Tuesday, June 22, 2010

Atlantic Power Corp

Because I like utility companies and just recently, I have read two columns that recommended this particular utility company (TSX-ATP), I decided to investigate it. After investigating this stock, my impression is that I would not be a stock I am interested in. However, I will talk about it and upload my spreadsheet so that you can decide for yourself. This company has recently converted from an income trust to a corporation. This company is in the TSX Utility Index. (Perhaps this is why it is recommended?)

The main point I have against this stock is that it cannot make a profit using EPS (Earnings per share) criteria. I know that this value is somewhat fake, but it does allow investors to compare different companies on basic level terms. This company has only been around since 2004 and it is only in 2008 that it had earnings of $1.67 (EPS). It is expected to earning some $.44 this year and $.76 next year, but these are only estimates and estimates can be wrong.

The other thing to note before going on to talk about what growth has been good, is that if you had bought this stock in 2008, the price has hardly moved and the return is just over 1% per year. However, the total return would be just over 5% per year because of dividends. The thing to note about dividend, besides being at a good rate, is that they are, on average at 34% of the cash flow from operations. This is not bad. However, the payment from cash flow for 2009 was up to some 42%.

The other think to note about dividends is that the growth in dividends has been at the rate of almost 5% per year over the past 5 years. This is a good growth. Also, if you had been invested in this stock over the past 5 years, the dividends paid on your investment would be just over 10%. The growth in revenues, cash flow and book value has all been good. For example, the growth in cash flow and book value over the past 5 years has been just over 20% per year.

Tomorrow, I will look at what the analysts say on this stock. However, it will never be on my buy list until it can consistently have some earnings. I do not like stocks that have no earnings.

Atlantic Power Corporation is a power income fund that owns interests in a diversified portfolio of power generation and transmission projects situated primarily in major U.S. markets.
This company has a collection of gas-fired plants in the US and is generally in the lower cost quadrant of generation in its region. Its web site is here Atlantic Power. See my spreadsheet at atp.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 for stocks followed and investment notes. Follow me on twitter.

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