Monday, November 11, 2013

Innergex Renewable Energy

I am putting up on my other blog my notes from the World Money Show 2013 in Toronto. I will put up these notes as I transcribe them here.

I do not own this stock Innergex Renewable Energy (TSX-INE, OTC-INGXF). In 2006 I bought Innergex Power on buy rating and favorable report from TD although it has only been going from 2003. In 2008 I sold Innergex as I do not think that it is a stock I want to hold as dividend increase less than inflation. After a few missteps because of analysts' reports, I am leery of acting on any now. Currently I look at them for information, not for any recommendations.

I would like to get into some alternative energy companies, and this one might be in the future something I would like, but it is not one I would buy now. It is an old income trust and it is not doing badly as it is throwing off a good dividend at a yield of 6.26%. I do not expect a lot from high dividend payers, but I would like to see growth in dividends at the rate of inflation at a minimum.

When this company started they were increasing the dividend at around the rate of inflation. However, as a corporation, they had to get their Dividend Payout Ratios into proper alignment. The DPR for EPS is off the charts. However, the DPR for cash flow is getting into line with the DPR for 2012 at 88% and the expected DPR for 2013 at 60%.

Their revenues are growing and this is good. They just cannot make a profit. Not only that, the Operational Profit Margin Ratio is going in the wrong direction although they had a turnaround in 2011 after it dropped some 55% in 2010. It is up again in 2012. The OPM also seems to be improving in 2013.

The outstanding shares have increased by 17% and 15% per year over the past 5 and 10 years. They have increased due to Share Issues, DRIP and Stock Options. As a shareholder, you would be interested in things like Revenue growth, but most also be very interested in things like Revenue per Share growth because of the big increase in outstanding shares.

Revenue growth is at 35% and 27% per year over the past 5 and 10 years. Revenue per Share growth is very good at 15% and 10% per year over the past 5 and 10 years. Earnings have gone nowhere. Since the company has had an earnings lost for the past 3 years, you cannot measure growth. Even looking at 5 year running averages you get an earnings loss. This occurs for EPS and Net Income.

Also having negative earnings means that you also have no return on assets or earnings.

The Liquidity Ratio has often been low, and including the cash flow after dividends has not helped much as they have sometimes paid out more in dividends than they had in cash flow per share. During the last 3 years, the ratio has been above 1.00. If it is below 1.00, it means that the current assets cannot cover the current liabilities and this is not a good position to be in.

The Debt Ratio has been steadily coming down. It started at 3.49 in 2003 and is currently at 1.39. It was 1.42 in 2012. I would prefer to see this ratio at 1.50. Leverage and Debt/Equity Ratios at 3.38 and 2.38 in 2012 is pretty much in line with other utilities.

As this is an alternative energy company, I plan to continue to track it. I have hope that it might be a good stock in the future. Shareholders have made money over the past 5 and 10 years, but a lot of what they have earned is in distributions. The 5 and 10 year return to date is 16.29% and 7.48% per year with 8.28% and 7.01% from dividends and 8.00% and 0.46% per year from capital gains. See my spreadsheet at ine.htm.

This is the first of two parts. Second part will be posted on Tuesday, October 12, 2013 and will be available here.

Innergex is involved in Canada's renewable energy industry. The Company develops, owns and operates facilities located in North America, leveraging run-of-river hydroelectric power generating facilities, wind farms and photovoltaic solar parks. Its web site is here Innergex.

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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