Canadian Utilities Ltd.

I do not own this stock of Canadian Utilities Ltd. (TSX-CU, OTC-CDUAF). I started to follow this stock in January of 2009 because it was on the Dividend Achievers list, the Dividend Aristocrats list and was also on Mike Higgs' dividend growth list at that time. The Dividend Achievers list is now called the NASDAQ Broad Canadian Dividend Achievers Index (DACA). The Dividend Aristocrats list is now an index on the TSX.

Lists of good dividend growth stock change over the years. Not only are stocks constantly added and deleted, but who owns the lists and where they are keep changing. However, this stock has been increasing their dividends yearly since at least 1990 where my spreadsheet records start.

The dividend yield is moderate as are the increases. The current dividend yield is 2.71% and the 5 year median dividend yield is 2.84%. The 5 and 10 year dividend growth is at 7.84% and 6.64% per year over the past 5 and 10 years.

The Dividend Payout Ratios are also good on this stock with the 5 year median DPR for EPS at 43.8% and for CFPS at 15.6%. The DPRs for 2013 were at 46.4% for EPS and at 15% for CFPS.

Return on Equity is fine, but the comprehensive income ROE is lower than the net income ROE. 5 year median ROE on net income is 12.9% and 5 year median ROE on comprehensive income is 10.2%. Debt Ratios are fine, but the company does depend on cash flow to get a good Liquidity Ratio.

Outstanding shares have not changed over the past 5 and 10 years. The best growth is on cash flow, then earnings and then revenue. I have a concern about the growth of revenue as it is much lower than that for earnings and cash flow. However, analysts do expect better growth over the next 2 years at just over 8% each year.

Revenue per Share growth is at 3.2% per year over the past 5 years and has declined by 1.3% per year over the past 10 years. The EPS has grown at 5% and 7.5% per year over the past 5 and 10 years. Cash Flow per Share has grown at 15.1% and 12% per year over the past 5 and 10 years.

ATCO says that they own some 88.1% of this company. The Southern family owns shares worth in the millions, but not a high percentage of outstanding shares. For example, Ronald Southern owns shares worth around $48.6M. There are lots of outstanding stock options. However, outstanding shares were just increased by 0.07% and 0.05% in 2013 and 2012 for stock options.

The 5 year low, median and high median Price/Earnings Ratios are 13.45, 15.52 and 17.42. The 10 year corresponding values are similar. The current P/E Ratio is 16.23 based on a stock price of $39.44 and 2014 EPS estimate of $2.43. This stock price test suggests that the stock price is relatively reasonable.

The 5 year median dividend yield is 2.84% and the current dividend of 2.71% is just 4.5% lower. This stock price test suggests that the current stock price is relatively reasonable. However, historically, dividend yield has been higher and the historical median dividend yield is 3.76% a value some 28% higher than the current dividend yield.

When I look at analysts' recommendations, I find Buy and Hold recommendations. The consensus recommendation is a Buy as are most of the recommendations. The 12 month stock price consensus is $43.70. This implies a total return of 13.51% with 2.71% from dividend and $10.80% from capital gains.

Sound bit for Twitter and StockTwits is: Utility Dividend Growth Stock. See my spreadsheet at cu.htm.

I will have only one entry for this stock as I must do on some stock because I cover too many stocks to do double entries on all that I follow.

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. 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.

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