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3 Fortis (TSX:FTS) Earnings Numbers You Shouldn’t Miss

Electricity pylons against a sunset

Fortis (TSX:FTS)(NYSE:FTS) earnings results came out this morning. It was a quarter that went as expected: quite smoothly. It was a quarter that saw 3.7% earnings growth. This, in a sea of negative surprises and pressures, stands out.

Fortis earnings were once again an example of stability and fortitude. This comes as a result of its business as well as its business practices. This morning, Fortis held its second-quarter conference call. Management highlighted many of the company’s strengths on the call.

Here are three numbers you shouldn’t miss.

Fortis’s EPS increased 3.7% to $0.56

In the second quarter, adjusted EPS increased to $0.56. This increase is despite a $0.03 hit due to the coronavirus. It is also despite a $0.04 hit due to an increased share count. Increases in residential sales and rate base growth were the drivers of this increase.

Second-quarter results are a testament to Fortis’s defensive business. A large portion (over 80%) of its revenue is regulated or residential, which leads to consistency. But even its unregulated business has done well. Sales increased 3% at utilities not protected by regulatory mechanisms. Residential sales drove this increase, as weather in Arizona boosted energy demands.

So, as expected, commercial and industrial sales were weak, offset by higher residential sales. Businesses shut down, and people remained home, so this shift happened. This is a very important point. It means that even if shutdowns linger, Fortis’s earnings will remain strong.

Fortis has $5 billion in total liquidity

Liquidity is always important. It is essential for a company to have the ability to easily cover its short-term liabilities and debts. This provides a much-needed safety net. Today, liquidity is even more important, because the coronavirus pandemic has caused severe interruptions in the economy. And it has caused liquidity concerns for many.

Although Fortis’s business has been mostly sheltered from the impact of the pandemic, the macro environment is more risky for all. Even Fortis, a North American leader in the regulated gas and electric utility industry, can be hit. This is why it is such an advantage that Fortis has $5 billion in total liquidity. It leaves the company well covered to withstand potential hardships and setbacks. We don’t have to worry about Fortis’s survival.

Fortis has always ensured that it has ample liquidity and balance sheet strength. It is its conservative way of doing business that was always important, but especially so in hard times. Even in the second quarter, Fortis was able to successfully issue $2 billion in debt. Fortis even issued $200 million, 30-year debt at a 2.54% interest rate. In a move to take advantage of record-low interest rates, Fortis secured this historic deal.

The company is ready for the potential challenges ahead.

The $4.3 billion capital plan for 2020 is on track

Fortis’s capital plan for 2020 remains on track. Its five-year capital plan of $18.8 billion also remains on track. Much of this capital plan is highly executable and low risk. This means money spent on asset resiliency and modernizations. These plans are expected to facilitate a 6.5% compound annual growth rate in Fortis’s rate base up to 2024.

Fortis is also thinking long term. With a goal to reduce emissions by 80% by 2035, significant dollars will be spent here. In fact, more than 70% of the capital plan is dedicated to “asset resiliency, modernization, cleaner energy initiatives.”

Foolish bottom line

In conclusion, Fortis is in a great position right now, both financially and strategically. The company is able to survive and thrive, even in this crisis. The company is also able to invest for the future. The three numbers you should know from Fortis’s earnings all relate to this.

Speaking of top stocks…

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Fool contributor Karen Thomas has no position in any of the stocks mentioned. The Motley Fool recommends FORTIS INC.

The post 3 Fortis (TSX:FTS) Earnings Numbers You Shouldn’t Miss appeared first on The Motley Fool Canada.

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Russia vows ‘promising’ virus vaccines in September

Russia said Wednesday that it plans to begin production of two “promising” coronavirus vaccines in September and October as Moscow races to develop a formula before Western countries. At a meeting chaired by President Vladimir Putin, Deputy Prime Minister Tatyana Golikova singled out two vaccines under development by a research institute in Moscow and a […]

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How to Make Your CRA CERB Money Last Longer

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For now, eligible Canadians can get $2,000 per month of Canada Emergency Response Benefit (CERB) money. This is needed relief money, as COVID-19 has disrupted industries and driven many Canadians out of work.

The Canadian government expects to pay out a total of about $70 billion in CERB money by the end of the summer. That’s a big bill to pay to keep Canadians fed and the economy going.

CERB payments will stop at one point. Here’s how you can make your CRA CERB money and your savings last longer.

Invest with a focus on income

By focusing your investments on income, money will flow in regularly to help you pay the bills for utilities, groceries, and other necessities. If there’s any extra income, you can also get yourself a treat.

Many dividend stocks have sold off in light of the COVID-19 disruptions to the economy. The pullbacks are legitimate. However, many of these companies have the balance sheets to withstand economic downturns.

For example, it’s a good time to accumulate shares in Toronto-Dominion Bank (TSX:TD)(NYSE:TD) for long-term investment.

Surely, this year, its earnings will be meaningfully impacted by the recession in Canada and the United States. However, its earnings should still be enough to cover its dividend. Its payout ratio is estimated to be about 65% this year.

To be prudent, the bank might halt dividend increases in the near term. Nevertheless, the depressed stock has lifted its dividend yield to 5.3%, which makes it worthwhile for investing.

In a normal market, the best yield investors can get from TD stock is about 4%. So, investors can get extra income of close to 33% today!

It could take at least two years for TD’s earnings to normalize. To be safe, investors should have an investment horizon of at least three years. By that time, buyers now would have collected some nice income, and the stock should recover to about $80 per share.

Real estate is another source for big income

Real estate investment trusts (REITs) that have any retail exposure have come under pressure, including H&R REIT (TSX:HR.UN). The diversified REIT is now trading at levels last seen during the global financial crisis in 2008/2009.

Its office, residential, and industrial properties are holding up well during the pandemic with rent collections of 99%, 92%, and 90%, respectively, in May. In comparison, it collected 50% of rents from its retail portfolio. Overall, it collected 80% of its rents for that month.

H&R REIT cut its cash distribution by 50% in May. It believes that this move will provide the “additional financial flexibility to absorb any income interruption related to the pandemic in the near term, and allow for significant capital reinvestment into our properties to address tenant turnover without increasing the REIT’s financial leverage.” Therefore, another cash distribution cut is unlikely.

Now, when the economy is stressed, is the best time to invest in H&R REIT for long-term income generation. It currently yields close to 6.9%. Last time it cut its cash distribution in 2009, it steadily increased the payout when economic conditions improved. Thus, it could do it again this time. If so, buyers today will get even more income as things improve.

Right now, analysts think the stock can appreciate about 48% higher over the next 12 months. Over three years, it’s highly possible for the stock to get back to even more normalized levels of $19, which would represent 89% upside on top of the rich dividend income it provides.

Notably, the stock will report its Q2 results on August 12, which is not too far off into the future. So, by all means, feel free to wait for the report for more clarity on the COVID situation before deciding to invest in H&R REIT or not.

Speaking of stocks that churn out juicy income…

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Fool contributor Kay Ng owns shares of H&R REAL ESTATE INV TRUST and The Toronto-Dominion Bank.

The post How to Make Your CRA CERB Money Last Longer appeared first on The Motley Fool Canada.

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Constellation (TSX:CSU) Stock Can Turn $11,628 Into $1 Million

A close up image of Canadian $20 Dollar bills

Constellation Software Inc. (TSX:CSU) can make you a millionaire. Just ask its long-term shareholders.

In 2006, CSU shares were priced at $18. Today, they’re above $1,500. An $11,628 investment would now be worth a touch over $1 million.

The good news is that the ride isn’t over. The same factors that made Constellation so successful continue to drive additional gains. With a market cap of $32 billion, the biggest days of growth are over, but if you maintain a long-term mindset, you can still double, triple, or even quadruple your investment with this proven stock.

Here’s the secret

If you want to understand Constellation’s success, you only need to read its last shareholder letter, which was published in 2018.

“For competitive reasons we are limiting the information that we disclose about our acquisition activity,” CEO Mark Leonard began. “We believe that sharing our tactics and best practices with a host of Constellation emulators is not in our best interest. We have discussed the matter with many of the large Constellation shareholders, all of whom (despite grumbling) eventually agreed.”

This is a strange statement. Few businesses brag about becoming less transparent.

The company hasn’t released a shareholder letter since. It also cancelled all public conference calls. What’s going on here?

While Constellation is a software provider, it’s not one of the big players. The company specializes in small-market, niche products. Some have just a few dozen customers. By going niche, Constellation reduces competition, which improves customer retention as there are few alternatives to switch to.

The company now has more than 100 products, but it’s constantly on the hunt for more. It uses its vast network to target and acquire additional niche software businesses.

Because each individual market is small, there’s not much bidding pressure. Constellation scores incredible deals, sometimes making all of its money back in the first year post-acquisition.

But Constellation’s massive success last decade caught the eyes of many who wish to emulate this strategy. To keep competition to a minimum, executives decided to cancel public events and letters, as they may indicate where the company’s acquisition strategy is headed, attracting additional suitors that would drive up purchase prices.

Buy Constellation stock?

In 2008, Constellation posted returns on capital of 28%. In 2017, the return profile was even higher at 29%. Going silent has allowed the company to continue this incredible success. Since the start of 2018, shares have doubled in price.

The market simply doesn’t know how to value this company. Constellation is one of the most successful stocks in history, yet few people know of the company. That keeps the valuation multiple perpetually low, which means the fundamentals drive huge price action year after year.

On the surface, it’s difficult to say this stock is cheap. Shares now trade at 74 times earnings. But in 2015, shares traded at 79 times earnings. If you bought then, you would have tripled your original investment.

Constellation stock is pricey, but in this case, you get what you pay for. That means a proven winner with a differentiated business model that drives continuous returns on capital.

The pick below is like buying Constellation stock in 2004.

The 10 Best Stocks to Buy This Month

Renowned Canadian investor Iain Butler just named 10 stocks for Canadians to buy TODAY. So if you’re tired of reading about other people getting rich in the stock market, this might be a good day for you.
Because Motley Fool Canada is offering a full 65% off the list price of their top stock-picking service, plus a complete membership fee back guarantee on what you pay for the service. Simply click here to discover how you can take advantage of this.

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The Motley Fool owns shares of and recommends Constellation Software. Fool contributor Ryan Vanzo has no position in any stocks mentioned.

The post Constellation (TSX:CSU) Stock Can Turn $11,628 Into $1 Million appeared first on The Motley Fool Canada.

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