Thursday, August 22, 2013

ATCO Ltd 2

I do not own this stock ATCO Ltd (TSX-ACO.X, OTC-ACLLF). This is a utility stock that gives a rather low dividend for a utility, but it has reasonable growth in dividends at just over 8% per year. This is a dividend paying stock that is on everyone's list. This stock is on the Dividend Achievers list, the Dividend Aristocrats list and was also on Mike Higgs' list.

I think the important thing to mention here is insider ownership. Ronald D. Southern owns about 85% of the Class II voting shares. He seems to be handing the operation of this company over to his daughter Nancy Southern. There are other insiders having some Class II shares, but quite small amounts. Also, because this company owns around 50% of Canadian Utilities (TSX-CU), you probably would not want to own both companies.

The 5 year low, median and high median Price/Earnings per Share Ratios are 8.94, 10.49 and 11.73. The current P/E Ratio is 12.80 based on a stock price of $43.40 and EPS estimate for 2013 of $3.39. This test suggests that the stock price is relatively high.

I get a Graham Price of $41.69. The 10 year low, median and high median Price/Graham Price Ratios are 0.72, 084 and 0.92. The current P/GP Ratio is 1.04 based on a stock price of $43.40. This test suggests that the stock price is relatively high.

I get a 10 year median Price/Book Value per Share ratio of 1.58. The current P/B Ratio is 1.90, a value 20% higher. This test also suggests that the stock price is relatively high.

The 5 year median dividend yield is 2.01%. The current dividend yield is 1.73% a value some 14% lower. This test also suggests that the current stock price is relatively high.

There are not that many analysts following this stock. However, the analysts' recommendations are split between Buy and Hold and the consensus recommendation would be a Buy. The 12 months stock price is $48.00. This implies a total return of 12.33% with 1.73 from Dividends and 10.60% from capital gains. A 12% total return from a Utility is a good return.

Winnipeg Free Press reports on ATCO's second quarterly results. There is an interesting article on Ronald Southern at Business World Magazine. Pat McKeough talks about this stock on TSI Network. And lastly, My Own Advisor blogger has an interesting take on TSI Network, including this stock.

As with a lot of utility stocks, I think that this one's stock price is too high. There will be future times to buy at relatively better prices. See my spreadsheet at aco.htm.

This is the second of two parts. The first part was posted on Wednesday, August 21st, 2013 and is available here.

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. Its web site is here ATCO.

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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