I own this stock of Emera Inc. (TSX-EMA, OTC-EMRAF). I found it on a dividend growth stock list. I first bought this stock in 2005 and then some more in 2011. I have made a total return of 14.96% per year on this stock. Of this return, 4.33% is attributable to dividends and 10.63% is attributable to capital gains.
If you look at total return over the past 5 and 10 years to the end of 2012, you get returns of 14.07% and 12.6% per year, respectively. Of these returns 4.39% and 4.52% per year respectively is attributable to dividends and 9.68% and 8.08% per year respectively is attributable to capital gains.
The growth in dividends over the past 5 and 10 years has been at 8.7% and 4.7% per year. The latest dividend increase at the end of 2012 was for 3.7%. The current dividend yield is 3.92%. I have held this stock for 8 years and on my original investments I am making a yield of 6.8%.
The Dividend Payout Ratios are fine, with the 5 year median DPR for earnings at 70% and the DPR for cash flow at 37%.
Over the past 5 and 10 years outstanding shares have increased by2% and 3.3% per year. The increase is due to stock options, Employees Plan, DRIP and issuance of stock. Revenue is up by 9% and 5.3% per year over the past 5 and 10 years. Revenue per Share is up by 5.5% and 3.3% per year over the past 5 and 10 years.
Earnings per Share is up by 5.9% and 7.6% per year over the past 5 and 10 years. Cash Flow per Share has not changed over the past 5 years and is up by only 2.8% per year over the past 10 years. If you look at 5 year running averages over the past 5 and 10 years, cash flow is up by 2.5% and 2% per year.
Book Value per share has really not changed over the past 5 and 10 years. Part of the reason for this is that the company changed their accounting rules from CDN GAAP to US GAAP and there was a 17% drop in book value with accounting change. The company has also issued preferred shares and there is an increase in the non-controlling interest in this company.
The Return on Equity looks good with a ROE at the end of the financial year of 2012 at 10.8% and with a 5 year median of 10.7%. However, there is a big difference between the ROE on net income and the ROE on comprehensive income. The ROE on comprehensive income is at 6. 2% for the financial year of 2012 and it has a 5 year median of 7.33%. This could mean that there could be problems with the quality of the earnings reported.
As are most utilities, this company has a heavy debt load. However, the Liquidity Ratio is low at just 0.93. (This means that the current assets cannot cover the current debt.) If you add in cash flow after dividends, you get a better ratio of 1.15. The Debt Ratio is also a bit low at 1.43, but is rather typical of this company.
The Leverage and Debt/Equity Ratios at 4.54 and 3.16 are a bit high and higher than the 10 year median ratios of 3.24 and 2.23. In other words, the debt ratios are not where I would prefer to see them and they are probably at this point a bit worse than the industry average for utilities. (See my site and my blog for further information on Debt Ratios.)
Emera Inc. is an energy and services company that has two wholly-owned regulated electric utility subsidiaries, of Nova Scotia Power Inc. and Bangor Hydro-Electric Company. Emera also owns 19% of St. Lucia Electricity Services Limited, and 25% of Grand Bahamas Power Company that serves 19,000 customers on the Caribbean island of Grand Bahamas. Emera also owns the Brunswick Pipeline; Bayside Power, in Saint John, New Brunswick; Emera Energy Services; a joint venture interest in Bear Swamp northern Massachusetts; a 12.9% interest in the Maritimes & Northeast Pipeline; and an 8.2% interest in Open Hydro. Its web site is here Emera. See my spreadsheet at ema.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.
I took a quick look at EMA. The PE seems out of line with the industry. The top line growth seems to be suffering a bit and as far as I can see, they have negative cash flow.
ReplyDeleteThe technical analysis, the graphs, look good but I cannot get over the negative cash flow.
Do my concerns have any merit in your opinion?
I think that all the good utility stocks are overpriced (or overbought). However, I can see why people are buying them. They are buying because the dividend yield is high compared to bond yields. (The real question is will these same buyers hold on to the utilities in the first bear market they encounter? History says probably not.)
ReplyDeleteEmera does not have negative cash flow, but negative cash flow growth. Growth in revenues, earnings, cash flow etc is tough these days as we still have financial problems in our economy. The thing with utilities is that the risk level is rather low.
I cannot give out investing advice because I am not licensed to so do so. So, the above remarks are just my personal opinion and the above and my 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.