Fortis Inc. FTS recently announced its new five-year capital investment plan for the 2021-2025 period. These investments will aim at providing safe, reliable and affordable services to the company’s customers, support its investment-grade credit ratings and dividend growth, and add stability to its shareholders.
Moreover, the company issued an update on its carbon emission cutback plans along with dividend policy.
Capital Investment Plans
Update on 2020 Plans: Major capital projects remain on track and are progressing per the plan. The utility’s current-year capex of $4.3 billion remains on target and is likely to grow its rate base this year by approximately 8%.
Future Plans: The electric utility plans to invest $19.6 billion in the 2021-2025 period, increasing $800 million from the prior year's plan. Of nearly $20 billion, $5.1 billion is reserved for electric transmission infrastructure at ITC Holdings Corp. while $4.4 billion is likely to be spent on Fortis’ natural gas and electric subsidiary, FortisBC. Further, a $3.8-billion amount is expected to be invested in its unit UNS Energy, Arizona to support a cleaner energy future.
Also, its consolidated rate base is expected to be $36.4 billion in 2023 and $40.3 billion in 2025, up from $30.2 billion in 2020. These projections indicate a respective three and a five-year CAGR of 6.5% and 6%.
Notably, the capex plan is likely to be primarily funded with cash from operations, debt raised and common equity from the dividend reinvestment plan.
Emissions Reduction Target
The utility has been making extensive efforts to meet its target of lowering carbon footprint by 75% within 2035 from a 2019 base year. It anticipates achieving this goal by exiting coal generation and adding approximately 2,400 megawatts (MW) of wind and solar power systems, and 1,400 MW of energy storage systems.
Likewise, other electric utilities are adopting measures to supply clean and reliable energy to its customers. Some of the companies, namely Duke Energy DUK, DTE Energy DTE and Xcel Energy Inc. XEL are planning to provide absolute clean energy by 2050.
Fortis declared a dividend of 50.5 cents per share, marking a 5.8% hike in the quarterly dividend, payable Dec 1 to its shareholders of record at the close of business on Nov 18, 2020. Additionally, the company extended its target for average annual dividend per share growth of nearly 6% to 2025, based on a 2020 annualized dividend of $1.91. From Dec 1, the 2% discount offered on common share issuances will be reinstated under the dividend reinvestment plan.
Zacks Rank & Price Performance
Fortis currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Shares of the company have gained 23.3% in the past six months, outperforming the industry’s rise of 12.2%.
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