Thursday, March 25, 2010

Fort Chicago Energy 2

I am reviewing this stock (TSX-FCE.UN) today as the annual reported for December 2009 has been published and I own some of this stock. This dividend stock was recommended by a newsletter I like. I bought only a small amount of this stock in December 2008 and March 2009 and my return has been some 56%. This is because I bought this stock at a good price and the dividends are good. There were some aspects of this company I did not like, so I made a small purchase.

In this second part of my report, I like to start with Insider Buying and Insider Selling. There was a small amount of selling in the early part of this year. This means nothing. There has also been some buying of stock under the company’s employee buying plan, and is positive. There has been no dividend increases lately as this company will be going to a corporation and plans, at the moment, to retail the current dividend. This dividend is good as it is over 9%.

The next thing is the P/E ratios. The 5 year low is 17.3 and the 5 year high is 24.7. I get a current one of 21.4. The P/E ratio is high on this stock. For those that want to check the Price/FFO ratios, they are on my spreadsheet. You can check relative values, but do not mistake P/E and P/FFO ratios as being interchangeable. However, P/FFO ratios of different companies can be compared.

The next thing I want to look at is the dividend yield. The current yield of 9.4% is slightly below the 5 year average of 9.5%. However, the yield for this stock was more like 8%, until the recent recession. I get a current Graham Price of $7.51 and the stock price is $10.69. However, I should point out that this Graham Price (which takes into consideration the earnings and book value) has fluctuated over the years. This is because both the earnings and book value has fluctuated over the years. Also, there is little or no increase in the Book Value, but this figure is affected by depreciation of assets, so it may not fairly reflect the company’s break up value.

We are not going to get much value out of the Price/Book Value ratio either. This is because of the decreasing book value and problems shown above. Probably the most effective measure of the current stock price is the dividend yield and it seems to be saying stock price is reasonable or slightly low. The one real Buy signal is the negative Accrual Ratio, and this is quite close to a negative 5%.

So, what do the analysts recommend to do with stock? When I look at the recommendations, there are lots and lots of Hold recommendations, some Buy and the odd Sell recommendations. (See my site for information on analyst ratings.) No analysts with Hold recommendations expect any rise in the stock price, or maybe a slight decline in the stock price, over the next year. Any buy recommendation comes with talk about the great yield. It is called a boring company that has great assets. Some feel that it is only a good buy under $10.

I plan to hold on to the shares I have. The yield is great and I might reconsider and get more if the price drops below $10.

Fort Chicago owns and operates energy infrastructure assets across North America with three principal businesses of Pipeline Transportation, natural gas liquids and power. The company operates in Canada and US. 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 and my investing notes at Follow me on twitter.

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