Via James Hymas’ daily report…
FortisBC (a subsidiary of Fortis, TSE:FTS) sold CDN$100 million worth of the most mis-named “Medium Term Notes” which, according to the shelf prospectus filing, are unsecured debentures. The yield was 5.01%, a spread of 135bps over government, and the term was… 40 years.
I know utility companies are supposed to be rock-solid stable, but this thirst for yield is becoming a bit too much to handle. Capital is racing to purchase income at any cost. Equity in the master company (Fortis Inc.) at current prices and past 12 months of earnings ($1.60 EPS) is 5.1%, so assuming any sort of natural growth for inflation and rising prices would lead one to suspect that the equity would be the cheaper option, even when you factor the elevated prices for utility company equity. Fortis’ common shares hardly budged even during the peak of the late 2008-early 2009 economic crisis.