Some analysts have begun to assert that the utilities sector broadly, and some specific utilities players in particular, have become a bit expensive of late. With a stock price that has certainly sown a resistance to economic downside pressures, Fortis Inc. (TSX:FTS)(NYSE:FTS) could be made to appear as a fairly-priced security.
In this article, I’m going to discuss why I believe Fortis’ share still represents value at these levels, particularly for those with a low risk tolerance and a relatively long-term investing time horizon.
Fortis’ earnings have shown to be as steady as they come through this pandemic, a fact which bears noting particularly for those aforementioned risk-averse investors out there. This inherent defensiveness represents a great deal of value for such investors, as cash flow stability has shown to be hard to come by in other sectors of late.
This high level of cash flow certainty has allowed Fortis to raise its dividend each year for nearly five decades providing a great deal of value to investors with income needs over the long-term.
Fortis’ shares currently trade around 12 times EBITDA, a relatively cheap multiple when one considers the broad stock market, but not necessarily cheap for the utilities sector. I think a significant amount of investment interest in "Steady Eddie" investments like Fortis is likely to continue into the future, and these projected drivers could take Fortis’ multiple higher particularly given the current macroeconomic backdrop of lower-for-much-longer interest rates we’ve now entered.
Invest wisely, my friends.
