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  5. CPX: Hi team, I own Fortis and Emera for dividends and safety. [Capital Power Corporation]
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Investment Q&A

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Q: Hi team,
I own Fortis and Emera for dividends and safety. Given the higher dividend and recent better performance of Capital Power, would it be reasonable to replace either FTS or EMA with CPX?

Asked by Ken on August 04, 2022
5i Research Answer:

CPX is the smallest of the three companies ($5.7B market vs. EMA at $15.9B and FTS at $28.6B). EMA and FTS do not generate positive free cash flows, whereas CPX does. All three companies have very similar valuations, but FTS and EMA have expanded their balance sheets considerably over the years, whereas CPX has not. While all three companies have very similar valuations, this has only been the case over the past few quarters. Prior to that, CPX has expanded its multiples over the past several quarters, whereas FTS and EMA have remained at the same valuation levels. To us, this means that a lot of CPX's outperformance has been through multiple expansion, rather than financial outperformance. It is possible that CPX continues its multiple expansion, but due to their larger size and better financial stability, we would prefer FTS and EMA today.