Fortis Perpetual Preferred Share FTS.PR.F

Fortis Inc. (Perpetual Redeemable) Preferred Share Series F (FTS.PR.F)
Author(s)’ disclosure of share ownership:	Author(s) do not hold shares
Last updated:	18-Jan-21
Share Price At Date of Last Update:	$25.05
Yield:	4.9%
Currency:	$ Canadian
Generic Rating (This rating does not consider the circumstances of any individual investor and is therefore not specific advice for any individual):	(lower) Buy rated at $25.05
SUMMARY AND RATING: These Fortis Inc. preferred shares (REI.PA on Toronto) were issued at a price of $25.00 in late 2006 paying 4.9% on a $25.00 amount ($1.225 per year). Note that preferred shares can have customised aspects that affect their value. We have described the features here but we do not guarantee completeness or total accuracy of this description. For more detail consult the prospectus on sedar.com. These shares are perpetual, meaning that the distribution amount will not change. They may remain outstanding indefinitely but the company has the right to redeem them at any time by paying the investor/owners of these $25.00 plus any accrued dividends. They are also cumulative meaning that in the unlikely event that the dividend is ever suspended it would be paid later unless the company went broke. On January 18, 2021, they closed at $25.05 price to yield 4.9% per year. If held in a taxable account, they are eligible for the dividend tax credit. These preferred shares are subject to a market value decline if Fortis Inc.’s outlook worsens materially. In theory, there is some potential for dividends to be skipped or for Fortis to go bankrupt with no recovery of this investment. However we think that the possibility of such a scenario is very remote indeed. Note that these shares can be expected to decline in value if interest rates rise. These preferred shares are rated pfd-3 (high) by DBRS on a scale of 1 to 5, where 1 is the strongest. We would be comfortable buying these preferred shares for the yield. However, note that they have often traded somewhat below $25. There may be better opportunities ahead to buy at a somewhat lower price if there is any indication that interest rates could rise. Overall we would rate these (lower) Buy for those seeking yield and who are prepared to hold these more or less indefinitely. Preferred shares are more suitable for taxable accounts than non-taxable accounts.
INSIDER TRADING / INSIDER HOLDING: There has been no insider trading of any of Fortis’ preferred shares in the past few years and it appears that insiders own little or none. That could considered to be a negative to at best neutral signal.
Symbol and Exchange:	FTS.PR.F
Basis and Limitations of Analysis: The following applies to all the companies rated. Conclusions are based largely on achieved earnings, balance sheet strength, earnings growth trend and industry attractiveness. We undertake a relatively detailed analysis of the published financial statements including growth per share trends and our general view of the industry attractiveness and the company’s growth prospects. Despite this diligence our analysis is subject to limitations including the following examples. We have not met with management or discussed the long term earnings growth prospects with management. We have not reviewed all press releases. We typically have no special expertise or knowledge of the industry.
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