ATCO Ltd

On my other blog I am today writing about space again and Mars...continue...

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. It had higher growth in dividends prior to 2003 so that people that bought this stock at a median price 15 years ago is getting around 8.7% return on their original purchase price. If bought today at current increases that return would be around 8.9%.

The reason to buy dividend growth companies is because you will get good growth in dividends but accept a current lower dividend yield. This is why you might want to take a look at dividend yields on an original stock purchase price. Because I have a combination of low dividend yield and high dividend grow companies and high dividend yield but low dividend yield companies and some in between I have a portfolio that has grown my dividend income by just over 100% over the past 10 years.

The Dividend Payout Ratios are low for this company coming in at a 5 year median DPRs for earnings at 20% and for cash flow at 5.8%. Low DPRs can affect the viability of dividends and therefore can be seen as a good thing.

The total return on this stock is also quite good with 5 and 10 years total returns at 9.58% and 16.52% per year with 7.89% and 14.14% per year from capital gains and 1.68 and 2.38% per year from dividends.

Outstanding share have decreased by marginal amounts over the past 5 and 10 years. Outstanding shares were increased by stock options and decreased by buy backs. There is sometimes value in using 5 year running averages. Revenue per share has grown over the past 5 and 10 years at 8.6% and 3.5% per year. However, if you look at 5 year running average growth over these periods, they are much lower at 3.2% and 2.6% per year.

The growth in Earnings per Share is better with growth over the past 5 and 10 years at 8.7% and 9.2% per year. Growth in Cash Flow per Share is also quite good at 14.9% and 12.5% per year over the past 5 and 10 years. The growth in Book Value per Share is also good at 8.6% and 8.9% per year over the past 5 and 10 years.

The Return on Equity for the financial year ending in 2012 is good at 13.8%. However, it is usually lower and the ROE has a 5 year median value of just 7.3%. The ROE on Comprehensive Income seems to be consistently lower with the ROE for 2012 at 10.2% and the 5 year median value at just 7.0%.

Utility companies generally have big debt loads and they often rely on cash flow to get to a decent Liquidity Ratio. The Liquidity Ratio on this company has varied a lot over time. The ratio for 2012 is 1.36 and the current one is even lower at 0.90. However, when you add in cash flow after dividends these ratios are 2.68 and 1.66, respectively.

The Debt Ratio for this company is generally good with the one for 2012 at 1.52 and the current one at 1.63. The current Leverage and Debt/Equity Ratios are fine at 2.58 and 1.58.

This utility has provided its shareholders with a good return over the years. The dividend yield has always been a bit low. The dividends have been increasing since 1993 when data in my spreadsheet starts. It is on a number of dividend growth stock lists. This is why I follow this stock. I have not bought it because I already possess enough utility stocks.

It is a good dividend growth utility stock. See my spreadsheet at aco.htm.

This is the first of two parts. Second part will be posted on Thursday, August 22nd, 2013 and will be 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.