Thursday, April 12, 2012

TransAlta Corp 2

I own this stock (TSX-TA). I bought this stock in 1987; I sold some in 2000 and then bought some more in 2009. I have made a total return of 7.45 per year. The portion of dividends is 7.11% and capital gain portion was just 0.34%. The dividend yield was much higher on this stock prior to 1997.

On the insiders trading report, it shows a small amount of insider buying and a small amount of insider selling. The net insider buying at $0.6M. This company is also moving away from options and to Performance Share Ownership Plan (Psop) units, Restricted Share Units and Deferred Share Units. Everyone, including the directors have more of these new types of options than common shares. There are a lot of people with these new type options including CEO, CFO, Officers and others and directors.

There are some 211 institutions that own 53% of the shares of this company. Over the past 3 months they have bought and sold shares. There is a net of buyers, but they have reduced their overall share in this company by 2% during this period.

The 5 year median low and high Price/Earnings Ratios are 17.80 and 23.98. The current P/E ratio is relatively low at 16.11. (Although I think the P/E ratios on this stock are rather high for a utility stock.) I get a Graham Price of $17.39. The low and median difference between the Graham price and the stock price is stock price being 7.9% and 29.8% higher than the Graham Price. Currently, the stock price is 2.8% above the Graham price and this would point to a relatively low stock price.

The 10 year median Price/Book Value Ratio is 1.74 and the current ratio of 1.48 is only 85% of the 10 year median ratio. The current P/B Ratio points to a reasonable stock price. (For the stock price to be low, the current P/B Ratio would have to be just 80% of the 10 year median ratio.) The 5 year median dividend yield is 5.32% and the current yield of 6.49% is some 22% higher. This relatively high dividend yield points to a relatively low stock price.

When I look at analysts’ recommendations I find they include all of Strong Buy, Buy, Hold, Underperform and Sell. The consensus recommendation would be a Hold. One analyst just announced recommendation change from Sell to Hold. The Hold consensus comes with a 12 months stock price of $20.89. One hold analyst gives a 12 months stock price of $21.00. (See my site for information on analyst ratings.)

A number of analysts think that TransAlta is well managed. One analyst said this company was the weakest company in the utilities group. Another analyst said that it is not popular at the moments as it has had some troubles. A number of analysts mentioned the great dividend yield. (It is currently at 6.5%.) A number of analysts thought that it will have trouble growing. The worry is that with Dividend Payout Ratios high the company has not enough money to expand.

I think that the company will get though its problems and be a solid dividend payer in the future. I am holding on to my current shares.

New on April 19, 2012. See someone else’s view of this sock at Student of Value Investing blog.

TransAlta is a power generation and wholesale marketing company. TransAlta maintains a low-to-moderate risk profile by operating a highly contracted portfolio of assets in Canada, the United States and Australia. TransAlta's focus is to efficiently operate our biomass, geothermal, wind, hydro, natural gas and coal facilities in order to provide our customers with a reliable, low-cost source of power. 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.

1 comment:

  1. I'm holding as well Susan.

    Unless a dividend cut comes, I'm going to keep it DRIPping in my brokerage account.