Thursday, October 11, 2012

ATCO Ltd 2

On my other blog I am today writing about what I think of a U of T lecture series a friend of my mine wanted to go to. The lecture series seemed to be a series about conspiracy theories galore... continue...

I do not own this stock (TSX-ACO.X). I have followed this stock for some time. It is a utility stock that has been and is still on the dividend lists that I follow of Dividend Achievers (see resources) and Dividend Aristocrats (see indices). Some consider this stock to be a dividend growth stock.

When I look at insider trading I find $1.4M of insider buying and $0.9M of insider selling with a net of insider buying of $0.5M. This company not only has options but also Share Appreciation Rights (SARs). There seems to be an awful lot of options and rights outstanding.

Both the CEO and CFO have lots of these options and rights and far more of these than actual shares. However, they both own shares worth in the millions (5 to 7 million). There are also lots of officers with options and rights. As a group, officers have lots more options and rights than shares. There are also subsidiary Executives who have rights and options. They seem to have more options and rights than actual shares. It is only the directors who have no options or rights, but they do not own much in shares either.

There are voting shares (TSX-ACO.Y) and non-voting shares (TSX-ACO.X). Ronald Southern owns around 84% of the voting shares and therefore controls the company. There only seems to be minimal amount of institutional ownership of shares.

The 5 year low, median and high median Price/Earnings Ratios are 8.94, 10.49 and 11.73. The current P/E Ratio of 12.09 on stock price of $75.17 and 2012 Earnings of 6.22 show a relatively high stock price, but not excessively high stock price. (Note 10 year median P/E Ratios are similar to the 5 year median ratios.)

I get a Graham Price of $74.38. The 10 year low, median and high median Price/Graham Price Ratios are 0.69, 0.79 and 0.97. The current ratio of 1.01 again shows a relatively high current stock price, but not an excessively high stock price.

I get a 10 year Price/Book Value per share Ratio of 1.48 and a current P/B Ratio of 1.90. The current ratio is some 29% higher than the 10 year ratio. This shows a relatively high stock price.

The 5 year median dividend yield is 2.01% and the current dividend yield is 1.74%. The current one is almost 14% lower than the 5 year median yield. This shows that the current stock price is relatively high. (Note that the 10 year median low dividend yield is 1.77%.)

All my stock tests show the same trend and that is a current relatively high stock price.

When I look at analysts' recommendations, I find Buy and Hold recommendations. Most recommendations are a Hold. The consensus 12 months stock price is $80.80. This implies a total return of $9.23, with 7.49% from capital gain and 1.74% from dividend income.

One Analyst with a Buy recommendation gives a 12 month stock price of $87.00. (This implies a 17.48% total return with 15.74% from capital gain.) They considered this stock to be a low risk stock. Another with a buy recommendation said it was a "Great western Canadian success story".

Globe Investor Number Cruncher on September 17 mentioned this stock in their story on "In the value hunt, these bargain stocks measure up". They were looking for stock with P/E lower than the market average. (I always look at P/E relative to this stock and also consider P/E on similar stocks. In my experience the P/E for utilities tend to be relatively lower than the market average. See the MacLeod Gazette for an item on the historical background of this company.

I still think this is a good company. However, along with a lot of Canadian utility stocks, the stock price is relatively high.

ATCO LTD. is a management holding company with operating subsidiaries in electric and natural gas utility operations, independent power operations, production, storage, processing, gathering, delivery of natural gas, technical facilities management for the industrial, defense and transportation sectors, the manufacture, sale and leasing of industrial shelters and industrial noise abatement technologies. ATCO has just over 50% stake in Canadian Utilities Ltd. The company utilizes a dual share structure of voting and non-voting shares. Its web site is here ATCO. See my spreadsheet at aco.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 or StockTwits.

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