AltaGas Ltd

On my other blog I am today I am writing about Kiva...continue...

I own this stock of AltaGas Ltd (TSX-ALA, OTC- ATGFF). I originally bought this stock in 2009. It was on the dividend lists that I was following and I was looking for something to buy. A lot has happened since then. The company was an income trust when I bought it and in 2010 it converted from an income trust to a corporation and cut its dividend 39%.

I bought more stock in 2009 and then in 2010 and also 2012. I have made a total return of 31.62% per year on this stock with 23.93% from capital gains and 7.69% from dividends. I like this stock and have some 3.8% of my portfolio in it.

The 5 and 10 year total return on this stock is at 11.13% and 24.07% per year. Over these periods, 4.89% and 13.56% was made in capital gains and 6.24% and 10.51% from dividends (or distributions).

The 5 year median dividend yield is 8.64%. Generally speaking income trusts had much higher yields than other stocks. It was felt that the good ones would have their stock prices up and the dividends down so that the end results would be a yield around 4 to 5%. This is what has happened in this stock. The current yield is 4.1%.

It was removed from the dividends lists because of this cut in dividends. However, this stock again started to raise the dividend in 2011 (by 4.5%). The company again raised the dividend in 2012 and this increase was a 4.3% increase. Over the past 10 years, the growth in dividends is at 17% per year. (The decrease over the past 5 years is 7.8%.)

The Dividend Payout Ratios for earnings is a bit high, with a 5 year median of 131%. However, this used to be an income trust company and they do make a profit. It is expected that the DPR for earnings will move below the earnings by 2014. The 5 year median DPR for cash flow is 71%. The DPR for cash flow for 2012 was 58%.

The outstanding shares have increased by 12.6% and 8.8% per year over the past 5 and 10 years. Shares have increased due to Stock Options, Shares Issues and DRIP. They have made acquisitions.

Last year was not a great year for revenue as it was down by 7% and analysts expect another year of lower revenue in 2013, but they expect a nice increase in 2014. The Revenue is up by 0.3% and 11.6% per year over the past 5 and 10 years. Revenue per Share is down over the past 5 years by 11% and up over the past 10 years by 2.5%.

Earnings per Share is down by 14% per year over the past 5 years and up by 7.2% over the past 10 years. If you look at 5 year running averages, earnings are only down by 1% per year over the past 5 years and up by 12% per year over the past 10 years.

Cash Flow per Share is down by 3% per year over the past 5 years and up by 4.6% per year over the past 10 years. The Book Value per Share is up by 11% and 12% per year over the past 5 and 10 years. This company has changed their accounting rules to US GAAP and this has affected the Book Value.

The Return on Equity is low for 2012 at just 6.8%. The 5 year median value is better at 10%. The ROE on comprehensive income is close, but lower at 6.6%.

The Liquidity Ratio has always been rather low and it still is at 1.05 for 2012. The Debt Ratio is better at 1.51. Leverage and Debt/Equity Ratios are rather normal for a utility at 3.35 and 2.22.

I have been pleased with my investment in the company. I do not expect my high return going into the future. The dividend yield is lower and on utilities you can expect that capital gain, on a long term basis to be similar to dividend increases. That would translate into dividends around 4% and capital gain around 4%.

However, as this stock is of a median risk and is into LNG exports, the capital gain would probably be higher than 4%. I know some analysts expect the capital gains would be more than twice the 4% I have suggested for utilities. They are probably right. In any event, I will not earn the 30% per year return I have been earning going into the future.

AltaGas operates physical assets and provides essential services to customers who produce and consume natural gas and power. Their gas business provides gathering, processing, transportation, storage and marketing of natural gas and natural gas liquids. Their power business generates and delivers power in Alberta and British Columbia and is developing a significant portfolio of renewable power projects. Its web site is here AltaGas. See my spreadsheet at ala.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.