Thursday, June 11, 2009

Transalta Corp 2

I am continuing my review this stock (TSX-TA) today. It is not on the Canadian increasing dividend paying stock lists that I follow, but I have seen it recommended by other people that recommend good Canadian Dividend Paying stock. As I have said yesterday, it pays good dividends and is stable. It is a utility stock.

The first thing I looked at was Insider Buying and Selling. There is lots of insider buying, with CEO, CFO and directors all raising their stake in this company. The other thing about this stock is that after 9 years of flat dividends, the dividends on this stock were raised around 8% in 2008 and 2009. It is obvious that management has confidence in the future of this company.

It is a good buy in connection with spreadsheet ratios? First, I looked at the dividend yield. The current yield is 5.7% compared to a 5 year average of 4.1%, so this is good. The P/E at around 15 is not that low, but it is lower than the 5 year average of 22. Of course, the P/E is dependent on the earnings estimate, and I note that Globe Investor site gives it a current P/E of 17. This is on par with the 5 year average low of 17, but the low P/E ratios of the past have been lower.

The current price is at the current calculated Graham Price of $20.29; but it is still higher than the one for the end of 2008, which is $18.19. Perhaps a better indicator is the Price/Book Value ratio. The current P/BV ratio of 1.50 is less than 80% of the 10 year average P/BV 2.04. These all point to the current price being a decent one.

There are Buy ratings on this stock and Hold ratings. I cannot find any other. The consensus rating is really a toss-up between the Buy and a Hold. (See my site for information on analyst ratings.)

I can see why this stock is given a buy rating because of the new dividend increases and the fact of insider buying. On the other hand, if the current economic problems go on longer, there might be decrease demand for power. Also, this stock hit higher prices 10 years ago than it is at currently. Earnings and cash flow per share 10 years ago were just as good as they are today. Because of the problems it was having, I sold half the stock that I owed in 2000. I think it will do better in the future and this is why I purchased more this year. However, I will continue to monitor this stock.

Transalta is an electric generation and marketing company. They operate in Canada, the U.S., Mexico and Australia. Most of its generating capacity is coal-fired, but it does produce electricity from both hydro power and alternative energy. Its web site is See my spreadsheet 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.

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