Fortis (TSX) is widely recognized as a leading blue-chip stock with a reputation for stable and dependable performance. With its extensive portfolio of regulated utilities across North America, Fortis exemplifies long-term reliability and durability, making it a standout choice for conservative investors.
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Consistent Performance Amidst Market Fluctuations
Fortis has demonstrated impressive stability in its earnings since 2004. Despite various market fluctuations, the company’s adjusted earnings per share (EPS) have only experienced declines in four out of the last 20 years. Notably, three of these declines were minor, around 1%, with the most significant drop being approximately 6%. Each of these dips was followed by a recovery in the subsequent year, showcasing Fortis’s resilience and robust business fundamentals. This consistent performance underscores the quality and reliability that investors find appealing in Fortis.
A Legacy of Dividend Growth
One of Fortis’s most notable features is its long-standing commitment to dividend growth. The company is celebrated as one of Canada’s oldest Dividend Aristocrats, with a remarkable 50-year history of continuous dividend increases. Over the past decade, Fortis has achieved a strong 10-year dividend growth rate of 6.3%. This consistent dividend performance has resulted in a total return of nearly 10% annually over the last 10 years. For example, an initial investment of $10,000 in Fortis stock would have grown to approximately $25,900, factoring in both dividends and price appreciation.
While Fortis may not offer the highest returns compared to more volatile stocks, its defensive nature and lower risk profile make it an attractive option for conservative investors. FTS provides stability and a reliable income stream, making it a solid candidate for those with a long-term investment horizon.
Is It Too Late to Buy Fortis Stock?
Fortis has experienced a notable rally since July, with its stock price climbing around 15%. This rise prompts the question: is it too late to invest in Fortis? Assessing the stock’s current valuation is crucial to making an informed investment decision.
The dividend yield is a key indicator of a stock’s valuation. Generally, a higher yield suggests a potentially attractive buying opportunity, while a lower yield may warrant caution. Currently, Fortis is trading at $60.75 per share, offering a dividend yield of just under 3.9%. Historical data from YCharts shows that this yield is approximately at the midpoint of its 10-year range, indicating that the stock is fairly valued at present.
FTS Dividend Yield Chart
Additionally, the price-to-earnings (P/E) ratio is another common metric for assessing stock valuation. Fortis is currently trading at about 19 times its adjusted earnings, which aligns with its long-term average valuation. This suggests that the stock is fairly valued, reinforcing a “hold” recommendation.
When to Strategically Buy Fortis Stock
For conservative investors, buying during market corrections can be advantageous. For example, in 2023, Fortis’s stock fell more than 15% from a peak of around $58 to approximately $49 per share. Similarly, in 2022, the stock experienced a 22% decline, largely due to rising interest rates. Such market corrections present opportunities to acquire shares at more attractive prices.
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The Foolish Investor Takeaway
In conclusion, while there may not be an immediate margin of safety for buying Fortis stock at today’s prices, its high quality and dependable performance make it a valuable addition to a diversified portfolio. The current recommendation is to “hold” the stock and consider adding shares during market corrections to achieve better long-term gains.