The market is full of uncertainty as the COVID-19 pandemic continues its rampage. With increased market volatility, utility stocks, in particular Fortis (TSX: FTS) (NYSE: FTS), investments still solid?
So far, the stock has lost 4.42% since the start of the year. The loss, however, is not as serious as other actions in sectors other than public services. It seems that investors are piling up cash in the most reliable sector during the stock market crashes.
The pressure is there
The utilities sector is in the spotlight as investors seek security in less volatile investments. As a utility operator, the pressure on Fortis is to stay in business in these uncertain times.
Fortis is well aware of its importance as it is responsible for the production, transport and distribution of electricity. It is estimated that 2,516,000 customers depend on Fortis for electricity and gas. Coverage extends from Canada to the United States and the Caribbean countries.
Likewise, utility companies should keep abreast of updates and new developments from the World Health Organization (WHO) regarding the spread of the coronavirus.
Preparing for a pandemic
With a full-blown economic and public health crisis, consumers will find it difficult to pay their utility bills. In Canada, Fortis and almost all utility companies in all provinces provide relief to end users during the pandemic.
Fortis waives the late fees and ensures that there will be no disconnection of the services in the event of non-payment. Large commercial and industrial customers can discuss payment terms with their key account managers at Fortis.
Unlike water and irrigation systems, electricity and natural gas operations are not sensitive to the harmful effects of the coronavirus. However, Fortis monitors its network and systems 24/7. In the event of generalized illness, a comprehensive emergency and pandemic plan is in place.
Impact on cash flows
Fortis is ready to help and relieve customers of financial difficulties during the pandemic. But payment extensions are a big sacrifice, as they will have an impact on the company’s cash flow.
This company is the first utility company in Canada. Since the business is highly regulated, the government somehow finances the operations of its gas and hydroelectric plants and its electricity distribution network. The cash flow is stable because there is a base rate set for the electricity it provides.
Fortis is currently trading at $ 51.08 per share, while the dividend yield is 3.74%. In 2019, the title was able to generate a total return of 23%. The company’s superior and inferior results recorded increases of 4.68% and 47.68%, respectively, compared to 2018. Fortis should expect an annual growth rate of 5.03% over the five coming years.
Fortis is a great investment choice if you want the best of the best today and for the foreseeable future. This stock of public services is an essential and vital part of most income investor portfolios.
The market will not stabilize until COVID-19 becomes available. However, even if the sea is rough, Fortis will sail in strong winds. The real resilience of the company appears in times of great recession.
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Crazy contributor Christopher Liew has no position in any of the titles mentioned.