Northland Power Inc

On my other blog I am today writing about My Own Advisor blog Part 2. My Own Advisor has been blogging for a couple of years and has a lot to share with novice investors. This is a second part for this blogger as in my original post on My Owner Advisor Blog I just noted the investment books he was recommending. The following are posts on this blog for novice investors... continue...

I do not own this stock of Northland Power Inc. (TSX-NPI). This company is into generating electric power. I have a lot invested in pipelines and I would like to have more invested in electric power as my utilities investment. I read a report on this stock last year that said it was a good defensive stock to buy and this is why I started to follow this stock. This is another stock that used to be an income trust, It was called Northland Power Income Fund (TSX=NPI.UN). This company is labeled an Alternative Energy company.

The first thing to talk about is dividends. The yield is quite good at 5.64%. They basically did not lower the dividends when the company changed from an income trust. However, the 5 year median Dividend Payout Ratios are far too high. The DPR for earnings is 229% (ignoring the years with negative income). The 5 year median DPR for cash flow is 112%. The DPRs for 2012 are expected to be 771% for Earnings and 101% for cash flow.

The DPRs are not expected to improve anytime soon. No one is talking about Distributable Income or AFFO in comparison with the dividend distribution this year. DI or AFFOs figures were given for this company up to last year to compare with the distributions.

According to my calculations, outstanding shares have increased at the rate of around 14% per year over the past 5 and 10 years. Wherever you look, different sites show different numbers of outstanding shares. I have included the convertible shares as they can collect distributions in starting in 2012. The other thing is the most of the convertible shares are owned by the previous Chairman of the Board. Because of the convertible and common shares he owns, I calculate that he owns around 70% of the outstanding shares. The number of outstanding shares becomes important when you look at values per shares (like revenue per shares).

The recent increase in outstanding shares has to do with the merger of Northland Power Inc. and Northland Power Income Fund to form the new Northland Power Inc. company.

I find that revenues have increased by 14% and 16% per year over the past 5 and 10 years. However, Revenue per Share has grown by 0% and 2% per year over the past 5 and 10 years. The difference in these two growth rates is due to growth in outstanding shares.

I cannot get a growth for earnings per share as the EPS was negative for 2012. Analysts expect that EPS will be positive for 2012 and 2013. The EPS for the first quarter was positive. However, the EPS for the 2nd quarter was negative and was a surprise for the market.

Although there are no years with a negative cash flow per share, cash flow per shares has not grown much either. Growth of cash flow per share over the past 5 and 10 years is at 0.5% and 1.7% per year, respectively.

There has been no growth in book value per share over the past 5 and 10 years. Book value per share has declined by 8% and 3% per year over the past 5 and 10 years.

Return on Equity is non-existent for the financial year of 2011 as the company had a loss. The 5 year median ROE is just 0.2%. The ROE based on comprehensive income also has a 5 year median value of 0.2%.

The current Liquidity Ratio is quite good at 2.10 and a lot higher than the Liquidity Ratio for the 2011 financial year of 1.06. The current Debt Ratio of 1.64 is also better than the ratio of 1.52 for the 2011 financial year. The current Leverage and Debt/Equity Ratios are a bit high at 3.70 and 2.26. The comparable 5 year median ratios are much better at 1.59 and 0.59.

It would be nice to make money from alternative energy and perhaps the environment at the same time. However, even though this company can usually make a profit, I would not buy one where the profit cannot cover the dividend distributions.

Northland Power Inc. indirectly owns interests in power projects. Northland's assets comprise facilities that produce electricity from "clean" natural gas and "green" renewable sources such as wind and biomass. Electricity generation is sold under long-term PPAs with creditworthy customers, and any fuel for natural-gas-fired projects, where required, is purchased under long-term contracts to assure stability of operating margins. This company operates in Canada, US and Germany. Its web site is here Northland Power. See my spreadsheet at npi.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.