Tuesday, June 30, 2015

Algonquin Power & Utilities Corp

I will not be posting tomorrow as it is our July 1 holiday. My post on my other blog called Investing, Economics Mostly will occur on Thursday.

Sound bite for Twitter and StockTwits is: Stock price is relative cheap to reasonable. However, I am not keen on this stock. I do not like the change to paying dividends in US$. They have revenue growth, but not EPS growth. On the other hand there is insider buying. See my spreadsheet at aqn.htm.

I do not own this stock of Algonquin Power & Utilities Corp (TSX-AQN, OTC-AQUNF). This is a dividend paying utility stocks. I got it off a list of dividend paying utility stocks. Also, I own Emera Inc. and this company owns shares in Algonquin Power.

This company used to be an income trust. When it became a corporation in 2009, it reduced its dividend by 73.9%. They then started to increase their dividends again and dividends were up by 41.7% by 2014. In 2014 they switched their dividends to US$. Their most recent dividend increase, in US$, is in 2015 and is for 10.1%. Since earnings are in CDN$ and dividends are in US$, I have looked at Basic and Diluted Earnings and cash paid in Dividends.

They are currently covering their dividends paid in cash. The payout ratio is 84.7%. Two things should be noted. They are issuing shares under a DRIP plan and since their annual statements terminology is "Cash" dividends, I am assuming this excludes dividends owing on DRIP plan shares. Also, they are increasing their shares outstanding each year, so naturally they would be paying dividends on more shares at the end of the year than at the beginning of the year.

As far a dividend increases go, the dividends are down by 9.1% over the past 10 years. However, dividends are up by 8.2% over the past 5 years. They are again a dividend growth company. Of course, there are problems with dividends paid in US$. First it is harder to pin point growth as it depends on the currency exchange rate. Another problem is that each dividend payment will vary with the variance in the currency exchange rate.

Outstanding shares have grown at 20.7% and 13.1% per year over the past 5 and 10 years. As a shareholder, I would be more interested in per share values and growth. Revenue growth is moderate to good. There is no growth in EPS, but there is in Net Income. Cash Flow has grown but CFPS growth is low to moderate.

Revenue has grown at 38.2% and 19.4% per year over the past 5 and 10 years. Revenue per Share has grown at 14.5% and 5.6% per year over the past 5 and 10 years. The real problem is EPS and EPS is down by 4.5% and 0.6% per year over the past 5 and 10 years. CFPS is up by 7.2% and 0.5% per year over the past 5 and 10 years.

Leverage and Debt/Equity Ratios are high and the Liquidity Ratio is low. The company relies on cash flow to cover current liabilities. The Liquidity Ratio is 0.87 in 2014 and if you add in cash flow less dividend it is 1.17. This is still a low ratio. The Leverage and Debt/Equity Ratios are 3.10 and 1.72 in 2014. The Debt Ratio is fine at 1.81.

The 5 year low, median and high median Price/Earnings per Share Ratios are 23.75, 28.18 and 32.60. The corresponding 10 years values are similar at 23.88, 27.63 and 31.44. I think that these are rather high P/E Ratios for a utility. The current P/E Ratio is 21.68 based on a stock price of $9.54 and 2015 EPS of $0.44. This stock price test suggests that the stock is relatively cheap.

I get a Graham Price of $7.74. The 10 year low, median and high median Price/Graham Price Ratios are 1.32, 1.45 and 1.59. I also find these to be high ratios for a utility stock. The current P/GP Ratio is 1.23 based on a stock price of $9.54. This stock price test suggests that the stock is relatively cheap.

The 10 year Price/Book Value per Share is 1.51 and the current P/B Ratio at 1.57 is some 4.3% higher. The current P/B Ratio is based on a stock price of $9.54 and BVPS of $6.05. This stock price test suggests that the stock is relatively reasonable.

When I look at analysts' recommendations, I find Strong Buy, Buy and Hold. Most of the recommendations are a Buy and the consensus recommendation is a Buy. The 12 month consensus stock price is $10.80. This implies a total return of 18.20% with 13.21% from capital gains and 4.99% from dividends.

This press release on PR Newswire talks about the company coming to terms with CRA about the unit exchange that occurred in 2009. This update on Dakota Financial News talks about recent insider buying.

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.

APUC owns and operates a diversified portfolio of clean renewable electric generation and sustainable utility distribution businesses in North America. Liberty Water Co., APUC's water utility subsidiary, provides regulated water utility services. Through its wholly owned subsidiary Liberty Energy Utilities Co., APUC provides regulated electricity and natural gas distribution services. Algonquin Power Co., APUC's electric generation subsidiary, includes renewable energy facilities and thermal energy facilities. Its web site is here Algonquin Power.

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.

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