Fortis Inc. (TSX:FTS)(NYSE:FTS) is one of Canada’s most popular dividend stocks for a couple of important reasons.
First, it has a demonstrated history of raising its dividend. That’s a bit of an understatement, actually. Fortis has raised its dividend each year since 1972, a streak of 44 consecutive years. It’s the best dividend growth streak in Canada today.
Another big thing investors like about Fortis is the stability of its business. The company owns power plants, power infrastructure, and natural gas assets across Canada, the United States, and the Caribbean. They tend to spin off very predictable cash flows, especially since Fortis has focused on markets that have regulated prices.
Fortis’s latest acquisitions in the U.S. are good news for a few different reasons. Growth potential is much better on that side of the border. And these acquisitions pay profits in U.S. dollars, cash that looks particularly attractive when converted back to Canadian dollars.
The company is also investing billions in its growth program, committing to spend some $13 billion over the next five years. Spending will be focused on the U.S., but Fortis will still shell out more than $5 billion at home here in Canada.
The only problem? It’s easy to argue Fortis is a little overvalued at $41 per share. The company trades at 22.1 times trailing earnings and 18.5 times next year’s projected bottom line. Perhaps investors would be better off to wait for an entry point 10% lower. That would also push the potential yield up past 4%.
