Tuesday, January 27, 2009

Canadian Utilities 2

Since I stopped working, I have enjoyed taking my morning coffee, almost daily, at Starbucks. I go to the one that in the old Britnell’s Book shop on Yonge, just north of Bloor. This is a lovely place to go. For $2, you can enjoy a great cup of coffee and an atmosphere conducive to reading. I am always reading about how expensive Starbucks is. However, I suppose expensive depends on your point of view. Take the stock market. Some feel that it is still not cheap enough and do not feel that this is the time to start buying. However, it is relatively cheap, so I am slowly buying. Today I was looking into buying Canadian National Railway. I will discuss this stock tomorrow.

Now back to the current stock I want to discuss, Canadian Utilities (TSX-CU). Mostly the insider buying/selling has been on the selling side. However, the selling seems to be in options, so this does not tell us anything. Most analysts have a Hold rating on this stock. However, most also seem to think it is a good quality utility company with solid dividends. It has not done as well as other utilities or the TSX this year, and this seems to be why it is rated as a Hold. Also, most analysts seem to feel that earnings will be fairly flat for 2009.

However, if you look at this stock over the 1, 3, 5 and 10 year periods, it has done better than the TSX and TSX Utility Index. This is a good stock to get solid dividends and solid capital gains. The average 5 year yield is just over 3%, and the dividend increases per year over the last 5 years is quite good at almost 5%. The dividend increase for both 2008 and 2009 has been over 6%.

Good buying indicators are that the current price is quite close to the Graham Price, the current yield of 3.7% is higher than the 5 year average of 2.88% and the P/E of around 12% is lower than the 5 year average of 16%. The negatives are the expected flat earnings and the expected flat cash flow going into 2009. The stock price will probably not pick up until there is some earnings or Cash Flow growth again.

Canadian Utilities Limited operates in four business segments: regulated natural gas operations; regulated electric operations; technologies; and power generation. These operations provide service to industrial, residential and commercial customers. Other businesses consist of: natural gas gathering, processing, storage and natural gas supply management and technical facilities management. ATCO owns this company. Its web site is www.canadian-utilities.com. See my spreadsheet atwww.spbrunner.com/stocks/cu.htm. I have reloaded my spreadsheet to include the latest quarterly report.

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 www.spbrunner.com/stocks.html for a list of the stocks for which I have put up spreadsheets on my web site.

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