Thursday, October 15, 2009

ATCO Ltd 2

I am continuing my review this stock (TSX-ACO.X) today as I have updated my spreadsheet with the December 2008 financials and the 2nd quarterly financials. I do not own this stock. This company is on the dividend lists of Dividend Achievers and Dividend Aristocrats (see indices). (Note the new address for Dividend Achievers list.)

The first thing I always look at is Insider Buying and Insider Selling. You do not often get much information from this, but every once in a while you can get very strong buy or sell signals. As it happens for this stock, there was a bit of Insider Buying and a bit more of Insider Selling, but we do not learn much. The thing on this stock that gives some insider information is that they raised the dividend over 6%. This is not bad. However, you can see from the spreadsheet the dividend raises hit a peak about 10 years ago and have been declining every since.

According to my spreadsheet, the 5 year average low for the P/E ratio is 9.6. For the estimated earnings for 2009, I get a P/E of 13. If you look at sites that use the earnings for the last 12 months, the current P/E is around 9. Any P/E ratio under 10 is good. When I look at the Graham Price, I see that the current price is some 20% lower than the Graham Price. This is good. However, since this stock is largely owned by a single shareholder, the stock price has a tendency to be around the Graham price. So being below the Graham Price is this case is not as good as it first appears to be.

When I look at the current yield compared to the averages, I find that the current yield at about 2.3% to be higher than the 5 year average of 2.1%. When I look at the Price/Book Value ratio, which is currently around 1.49, is slightly lower than the long term average of 1.55.

The Globe and Mail Investor site gives this stock a 4 star rating. When I look for analyst ratings, I find that few analysts follow this stock. There are some Buy, Hold and Underperform ratings for this stock. The consensus recommendation is a Hold. (See my site for information on analyst ratings.)

If you look at the charts and compare this stock to the TSX Index and the Utility Index, it has done as bit better than both over the long term, plus the dividends have added some 2% per year to the total return received for this stock. There appears to be a lack of enthusiasm for this stock. The current price seems to be good, but no bargain. When I updated dated my spreadsheet yesterday, I noted that the earnings estimates have gone up a bit and this is a good sign. Some analysts expect the stock price to go up a bit over the next year, but there is definitely a lack of enthusiasm for the stock.

ATCO LTD. is a management holding company with operating subsidiaries in electric and natural gas utility operations, independent power operations, production, storage, processing, gathering, delivery of natural gas, technical facilities management for the industrial, defense and transportation sectors, the manufacture, sale and leasing of industrial shelters and industrial noise abatement technologies. ATCO has a 52% stake in Canadian Utilities Ltd. The company utilizes a dual share structure and it is effectively controlled by R.D. Southern. Ronald D. Southern owns 83%. The Southern family of Alberta made its wealth by doing a fine job of managing the company and its subsidiaries. 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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