2021 Week 24: Fortis (NYSE: FTS)

Portfolio Update

The FiveTwenty portfolio received $58.57 in dividends in the past week. JNJ, ADM, and WBA paid their quarterly dividends during the week.

Past Week Dividend$58.57
Current Quarter Dividend$298.41
LifeTime Dividend$411.45
Estimated Annual Dividend$1,811.15
Dividend Scorecard

The capital allocation for the week of 06/13/2021 to 06/19/2021 will be used to add to our position in Fortis (NYSE: FTS)

FTS – Position Update

Since our last check-in on FTS in week 12 of 2021, the company reported Q1 2021 earnings on 05/05/2021. Additionally, the share price increased 5.37% from C$53.59 to C$56.47.

TTMPrev. Update10-year median
Dividend Streak47 years47 years
Yield3.53%3.67%3.57%
Payout Ratio74.63%176.46%2NA
P/E21.15120.852NA
Entry Criteria Scorecard

1 computed using TTM adjusted EPS of C$2.67 as of Q1 2021
2computed using TTM adjusted EPS of C$2.57 as of Q4 2020

FTS Q1 2021 earnings report

Did the latest earnings report raise any warning flags?

In Q1 2021, FTS grew revenue, adjusted net earnings, and adjusted EPS over the same period a year ago. The primary drivers of the increases were rate base growth and new customers rates at Tucson Electric Power effective Jan. 2021. Overall, revenue grew 6.2%, adjusted new earnings increased 14.4%, and adjusted EPS were 13.2% higher compared to Q1 2020.

Revenue
(in millions)
Adj. Net Earnings
(in millions)
Adj. EPS
.
Q1 2020$2,391$315$0.68
Q1 2021$2,539$360$0.77
% Change6.2%14.4%13.2%

Additional noteworthy developments during the quarter:

  • COVID-19 had no material impact on Q1 2021 financial results.
  • FTS recorded $0.9 billion in capital expenditures in the first quarter. Construction of the Oso Grande Wind Project completed in May 2021. The Wataynikaneyap Transmission Project, for which FTS hold a 39% equity interest, is progressing well and remains on trach for completion at the end of 2023. Furthermore, the company continues to be on track for the $3.8 billion capital plan for 2021.
  • Standard & Poor’s Financial Services (S&P) re-affirmed the company’s credit ratings in April 2021. On the other hand, DBRS Morningstar upgraded FTS to A (low) in May 2021.
  • Alberta Utilities Commission extend the ROE of 8.5% using a 37% equity component of capital structure through 2022 in March 2021.

Looking ahead, FTS re-affirmed the 6% dividend growth guidance. Furthermore, the company confirmed its five-year capital plan that is expected to grow the rate base at a five-year CAGR of 6% through 2025.

Thesis

Why are we adding to our position in FTS?

FTS’s Q1 2021 results have confirmed our belief in the company. Furthermore, the positive revisions to the company’s credit outlook by S&P and Morningstar are further confirmation that FTS is exiting the COVID-19 pandemic on solid financial footing.

With no negative surprises since our initial investment, we continue to believed that FTS is good source of growing dividends going forward.

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