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.
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