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Fortis Inc. (FTS)
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Canadian Utilities Limited Class A Non-Voting Shares (CU)
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ATCO Ltd. Class I Non-voting Shares (ACO.X)
Q: Dividend growth investor here. Was wondering about the quality ACO.X as an investment. Any balance sheet concerns? The rather large portion they own of CU seems to be dictating the performance of their stock price - more less flat-ish over the last few years. So in that regard why would, say, FTS be outperforming CU over the last 5 years by approx. 25%?
5i Research Answer:
Atco is profitable with $1 bln in cash on the balance sheet against roughly $10 bln in debt. While there is debt, utilities are able to carry higher leverage and interest is covered in the range of 2 to 4 times. The majority of debt is fixed and matures well after 2028 so we would not be particularly concerned with the balance sheet. Performance will be anchored to CU to some degree.
On FTS vs CU, we just think FTS has had a bit of a more consistent growth track record on the top and bottom lines.