Wednesday, July 30, 2008

TransAlta Corp 2

This is a utility company (TSX-TA) and what you expect from a utility company is around 8% return, with 2% to 4% of that return to be dividend income. The 10 year return on this company is 7.8%, with some 3% from dividend. This is because the company’s stock price has increased quite a bit over the last 5 years. The 5 year return is some 19%.

As I mentioned yesterday, at present, most analysts have a hold on this company and there is an offer to buy it at $39 a share. The stock has had a checkered past and there has not been much in the way of dividend increases until this year. The current dividend has increased from $1.00 per to $1.08 a share, the first increase in some 8 years. The company had a bad year in 2006, but has since recovered. Over the long term, this has been a good steady company for me with a return since 1987of some 9.3%.

I can see why most analysts have a hold call on this stock. No one expects it to go past $36 over the next year, so, it is not a good buy at present. Also, the current P/E is 22.5 and this is high for a utility company. It would not be a good buy unless the stock price pulled back a bit. The one good thing from the March 2008 report is the Accrual Ratio is -5% and this tends to show that a stock is throwing off more cash than is apparent. Such an Accrual ratio usually means that a stock will go higher, but this is only the first quarterly report for 2008.

I have reloaded my spreadsheet with 2008 estimates and figures from the March 2008 quarterly report.

TransAlta Corp is an electric generation and marketing company. They operate in Canada, the U.S., Mexico and Australia. Its web site is See my spreadsheet on this company at

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website at for a list of the stocks for which I have put up spreadsheets on web site.

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