dividend growth record. Will accumulate more of these if interest rates start to rise.

This one is on a risk/reward basis. Current thinking is that interest sensitives, be it bonds or utilities, sentiment is terrible, inflation is apparently coming and rates are going to be rising. He doesn’t think this thesis is a strong as we think. This is really a question of valuation. Yield of 4.07%.

Good high quality name. Interest sensitive so the recent decline has been because of higher rates. Also, going through some regulatory hearings so there is a perception that the large ROE may come down, which would decrease the cash flow somewhat. Doesn’t see a lot of growth in this one right now. Dividend is safe.

Preferred perpetual yield 5.3%. Hold or sell? This is a fine company, mostly regulated utility but does have some unregulated assets. This is one you shouldn’t be worried about dramatically from a credit perspective on a specific credit event. It will be general market risk. Trading $1-$2 below $25. It is okay, not a bad running yield, and you should be somewhat protected on the downside. On a 10 year view you might want to reconsider having perpetual exposure at 5%.

Preferred H? In the last couple of months, spreads have widened a little but this is been a general overflow. As people indiscriminately need to sell income-producing securities, they might be selling funds that own this type of paper and the manager has no choice but to raise liquidity. It could also be ETF pressure where money is being taken out and the program has to mechanically sell. Hold steady. In the next year or 2 or 3 you will have an opportunity to get higher cash flows from a higher government of Canada bonds more than likely.

Downward trend. Underperforming TDX and below 20 day moving average, so you have all three technical requirements on the down side. Downside risk is probably not that high from current levels. There are better opportunities at this time.