ATCO Ltd.

Sound bite for Twitter and StockTwits is: div growth, reasonable to cheap. This stock looks quite cheap when comparing historical dividend yield to current dividend yield. I like using dividend yield as values are current and not estimates. See my spreadsheet on ATCO Ltd.

I do not own this stock of ATCO Ltd. (TSX-ACO.X, OTC- ACLLF). I started to look at this stock in 2009 because it was a dividend paying stock that was on everyone's list. At that time this stock is on the Dividend Achievers list, the Dividend Aristocrats list and also was on Mike Higgs' list.

This stock has a moderate dividend and moderate dividend increases. The current dividend is 2.62% based on a stock price of $37.83. The 5 year median dividend is a lot lower at 1.88%. The dividends have grown at 11.5% and 9.4% per year over the past 5 and 10 years. If you had held this stock for 10 or 15 years, you would now be making around 5.6% and 10.6% yield on your original investment.

The total return over the past 5 and 10 years is at 7.36% and 8.87% per year. The portion of this total return attributable to dividends is 2.31% and 2.23% per year. The portion of this total return attributable to capital gain is 5.05% and 6.63% per year.

This stock has lost some 20% so far in 2015. For the 5 and 10 years to the end of 2014 total return was higher at 17.75% and 16.52% per year with 2.15% and 2.19% per year from dividends and 15.60% and 12.54% per year from capital gains.

Outstanding shares have not changes much over the past 5 and 10 years with shares declining by 0.6% and 1.2% per year over the past 5 and 10 years. Shares have increased due to stock options and decreased due to Buy Backs. There has been good growth in earnings and cash flow and moderate growth in revenue.

Revenue has grown at 7.9% and 3.1% per year over the past 5 and 10 years. Revenue per Share has grown at 8.2% and 3.5% per year over the past 5 and 10 years. Analysts expect Revenue to decline slightly in 2015.

EPS has grown at 8.3% and 10.7% per year over the past 5 and 10 years. Analysts expected EPS to drop significantly in 2015 by around 35% to $2.36 from 2014 EPS of $3.64. If you compare the 12 month period to the end of the second quarter to the 12 month period to the end of 2014, EPS is down by 21.7%.

Cash flow has increased by 10.6% and 9.87% per year over the past 5 and 10 years. Cash Flow per Share has increased by 10.9% and 10.3% per year over the past 5 and 10 years. Analysts expect CFPS to drop significantly in 2015 by around 30% from around $14.60 to around $10.20. If you compare the 12 month period to the end of the second quarter to the 12 month period to the end of 2014, Cash Flow is down by 3.5%.

Debt Ratios are fine and Return on Equity has been higher than 10 % per year every year for the past 10 years. However, ROE for Comprehensive Income tends to be lower than ROE on Net Income. This suggests that earnings maybe not be as good as they seem. For example ROE on Net Income for 2014 was 13.4% and the ROE on Comprehensive Income for 2014 was 11.7%. The ROE on Comprehensive Income is still good, but it is not as good as that for Net Income.

The 5 year low, median and high median Price/Earnings per Share Ratios are 9.81, 10.75 and 12.46. The 10 year corresponding values are similar at 9.91, 11.53 and 13.10. The current P/E Ratio is 16.03 based on a stock price of $37.83 and 2015 EPS estimate of $2.36. This stock price testing suggests that the stock is relatively expensive.

I get a Graham Price of $38.74 and the 10 year low, median and high median Price/Graham Price Ratios are 0.80, 0.94 and 1.07. The current P/GP Ratio is 0.98 based on a stock price of $37.83. This stock price testing suggests that the stock price is relatively reasonable but above the relative median.

The10 year median Price/Book Value per Share Ratio is 1.65. The current P/B Ratio is 1.34 based on a stock price of $37.83 and BVPS of $28.27. The current P/B Ratio is some 19% lower than the 10 year P/B Ratio median. This stock price testing suggests that the stock price is relatively reasonable and below the relative median. If the current P/B Ratio was 20% lower, then the stock would be considered to be cheap.

The 5 year median dividend yield is 1.88% and the current dividend yield at 2.62% is some 39% higher. The current dividend yield is based on a stock price of $37.82 and dividends of $0.99. You get quite similar results looking at historical average and historical median dividend yields of 2.26% and 2.06% which are some 16% and 27% below the current dividend yield. This stock price testing suggests that the stock is relatively reasonable to cheap and certainly below the relative median.

When I look at analysts' recommendations, I find Buy, Hold and Underperform recommendations. The consensus would be a Hold as most of the recommendations are a Hold. The 12 month stock price consensus is $47.30. This implies a total return of 27.63% with 2.62% from dividends and 25.03% from capital gains. This is a rather high total return and does not match a Hold recommendation.

There is a report from Dakota Financial News on recent analysts ratings. The blogger Dividend Beginner has a nice write up about this company.

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.

ATCO LTD. is a management holding company with operating subsidiaries in electric and natural gas utility operations, independent power operations, production, storage, processing, gathering, delivery of natural gas, technical facilities management for the industrial, defense and transportation sectors, the manufacture, sale and leasing of industrial shelters and industrial noise abatement technologies. ATCO has just over 50% stake in Canadian Utilities Ltd. Its web site is here ATCO Ltd.

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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