Emera Inc 3

I own Emera Inc. (TSX-EMA). I first bought this company in 2005 and then bought more shares in 2011. To date I have made a total return of 16.5% per year. The portion of my return attributable to dividends is 4.45% per year or 27% of my total return. After 7 years investing in this stock, I am making a dividend yield of 7.2% on the original shares that I bought.

When I look at the insider trading report I find lots of insider selling and little insider buying. Insider selling is at $12.6M and net insider selling is just over $12.4M. A large part of insider selling ($10.6M) is by the CEO and it seems to be all options. The company not only has stock options, but Performance Share Units and Deferred Share Units. Everyone, including the directors have more “options” than shares. (I think options are options, no matter what you call them.)

There are 78 institutions that hold 27% of the outstanding shares in this company. They have being buying and selling shares over the past 3 months and have reduced their shares by 2.6% over this time period.

I get 5 year median low and high Price/Earnings Ratios of 13.41 and 17.30. By this measure the current stock price of $34.07 is high as the P/E is 19.69. (The 10 year median high P/E ratio is still lower at 18.00.)

I get a Graham Price of $21.45. The current stock price is some 58.8% higher. The 10 year median low difference between the Graham Price and stock price is the stock price being 7% lower. The 10 year median high difference is the stock price being 20% higher. The median difference between the Graham Price and stock price over the past 2 year is the stock price being some 20% and 34% higher. (This is a utility stocks, so you expect the stock price to be around the Graham Price.) (See my site for information on calculating Graham Price.)

I get a 10 year median Price/Book Value Ratio of 1.79. The current P/B ratio at 2.88 is some 66% higher. What you want is a P/B Ratio is close to or lower than the 10 year median. By this test, the stock price is high.

The 5 year median Dividend Yield is 4.44% and the current dividend yield is 3.96%. The current one is 11% lower than the 5 year median. What you want is one at or higher than the 5 year median dividend yield.

When I look at analysts’ recommendations, they are all over the map. I find Strong Buy, Buy, Hold, Underperform and Sell. It all depends on how you view the company. It probably does not have much upside as far as capital gain goes, but it has a good dividend and it is a rather low risk company. If you are looking for income, the 4% dividend yield is good. If you are looking at total return, there will probably be little capital gain and you might not make much beyond the dividend yield.

By all accounts, the current stock price is rather high, but not excessively so. The problem is that there are a lots of dividend investors going for yield because interest rates are so low. This is a good, low risk company and it has a good dividend of almost 4%. This is basically what the Buy recommendations are saying also.
One analyst with a buy recommendation gave a 12 month stock price of $35 and said that the 4% dividend would be attractive to income-orientated investors.

So, it all depends on why you want to buy this stock. If you want to buy it simply for yield, then it is a buy. If you are looking for dividends and capital gain, then it is probably not a buy. It is overpriced.

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.