Analyst Actions: Fortis Primed for Big Boost in Earnings, Dividends


Looking for a stock that will significantly grow both its earnings and dividends in coming years? Consider Fortis Inc., (FTS.TO) suggests Industrial Alliance Securities analyst Al P. Nagaraj, the Globe & Mail reported.

Utility firms are reliable income producers that tend to hold up well in the stock market during periods of economic contraction, making for good long-term holdings.

Fortis is the largest investor-owned distribution utility in Canada and has seen its earnings per share rise at a compounded annual growth rate of 7% over the past 10 years. Its average annualized total return has been 15% over that period, well ahead of the 11% return of the S&P/TSX capped utilities index.

With its pending acquisition of CH Energy Group Inc. in New York state, Fortis is now expanding and diversifying into the much bigger regulated U.S. gas and electric utility markets. That means a lot of possible assets to snap up, considering that there are more than 200 investor-owned utilities in the U.S. with combined annual revenue of $400-billion, Nagaraj notes.

"We expect Fortis, through a combination of acquisitions and organic growth, to significantly boost its assets, earnings and dividends in the next few years," said Nagaraj. He forecasts revenues to grow to $5.1-billion from the current $3.7-billion by 2016. And he expects the utility's dividends to grow from $1.20 to $1.52 over that same time frame, representing compounded annual growth of 9%.

Nagaraj initiated coverage with a "buy" rating and 12-month price target of $40.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

Copyright (C) 2014 All rights reserved. Unauthorized reproduction is strictly prohibited.

This article appears in: Investing , Commodities

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