Fortis Inc. (FTS.TO)

(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.

This is one that he would stay away from as he thinks the P/E ratio is far too high relative to their yield. (20X current earnings and 19X forward.) 3.8% yield.

Within the interest sensitives, you want to look for those with the best ability to increase what they are paying. Utilities are more bond like. He would tend to focus on things with more dividend growth attached to them.

3.9% yield is fairly safe, making it somewhat defensive. Still waiting approval to acquire CH Energy (CHG-N) and still waiting for the outcome of the BC regulatory proceedings. He will be continuing to hold his stocks.

SHORT. This has exhibited 5% earnings growth but the only way they are getting future growth is to acquire. Because their dividend payout is so high, when they acquire, they have to raise money in the market.

Favours Emera over Fortus for dividend growth.

He owns the preferred. Prefers others in the space. This is a good solid hold, though.

A bit of a disappointing stock over the last while. Expects you will be getting high single digit overall returns over the next 3 years.