Wednesday, March 24, 2010

Fort Chicago Energy

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.

The reason for my great return is that the price of this stock has increased since I bought it. This stocks increase since the March 2009 low is over 60% and it still as a dividend yield over 9%. However, it is not likely that the distributions will increase over the short term. It will be changing to a corporation and I do not expect any changes in the distribution before 2011.

The one thing that hits you after reviewing the 2009 annual report is that this company has had a bad year. Although, a lot of the losses are do to write-offs. Because of the bad year it has had, the growth figures are from mediocre to really bad. The only good growth figures is the growth in distributions, and the 5 and 10 year growth figures are 3.7% and 5% per year. However, do not expect any growth from the current distributions, which is, and has been $1.00 per share since 2008.

The one thing that I have not liked about this stock is the lack of growth in the Book Value. The growth in Book Value was bad last year and the Book Value is currently dropping at the rate of 2 to 3% per year. The Total Return on this stock has been increasing. The 5 and 10 year growth figures are 6.2% and 11.8% per year respectively. A lot of this total return is because of the distributions paid. The 5 year growth for just stock price is a negative 2.6%.

Another negative for this stock is the Liquidity Ratio and no matter how you look at it, it is low at 0.49. This means that the current assets cannot cover the current liabilities. The Asset /Liability Ratio is also low at 1.32. However, the assets do cover the liabilities in this last ratio. When you look at the Return on Equity, the ROE for 2009 is just ok at 5.4% and the 5 year average is better at 8.7%. The one good ratio is the Accrual Ratio and it is a negative 4.7%.

I plan to continue to hold my shares. I do not have much invested and the yield is good and most analysts feel the distributions are safe. This stock is also being followed on another blog called Think Dividends.

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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