Canadian Utilities Ltd 2

On my other blog I am today writing about my use of analysts' estimates...continue...

I do not own this stock Canadian Utilities Ltd (TSX-CU, OTC-CDUAF). This stock is on the Dividend Achievers list, the Dividend Aristocrats list and was also on Mike Higgs' dividend growth list.

When I look at insider trading, I find $5.6M of insider selling and $5.4M of net insider selling. There is a minimal amount of insider buying. Most of the selling is by the CEO at $4.9M. The CEO has shares worth $14.2M and has options with the potential value of $40.8M. (This is because most options given by this company have an attached stock price.) She also has shares in ATCO. An officer has Class A shares worth 54.6M and Class B shares worth 20.8M and no options. Both these executives are of the Southern family that also controls ATCO. ATCO controls this company

The CFO has shares worth $1.7M and has options worth 3.9M. An officer has shares worth $0.4M and has options worth $0.4M. A director has shares worth $0.2M and has no options. This is just to give you an idea on insider share ownership and option values. (Note that there are two classes of share with Class A (TSX-CU) being non-voting shares and Class B (TSX-CU.X) being voting shares.)

The 5 year low, median and high median Price/Earnings per Share Ratios are 12.25, 14.02 and 18.83. The current P/E Ratio is 16.07 based on 2013 EPS of $2.19 and stock price of $35.20. This tests shows that the stock price is relatively reasonable, but toward to higher end of reasonable.

I get a Graham Price of $26.47. The 10 year median Price/Graham Price Ratios are 0.99, 1.17 and 1.34. The current P/GP Ratio is 1.33. This stock test puts the current stock price of $35.20 within the reasonable range, but just.

I get a 10 year Price/Book Value per Share Ratio of 2.20 and a current P/B Ratio of 2.48 a value some 13% higher. This put the stock price of $35.20 within the reasonable range. I get a 5 year median dividend yield of 3.12% and a current dividend yield of 2.76% which is 12% lower. This put the stock price of $35.20 within the reasonable range.

When I look at analysts' recommendations, I find Strong Buy, Buy and Hold recommendations. The consensus recommendation would be a Buy. The 12 month consensus stock price is $41.00. This implies a total return of 19.23% with 2.76% from dividends and 16.48% from capital gains.

The blogger Dividend Tactics gives this stock a recent good review. The blogger iPolitics gives a positive review of the second quarter for this stock. Also earlier this year, the blogger Pat McKeough gives both this stock and ATCO positive reviews.

Some analysts feel that the stock price is a bit too high and one analyst said that it is not good that the dividend yield is below 3%. However, a number still like this stock as a buy. I think that that the price is a big high, but it is not yet in the overpriced category. I think that the dividend yield is a bit too low. See my spreadsheet at cu.htm.

This is the second of two parts. The first part was posted on Tuesday, September 24, 2013 and is available here.

Canadian Utilities Limited operates in four business segments: regulated natural gas operations; regulated electric operations; technologies; and power generation. These operations provide service to industrial, residential and commercial customers. Other businesses consist of natural gas gathering, processing, storage and natural gas supply management and technical facilities management. Its web site is here Canadian Utilities.

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.