Monday, August 8, 2011

Innergex Renewable Energy

I do not own this stock (TSX-INE). The Innergex Power Income Fund has amalgamated with Innergex Renewable Energy Inc. to form Innergex Renewable Energy. When looking at this spreadsheet, please realize I am coming from the Innergex Power Income Fund (TSX-IEF.UN) to the Innergex Renewable Energy stock (TSX-INE). This can make a big difference in past performance for a stock. For a stock that amalgamates, you have to come from one of the stocks to show long term performance. The other thing to note is that the unit holders from Innergex Power Income Fund received 1.46 shares for each of their shares. I have adjusted my spreadsheet accordingly.

Currently, shareholders are getting a good dividend yield of 6.1%. This is lower than the 5 year average of 8.1%, but the distributions have probably now stabilized after the change of this company to a corporation. The dividends on this company had never increased much. They now have decreased almost 15% as the income trust is changed into a corporation. A lot of Income Trust companies had to decrease distributions when changing to corporations.

Over the last 5 and 7 years, the total return on this company was probably around 9%, with all but 2% of this return in distributions. Although the 5 year median distribution from Adjusted Cash Flow is 91%, the one for 2010 was a much more sustainable 65%. A problem I see that that no one seems to expect much in the way of earnings over the next two years and that puts the Payout Ratio for Earnings way out of any acceptable value. (See my site for information on Dividend Payout Ratios).

A couple of points in the favor of this stock is that revenues are growing nicely, with revenues per share growing at the rate of 12.4% and 9.1% per year over the past 5 and 7 years, respectively. Revenue growth is important if you are going to have future earnings and cash flow growth. The Adjust Cash Flow is also growing nicely at around 8% per year over the past 5 and 7 years. The Book Value hasn’t been growing but this is a common problem with income trust companies.

The Liquidity Ratio is a bit low at a current 1.08, but the Asset/Liability Ratio is much better at 1.61. Both the Leverage Ratio and the Debt/Equity Ratio are fine at a current level of 2.66 and 1.65, respectively.

I have reviewed a number of utility stocks involved in the renewable energy industry lately and I do not see any that I would currently like to buy, including this stock.

Innergex is involved in Canada’s renewable energy industry. The Company develops, owns and operates facilities located in North America, leveraging run-of-river hydroelectric power generating facilities, wind farms and photovoltaic solar parks. Its web site is here Innergex Renewable Energy . See my spreadsheet at ine.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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