Innergex Renewable Energy

I do not own this stock of Innergex Renewable Energy (TSX-INE, OTC-INGXF). In 2006 I bought Innergex Power on a buy rating and favorable report from TD although it has only been going from 2003. In 2008 I sold Innergex as I did not think that it is a stock I want to hold as dividend increased less than the rate of inflation. I was just trying out this stock. For the period that I held it I lost 4.8% per year. My capital loss was 17%.

This company is another income trust that has changed to a corporation. What I did not like was the low dividend growth although the dividend yield was good. Now the dividend yield is down, currently at 5.6%. The dividend growth is not any better. They had been keeping the dividend flat until this year as Dividend Payout Ratio for EPS is too high.

The Dividend Payout Ratio for 2013 was 880% for EPS and 60.3% for Cash Flow per Share. The payout ratio for CFPS is not bad; the real problem is with this company making money. The DPR for EPS for 2014 will be worse as the company is not expected to make a profit in 2014. Analysts seem to feel that DPR for CFPS will be around 66% for 2014.

They raised the dividend in 2014 by 3.4%. This is not a bad hike considering on how high the dividend yield. But I am not sure that they can keep this up as no one seems to expect the EPS to cover the dividend in the next few years.

The total return for shareholders over the past few years has been good. The 5 and 10 total return is at 15.83% and 8.50% per year. The portion of this total return from dividends is at 7% and 6.61% per year. The portion of this total return from capital is at 8.83 and 1.90% per year. The return from dividends will be lower in the future as the dividend yield decreases. This is common for old income trust companies.

The outstanding shares have been increasing by 17.4% and 13.6% per year over the past 5 and 10 years. They have increased due to Share Issues, DRIP and Stock Options. Because of the increasing number of shares, the "per share" values become important. Revenue growth is quite good, cash flow is good. The problem is the lack to earnings growth.

Revenue has grown at 27% and 25% per year over the past 5 and 10 years. Revenue per Share has grown at 8.4% and 9.8% per year over the past 5 and 10 years. Cash Flow has grown at 23% and 22% per year over the past 5 and 10 years. Cash Flow per Share has grown at 4.8% and 7.4% per year over the past 5 and 10 years.

Over the past 10 years, there has been 4 years of negative earnings. Analysts expect that 2014 will be another year of negative earnings. The third quarterly report for 2014 supports what the analysts are saying. Since exactly 5 years ago was a negative earnings year, I can only look at growth for the last 4 years and net income has grown at 14.7%. Net income has grown at 17.5% over the past 10 years.

However, EPS is down by 8.4% per year over the past 4 years and only up by 2.2% over the past 10 years. As a shareholder, I would be more interested in the EPS growth than the net income growth, because that is what is going to affect any shares I hold.

Return on Equity has been at or over 10% only 2 times in the past 5 years, and no times before 5 years ago. The ROE for 2013 was 10%. The 5 year median is just 0.3%. The comprehensive income has been equal to the net income, so there is no difference in its ROE.

The Liquidity Ratio was rather low in 2013 at 1.18. This ratio has often been low with a 5 year median of 1.31. If you add in cash flow after dividends, you get a ratio for 2013 of 1.81. This ratio has a 5 year median of 1.56.

Sound bit for Twitter and StockTwits is: Renewable Energy company with a hopeful future. At least I hope it will do well in the future. I would like to invest more in renewal energy because I think it is the wave of the future. However, this company has to first prove it can make a profit. See my spreadsheet at ine.htm.

This is the first of two parts. The second part will be posted on Friday, November 21, 2014 and will be available here. The first part talks about the stock and the second part talks about the stock price.

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. 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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