Algonquin Power & Utilities Corp 2

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I do not own Algonquin Power & Utilities Corp (TSX-AQN). However, I do own Emera Inc. (TSX-EMA) which owns 21.5% of this stock. Because the heavy involvement of Emera in this company, I do not think it would be a wise idea to own both stocks.

When I look at insider trading, I find a minimum of insider buying and no insider selling. CEO, CFO and officers have more options than shares. For example the CEO has $2.8M in shares and $8M in options. Directors have both options and Rights Deferred Share Units and they seem to have as much in shares as they have in options and Rights Deferred Share Units.

According to AQN, there are 55 institutions that hold 24% of the outstanding shares. Recent changes (they do not state time period) have these institutions increasing their outstanding shares by 6.5%. Reuters says that there are 37 institutions holding 17% of the shares and over the past 3 months their shares have increased by 3.5%. It would appear that institutional holdings are increasing. This is a positive.

The 5 year low, median and high Price/Earnings Ratios are 17.86, 21.00, and 24.14. The current P/E of 32.55 would suggest that the current stock price is rather high. However, the P/E based on the 2013 earnings is 21.7, which is a relatively moderate P/E Ratio. This company is not expected to earnings much this year according to the consensus EPS estimates. For the 1st Quarter, the EPS came in right on the consensus estimate.

I get a Graham price of $4.15. The 10 year low, median and high Price/Graham price Ratios are 1.20, 1.37 and 1.50. The current P/GP Ratio of 1.57 suggest that the stock price is rather high. However, the Graham Price is $5.09 in 2013 and the P/GP then is 1.28, a moderate ratio.

I get a 10 year Price/Book Value of 1.43 and a current P/B Ratio of 1.70. The current ratio is some 19% above the 10 year median. This would also suggest a rather high current stock price. The Book Value has taken a beating over the last 10 years. I do not see this changing quickly as the company is set to payout more in dividends than they are earning this year. A P/B Ratio of 1.70 is not that high in absolute terms.

The Dividend Yield is not going to give us a better story as the dividends have had a recent massive decline. We have a 5 year median dividend yield of 9% and a current dividend yield of 4.3%. On the other hand, we did expect that dividend yields would decline on old income trust stock to a range of 4 to5%. The current dividend yield is in the bottom half of this range.

The only Ratio that shows that the stock price might be a reasonable one is the Price/Sales per Share Ratio. The 10 year median P/S Ratio is 3.60 and the current P/S Ratio is 2.56. This is a relatively low ratio and shows a very good price. However, when you have to go looking for something that makes a stock look better in regards to price, you are often just grabbing at straws rather than really evaluating the stock price.

When I look at analysts" recommendations, I find Strong Buy, Buy and Hold. Most of the recommendations are Strong Buy and Buy and the consensus recommendations would be a Buy. One Buy recommendations comes with a 12 months stock price or $7.50. They also think that dividends will continue to rise in the mid-term as the DPR compared to AFFO is less than 100%. (DPR re AFFO is expected to be 97% and 80% in 2012 and 2013.)

12 Month stock price target is $7.28. This implies a total return of 16.13%, with 11.83% from capital gain and 4.30% from dividends. They have a Wikipedia entry.

Our newspapers have a couple of recent articles on this company. The first is from G&M called "Electrify your dividends with power company stocks" aqn.htm. It says that this stock could be a dividend yield play. The second one is from the National Post and is called "Algonquin"s target cut on lower earnings for new properties" and is by Julia Johnson. It says that Scotia Capital Inc. analyst Matthew Akman cut his 12 month stock price from $7.50 to $7.25, but that he still has a positive attitude towards this stock.

This company increased their shares by 42.7% in 2011. The increase was due to conversion of debentures and selling of shares. Emera Inc. increased their shares by 12M and 12.6%. They have subscription for almost 19M more shares.

In the near term this stock is overpriced. However, it may not be in the long term and this is where investors want to go. What we do not know is how well the company will manage in the long term. The G&M article that calls it a yield play may just have it right as yield is still a very good 4.3%.

APUC owns and operates a diversified portfolio of clean renewable electric generation and sustainable utility distribution businesses in North America. Liberty Water Co., APUC's water utility subsidiary, provides regulated water utility services. Through its wholly owned subsidiary Liberty Energy Utilities Co., APUC provides regulated electricity and natural gas distribution services. Algonquin Power Co., APUC's electric generation subsidiary, includes renewable energy facilities and thermal energy facilities. Its web site is here Algonquin Power. See my spreadsheet at aqn.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.