AltaGas Income Trust

I bought this stock (TSX-ALA.UN) in February of 2009 after reviewing it, as it was on the dividend lists that I follow. I purchases more in November 2009 with the money I got from selling EnCana. Since buying this stock, I have made a return of 26% per year. I got the stock for a reasonable, but not great price. This company is on the dividend lists that I follow of Dividend Achievers and Dividend Aristocrats (see indices). Although this might change as they will cut their dividend when they convert to a corporation in 2011.

I buy stocks to earn dividend income. This stock has done well in increasing their dividends over the last 5 and 10 years at the rate of 10% per year and 36% per year respectively. The current good dividend will stop when they change to a corporation, but there is no reason to believe that they will not restart increasing their dividend later. In the meantime, I have getting a 10% return on my investment and in 2011, this return will decrease to just over 8%. This is still a good return.

In looking at growth figures, their 10 year figures are much better than their 5 year figures. They did not have a good year in 2009, especially as far as Cash Flow and Book Value were concerned as both these items when down. Another problem is that this company deals in gas and the price of gas is going nowhere. This company’s results are expected to worse in 2010 and 2011 in regards to both earnings and cash flow. Also, no one expects the price of this stock to go anywhere either. The bright point is that the company is getting into renewable power generation. The company expects in the future to have stable and sustainable cash flow to generate future dividend payments.

The Liquidity Ratio is very low at 0.39, but this is because a portion of their long term debt came due this year. However, this debt is covered by their credit facilities, so I am not concerned. Also, their Asset/Liability Ratio is much healthier at 1.66. If you look at the return on equity, this stock is doing very well with 13.5% ROE for 2009 and a 5 year average of 17.2%.

Although I did not make a sizable purchase of this stock, I am happy with what I have and will continue to hold the shares I have. For another view on this stock, see Think Dividends blog.

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. Also, look at other investing notes on my website at www.spbrunner.com/investing.html. Follow me on twitter.