Canadian Utilities Ltd

I do not own this stock (TSX-CU). I started to follow this stock as it was on a number of dividend lists. It was on and still is some dividend lists of Dividend Achievers (see resources) and Dividend Aristocrats (see indices). It is not a bad idea to look at these lists to get ideas on stock to follow or buy. However, please be aware that these lists are constantly being updated. And, companies are not necessarily a good dividend stock just because they are on such lists.

The 5 year median dividend yield is 3.1% and the current yield is 2.55%. The 5 and 10 year growth in dividends is at 7% and 5.5% per year, respectively. The latest dividend increase is very good at 9.9%. Investors in the past have done quite well in that after some 10 years they are getting around 7.5% yield and after 15 years getting around 11.5% yield on their original investment

Total return over the past 5 and 10 years is also quite good. The 5 and 10 year total return is at 7.89% and 12.8% per year. The dividend portion of this return was 2.68% and 3.32% per year over the past 5 and 10 years. The dividends were some 34% and 26% of the total return over these periods. The capital gain portion was at 5.21% and 9.48% per year over these periods.

Revenue has increased at the rate of 4.3% per year over the past 5 years. However, revenue has declined by 1.6% per year over the past 10 years. The Revenue per Share is slightly different with the increase at 4% per year over the past 5 years and a decline of 1.7% per year over the past 10 years. The difference is because outstanding shares have marginally increased each year over the past 5 and 10 years.

Earnings per Share have done better with growth at 7.4% per year and 7% per year over the past 5 and 10 years. The growth in book value is somewhat in line with that of EPS with growth at 5.7% per year and 6.5% per year over the past 5 and 10 years. Growth in cash flow per share is very good with growth at 15.5% and 10% per year over the past 5 and 10 years.

Earnings for the 1st quarter come in within the expected analysts estimate range. However, the earnings for the second quarter come in lower than the expected analysts range. However, the yearly estimates for 2012 and 2013 seem not to have been changed. The EPS for the 3 months ending in June 2012 is $0.74 and the EPS for the 3 months ending in June 2011 is $0.70. So earnings are up some 5.7% between this quarter and last year's quarter.

The Return on Equity is quite good with the ROE at the end of December 2011 at 16.5%. The 5 year median ROE is also quite good at 15.3%. The ROE based on comprehensive income is a bit lower, but still quite good at 13.3% for the end of December 2011. The 5 year median is also good at 14.2%.

The current Liquidity Ratio is quite low at 0.82, but the situation is better than it initially appears as they have spent cash on assets and they have redeemed some preferred shares. The cash flow is still strong. The Liquidity Ratio at the end of December 2011 was 1.47, a better ratio. The current Debt Ratio is a bit lower than normal at 1.52.

The current Leverage and Debt/Equity Ratios are a little high at 3.74 and 2.45. Their 5 year median ratios are 3.02 and 1.74. All the debt ratios are trending the wrong way, buy I do not think that, at this point, there is anything to worry about. They have redeemed some preferred shares and issued new ones at a lower yield. They have bought assets and they still have a good cash flow.

This company has done well for its shareholders over the past 5 and 10 years. The markets have been rather difficult. It is a utility stock and lots of utility stocks have done well. Most of the utility type stocks have done well in our current market as dividends are decent. This stock still has a decent dividend, but the yield is below the both the 5 and 10 years median yields. The management of this company certainly feels good about the future with the recent large dividend increase.

Canadian Utilities Limited operates in four business segments: regulated natural gas operations; regulated electric operations; technologies; and power generation. These operations provide service to industrial, residential and commercial customers. Other businesses consist of natural gas gathering, processing, storage and natural gas supply management and technical facilities management. ATCO (ACO.X) owns just over 50% of this company. CU.X is voting and Class B, CU is non-voting and Class A. Its web site is here Canadian Utilities. See my spreadsheet at cu.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.