Wednesday, October 24, 2012

Innergex Renewable Energy

On my other blog I am today writing about the Money Show in Toronto for 2012. I will be putting my notes up as I transcribe them...continue...

I do not own this stock Innergex Renewable Energy (TSX-INE), but I used to. I bought it in 2006 because it was a utility company that was into alternative energy. TD Newcrest rated it highly. Then it was an income trust called Innergex Power Income Fund (TSX-IEF.UN). I sold it in 2008. It was still an income trust, but it was not increasing its dividends. It was not doing well and I also notice that although it is still followed by some analysts, it is not as well followed, as it was when I first bought this stock.

When they changed from an income Trust they decreased their dividends by 42% (2010) and the dividends have been flat since then. They cannot raise the dividends as they are not making any profit. The Dividend Payout Ratio from cash flow is 108%. However, the DPR form adjusted CF is better at 70%.

The company is expected to earn a profit in 2012; however, the expected profit has been trending down from $0.13 a month ago to $0.08 today. If you look at the EPS over the past 12 months to the 2nd Quarter of 2012, they still have an EPS loss.

Over the past 5 and 10 years this company has been making money for its shareholders in total return. The 5 and 8 year total return has been 9.28% and 9.92% per year, respectively. The portion attributable to dividends is 6.73% and 7.15% per year, respectively. There has been capital gain at 2.55% and 2.77% per year, respectively. However, since dividends are now lower, the total return will probably be lower. Current dividend yield is at 5.32%.

The outstanding shares in this company have increased by 18% per year and 15% per year over the past 5 and 8 years. The increases all seem to be public offerings. Note that this company has only been around since 2003, and that is why the maximum of years I can cover would be 8 to 9 years.

The increase in revenue is good for this company. The increase in revenue over the past 5 and 8 years is 29% and 27% per year, respectively. Even the revenue per share has increased nicely at 9.8% and 10.6% per year. Revenue is not a problem for this company.

Since the company has an earnings loss in 2011, there is no earnings growth. Even if they do make $.08 this year, earnings will be down since the company started in 2003. Since the company was started they, so far, have had 4 years of losses. Not a good showing for a company that is paying a dividend.

Cash flow has not done well either. Looking at adjusted cash flow, it is only up 2.8% and 7.3% over the past 5 and 8 years. There has also been a modest increase in book value per share of 3.8% and 1.8% per year over the past 5 and 8 years.

Since there is no profit, the return on equity would be negative.

The current Liquidity Ratio is 1.46, which is ok, but I would prefer it to be 1.50. This ratio has often been low and the 5 year median ratio is just 1.09. The current Debt Ratio is just 1.37 and here again I would prefer it to be 1.50. However, it has often been better and the 5 year median ratio is 1.60.

The current Leverage and Debt/Equity Ratios are rather high at 4.68 and 3.43. They took on more long term debt in 2011 for acquisitions. Utilities often have more debt than other companies.

As far as I can see, alternative energy companies are not doing well. At one time, I thought alternative energy would be a good thing. However, none of the companies I follow are doing well. I do not follow them all, but at the moment I have no desire to. Alternative energy will not be viable unless it is profitable.

Innergex is involved in Canada's renewable energy industry. The Company develops, owns and operates facilities located in North America, leveraging run-of-river hydroelectric power generating facilities, wind farms and photovoltaic solar parks. Its web site is here Innergex. See my spreadsheet at ine.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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