Transalta Corp

I am reviewing this stock (TSX-TA) today as I have received its annual report. I first bought this stock in 1987. I sold some in 2000 as this stock was going through a hard time. I also bought some more of this stock in February 2009. Since I bought this stock in 1987, I have earned 7.8% annual return. Over the past 10 years, including my recent purchase I have made a return of 8.5%. If I exclude my recent purchase, I have made a return of 11% over the past 10 years.

This is a utility stock and you would expect to make a return, with dividends included, of approximately 8% per year. What is expected is that there will be a dividend return of 4% and stock appreciation of 4%. From utilities stocks you should never expect a great return. What you should expect is that they will provide stability to your portfolio.

In looking at the growth rates on this stock, most of the 5 year growth rates are better than the 10 years, but not in all cases. For example, this stock’s Revenue growth of 11% for the last 10 years is better than the 5 year growth of just 4%. When you look at Cash Flow and Book Value, you see the opposite, where the 5 year growth is better than the 10 year growth.

For the Stock Price, it peaked in 2000 and then did not go anywhere until 2005. It is, of course, down at the present time as all stocks are depressed. However, over the long term, this stock has performed as expected. In looking at the dividends, increases have been few, except for the last 2 years and then they have been good at around 8% for 2008 and 2009.

The liquidity ratio has never been great on this stock as it has been below .60. However, the Asset/Liability Ratio has always been above 1.00 and is currently at 1.52. The Return on Equity (ROE) average for the last 5 years is ok at 8.6%. The one for 2008 is better at 9.4%. The one for the first quarter of 2009 is only 6.3% and this is rather low, but this is just the first quarter.

To end on a positive note, the Accrual Ratio is negative. At the end of the first quarter of 2009, it is at a very good -5.3%. I do not have a lot of stock, but I like utilities for the stability they bring to my portfolio and I plan to hold on to what I have. Currently, I do not plan to add anymore of this stock. Tomorrow, I will review what the analysts are saying about this stock. I am still looking at some US stocks, but I feel that I should concentrate on Canadian Stocks, as this is why I have this blog.

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 www.transalta.com. See my spreadsheet at www.spbrunner.com/stocks/ta.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.