AltaGas Income Trust 2

AltaGas Income Trust 2
I am continuing my review of this stock (TSX-ALA.UN) today to see if the current price is good and what the analyst are saying about it. This stock is on the Dividend Achievers list at www.dividendachievers.com, and the Dividend Aristocrats list at www.tmxmoney.com/en/individual.html (see indices).

As usual, I am first looking at Insider Buying and Selling. The first thing to note is that there is lots of insider buying which equals almost 2% of the value of the current shares. The CEO’s, CFO’s and Directors’ holdings of shares have gone up. However, the other Officers’ shares went down in December/February time frame. The current buying by insiders is certainly showing that insiders have faith in this stock. So, this is a good indicator.

Looking at spreadsheet ratios, I find that the yield at 13.5% is higher than the 5 year average of 8%. The P/E ratio at 10 is at the 5 year average low. This is lower than the 5 year average on the closing price of 13.6. The P/E for the end of 2008 was just 7.3. The current ratio depend on what the earnings estimates are and if they are lower than what the real earnings turn out to be, then the current P/E estimate could show higher than they actually are.

The Price/Book Value ratio at the end of 2008 was 1.29 and this is only 70% of the 10 year average of 1.85. Because of the lower stock price, the current P/BV is even lower at 1.19. This, like the yield is a firmer indicator of a good price than the P/E ratio is. This is because the P/E is based on estimate earnings, and like all estimates, could be wrong. The other good indicator is that the current stock price is some 25% lower than the Graham Price and this is also a good indicator.

There are lots of Buy ratings on this stock, and a few Strong Buys and some Holds. This means that the consensus rating would be a Buy. (See my site for information on analyst ratings.) I can find no other analysts ratings on this stock. Also, the Globe Investor site rates this stock 4 stars out of a possible 5 stars. The stability ratings on this income trust are-3/STA and 3M. These ratings are from 1 to 7 with 1 being for the most stable income trusts.

When looking at the charts, this stock is considered to be part of the Energy Trust Index. For the last 1 and 3 years, this stock has done better than the Energy Trust Index and worse than the TSX Index. For longer periods, it has worse than both these indexes. However, note that these indexes doe not take into consideration distributions. Since the distribution on this stock is high, it would have done better than the charts comparing it to the TSX would show.

In concluding, I would like to point out the problems that I see on this stock from yesterday. The first is that the Accrual Ratio is very high. The other thing is that the increase in dividends over the last 5 and 10 years would not be indicative of what the future holds. Since this is an income trust, it will change back to a corporation, and this will affect the distributions or dividends paid on this stock. Even if they maintain the current dividend, this means that you could go for a number of years without any dividend increases. You might also want to see the comments put on yesterday's entry for this stock.

AltaGas operates physical assets and provides essential services to customers who produce and consume natural gas and power. Their gas business provides gathering, processing, transportation, storage and marketing of natural gas and natural gas liquids. Their power business generates and delivers power in Alberta and British Columbia and is developing a significant portfolio of renewable power projects. Its web site is www.altagas.ca. See my spreadsheet at www.spbrunner.com/stocks/ala.htm.

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.