On my other blog I am today writing about Stock Prices continue...
I own this stock of TransAlta Corp. (TSX-TA, NYSE-TAC). I first bought this stock in 1987. It was a utility stock and utility stocks were considered to be good investments at the time I bought this stock. The stock is selling at a price slightly less than what I paid in 1987. I have really only made dividend income on this stock. I have made a return of 6.75% per year.
Dividend rose from the time I bought this stock until 2014. However, in 2014 they cut their dividend by almost 38%. Prior to the cut in 2014, dividends increased rather modestly at around 1.6% per year. Dividend increases were erratic and there were lots of years with no dividend increases.
The total return on this stock has not been good over the last 5 and 10 years. The 5 year return to date is a loss of 5.56% per year with a capital loss of 11.5% per year and dividends of 5.93 per year. The 10 year total return was at 3.43% per year with a capital loss of 3.42% per year and dividends of 6.85% per year. Share fell almost 15% on March 18 due to the cut in dividends.
Shares in this company have grown at 5.9% and 3.5% per year over the past 5 and 10 years. The shares have grown due to Stock Options, DRIP and Share Issues. There has been no growth in revenue, earnings or cash flow for the stock over the past 5 and 10 years.
Revenue per Share is done by 11.2% and 4.3% per year over the past 5 and 10 years. The 5 year running averages show a lower decline with the Revenue per Share down by 5.3% and 0% over the past 5 and 10 years.
Since there was an earnings loss in 2013 there is no growth over the past 5 and 10 years. Using the 5 year running averages, EPS is down by 41% and 26% per year over the past 5 and 10 years. The Cash Flow per Share is down by 8.9% and 1% per year over the past 5 and 10 years. There is a lower decline if you look at 5 year running averages which give a decline of 2.8% and 0.8% per year over the past 5 and 10 years. The problem is that this company has done poorly over the past 5 years.
The Return on Equity has never been high and it has only broken above 10% once in the last 10 years and only twice over the past 15 years. The 5 year median ROE is 5.3%. There is no ROE for 2013 as the company did not make a profit. However, there was a positive comprehensive income. The ROE for comprehensive income for 2013 was very low at just 3.9%. The comprehensive income was negative in 2012 as was the EPS and Net Income.
One of the things that the company wanted to do was strengthen its balance sheet. The Liquidity Ratio has always been low and for 2013 it was just 0.88. However, if you add in cash flow after dividends, this ratio becomes 1.40. Also, if you exclude 2013's portion of the long term debt, the ratio is 1.16 and if you add in cash flow after dividends the ratio is now 1.86.
The Debt Ratio has been good with a 2013 value of 1.54 and a 5 year median of 1.55. While the Leverage and Debt/Equity Ratios are not low, they are good for a utility stock. The Leverage and Debt/Equity Ratios were at 2.86 and 1.76 for 2013.
I had viewed this stock as a solid, but unspectacular stock. Perhaps I was wrong on this. I expected a return of around 8% per year on utility stocks. Until recently, this stock met that requirement over the long term. See my spreadsheet at ta.htm.
This is the first of two parts. The second part will be posted on Monday, March 24, 2014 and will be available here. The first part talks about the stock and the second part talks about the stock price.
TransAlta is a power generation and wholesale marketing company. TransAlta maintains a low-to-moderate risk profile by operating a highly contracted portfolio of assets in Canada, the United States and Australia. TransAlta's focus is to efficiently operate our biomass, geothermal, wind, hydro, natural gas and coal facilities in order to provide our customers with a reliable, low-cost source of power. Its web site is here TransAlta.
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. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.
See my website for stocks followed and investment notes. Follow me on Twitter or StockTwits.
Hi SP
ReplyDeleteI ran across your blog by accident and this is a (very) belated comment. I wonder why you do not consider fundamaentals in your assesments. For example TAC faces some basic fundamental difficulties which suggests that TransAlta is not a good investment in the short/medium term. For one, they are locked into unfavorable rates in AB for a couple more years. Secondly 2/3 of their electric energy sources are coal fired which is a disadvantage compared to NG falling prices. This information can be gleaned from the corporate website.
I own TransAlta Corp and I do know that they are having difficulties. They are in transition especially as they are doing conversions from using coal-fired plants to natural gas in Canada and the northwest U.S. I believe they will recover and the recovering will be long and slow. I am a long term investor and I will continue to hold my shares.
ReplyDeleteThere is a lot of information on the internet and I did not want to duplicate that. I had made a decision to mostly concentrate on my spreadsheets and what they are telling me. I do reference some links that provide another point of view. However, I wanted to cover stocks differently than what is already available. As you said a lot can be gotten from the corporate website, which I do reference also.
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. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.