Fortis (TSX:FTS) has been falling over the last few trading days, meaning this could be a great opportunity to pick up a defensive-minded winner at a discount, says one portfolio manager.
“Fortis is a utility that we own in our portfolios and we’ve owned it for a number of years,” says Christine Poole, CEO and managing director at GlobeInvest Capital, who spoke to BNN Bloomberg on Wednesday.
Fortis, which owns and operates utility transmission and distribution assets in Canada, the US and the Caribbean, including ITC Holdings, the largest independent electricity transmission company in the United States, has seen its share price drop from $56 at the start of April to now below $52.
“It’s very defensive so I think it is a very good investment in a portfolio for utility exposure,” Poole said. “We’ve been buying it in client portfolios in the $50 to $53 range.”
Fortis had its quarterly earnings last week, where the company generated adjusted net earnings of $315 million or $0.68 per share compared to $316 million or $0.74 per share a year earlier.
The company said its operations have had a “modest” impact from the COVID-19 pandemic but emphasized that because much of Fortis’ revenue comes from regulated and residential sources, which are highly recurring and not prone to the same vicissitudes that, say, retail is currently facing, the company’s business will do fine during the COVID crisis.
CEO Barry Perry said in his quarterly comments, “Given the critical infrastructure we operate and the need to keep the lights on and natural gas flowing, we are focused on the health and safety of our employees, customers and communities, and the continued reliability of our systems.”
Along with that income stability comes a dividend that is viewed as one of the safest in the business, and one which Fortis has regularly increased over the past 40 years.
“It gives you a nice yield of three and a half per cent which is not the highest yield, but I have very good confidence that the dividend is going to continue to grow over the foreseeable future,” Poole said.
“It’s a great, long-term investment in the utility space,” she said.
Fortis’ share price had a great run over the past five years, running from the mid-$30 range up as high as $59 by February of this year. For 2019, the stock climbed 18 per cent, an incredible lift for a defensive utility.
Looking ahead, Fortis management has said its long-term view is unchanged by COVID-19 so far, with its $18.8-billion, five-year capital plan to modernize infrastructure and move towards more cleaner energy delivery continuing unabated. At the same time, Fortis said it’s going ahead with adding new projects including the expansion of liquefied natural gas infrastructure in BC, completing its cross-border Lake Erie connector electric transmission project in Ontario and a clean energy project in Arizona.
“While uncertainty exists due to the COVID-19 pandemic, the Corporation’s long-term outlook is unchanged. Fortis continues to be well positioned to enhance shareholder value through the execution of its capital plan, the balance and strength of its diversified portfolio of utility businesses, and growth opportunities within and proximate to its service territories,” read management’s quarterly commentary on May 6.