I am back to reviewing stocks that I own, and this one, TransAlta Corp (TSX-TA, NYSE-TAC) I have owned for a long time. It is basically an electrical utility. What you should expect out of such a company is 8% return over the long term, basically with 4% from Dividends and 4% from Stock increases. I bought this company in 1987 and I bought some more in February of 2009. To date I have made a return of 7.7%. (The stock is currently depressed because of the recession. )
This stock pays a good dividend, usually in the area of 4%. However, the dividend is currently just over 6%. They do not raise their dividends often or usually by very much. The dividend growth for the last 5 and 10 years has been 3% and 2% per year, respectively.
Really, none of the growth figures is anything to write home about. TransAlta Corp had a tough year in 2009. The growth in revenue for the last 5 and 10 years was 0% and 10%. This is because revenue was down 11% in 2009. Also, cash flow growth over the last 5 and 10 years is 0% because cash flow dropped in 2009. However, 2008 was a usually good year for cash flow.
The company has a lot of debt, and this is quite normal for this sort of company. Leverage (Assets/Book Value) is 3.20 in 2010. It has been coming down lately as the 5 and 10 year Leverage is 3.48 and 3.75. The Liquidity Ratio is also better, coming in at 1.01 in the first quarter of 2010. The 5 year average is just 0.75. The Asset/Debt Ratio has usually been ok, with a 5 year average of 1.43 and a current one 1.45. The Return on Equity for 2009 was a bit low at 7%, but for the 1st quarter, it is back to what you would expect at 8.8%.
Let’s face it; this stock will never generate a lot of money for you. However, what it will do is give your portfolio some solid consistent income. I am happy with this stock. It has done as well as I expected to do. I will not be buying anymore as I have enough in my portfolio.
TransAlta Corp is an electric generation and marketing company. They operate in Canada, the U.S., Mexico and Australia. Most of its generating capacity is coal-fired, but it does produce electricity from both hydro power and alternative energy. Its web site is here TransAlta. See my spreadsheet at ta.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.
Post a Comment