Tuesday, June 7, 2011

Emera Inc

I own this stock (TSX-EMA). It is in my Locked-Pension Account. I bought this stock in July 2005 and I have made a return of 14.3% per year. The portion of this total return attributable to dividends would be around 4% per year.

The current dividend is good at 4%. The growths in dividends are not bad, especially over the past 5 years. Growth over the past 5 and 10 years in dividends is 5.2% and 2.5% per year, respectively. Total return has also been good on this stock over the past 5 and 10 years at 12% and 9%, per year, respectively. The portion of this total return that is attributable to dividends over both these time periods is around 4% per year.

However, revenue, earnings, cash flow and book value growth has not been that good lately, especially over the last 10 years. Unfortunately, revenue growth is not expected to be high for the next two years, with growth this year and next at 3% and 2%, respectively. For example, revenue per share growth has been, over the past 5 and 10 years, at 5% and 2.8% per year respectively.

Cash Flow growth has been worse over the past 5 and 10 years at 3% and 1% per year, respectively. Cash flow is expected to growth over this year and next at 6% and 8.7%. Book Value growth has been a bit better over the past 5 and 10 years, at 3% and 2.4% per year, respectively.

Earnings have been better with 5 and 10 year growth at 8.7% and 3% per year respectively. Also, earnings are expected to grow at the rate of 8.5% and 5% in 2011 and 2012. Please note that it is not wise to put too much faith in estimates, as they are probably wrong as often as they are right. However, estimates do give you guidelines as to why analysts give the recommendations on a stock that they do. It gives you an idea what is company is expected to do and it is better than having nothing.

The Return on Equity on this stock has often been good. The ROE for the end of 2010 is 11.1%. The 5 year median ROE to the end of 2010 is also 11.1%.

I guess the last thing to talk about is debt ratios. For this utility company, the Liquidity Ratio has often been quite low. However, it was better at the end of 2010 at 1.13. It is slightly lower for the 1st Quarter of 2011 at 1.06. The Asset/Liability Ratio is better, with an end of 2010 ratio at 1.39 and a current one of 1.40. When these ratios are under 1.00, it means that assets cannot cover liabilities. This sort of company often has a high debt. The Leverage Ratio currently at, 3.79 and the Debt/Equity Ratio currently at 2.70 are ok.

I have been pleased with my investment in Emera; and I think it has been a good investment for me. For such utility companies, what you expect in the long term is 4% dividends and 4% capital gain each year for the long term.

Emera Inc. is an energy and services company that has two wholly-owned regulated electric utility subsidiaries, of Nova Scotia Power Inc. and Bangor Hydro-Electric Company. Emera also owns 19% of St. Lucia Electricity Services Limited and 25% of Grand Bahamas Power Company that serves 19,000 customers on the Caribbean island of Grand Bahamas. Emera also owns the Brunswick Pipeline; Bayside Power, in Saint John, New Brunswick; Emera Energy Services; a joint venture interest in Bear Swamp northern Massachusetts; a 12.9% interest in the Maritimes & Northeast Pipeline; and an 8.2% interest in Open Hydro. Its web site is here Emera. See my spreadsheet at ema.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.

1 comment:

  1. Thanks for this review. I own Emera in my RRSP. I am a bit surprise to learn about the bad cash flow but maybe it will eventually recover.