Friday, November 6, 2009

AltaGas Income Trust 2

I am continuing my review this stock (TSX-ALA.UN) today as I own this stock and I was reviewing it for a possible purchase. There is a definite seasonality to the stock market and the fall is the time to do any purchases you might want to make.

I first looked at the Insider Buying and Insider Selling reports. What I found is that over the past year insiders have bought over 2.5M of this stock. They have also bought over 1.4M over the past 2 months. This is a very positive signal.

The next thing to look at is spreadsheet ratios. The 5 year average low for P/E is 10.7. Sites that show a P/E using last 12 months earnings have a P/E of 8. I get a P/E of just over 11 using expected 2009 earnings. Both these P/E ratios are on the low side. The 5 year average yield is just under 8%. The current yield is 11.8%. The current Price/Book Value is about 75% of the 10 year average. All these ratios points to a relatively good price.

And the last thing to point to a relatively good current price is the Graham Price. The Graham Price I calculated using the values at September 30, 2009 for the Book Value and the expected earnings for 2009 is $21.89. The stock price today is $18.20. This means that the current price is more than 16% lower than the Graham Price. Any price at or below the Graham Price is good.

Globe investor gives this stock a 4 star rating. When I look at analysts recommendations, I find only Buy and Hold recommendations. There are more Buy recommendations than there are Hold recommendations. The consensus recommendation will be a Buy. (See my site for information on analyst ratings.)

The last thing to mention is that in the 3rd quarterly report, the company has stated that they plan to convert to a corporation in the 2nd half of 2010. At that time they expect to declare dividends at a lower than the current distribution rate. They expect dividends will be set at an annual rate from $1.10 to $1.40. The yield at the current stock price for a $1.10 dividend is just over 6% and for a $1.40 dividend is at 7.6%. If you buy the stock, you can get a current high yield of over 11% and then enjoy a long term yield that is quite good.

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 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. Also, look at other investing notes on my website at

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