Canadian Utilities Ltd.

Sound bite for Twitter and StockTwits is: Dividend growth stock, reasonable price. The price does seem to be a bit above the relative median point. Of note is dividend yield on various prices after 15 years. This is how to build income. See my spreadsheet on 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 Aristocrats list is now an index on the TSX. ATCO (TSX-ACO-X) owns 88% of this stock, so you would not buy both these stocks.

The dividend yields are moderate as is the dividend increases. The current dividend yield is 3.33% and the 5 and 10 year growth in Dividends is at 8.7% and 7.3% per year. Dividend Payout Ratios are good with the 5 year median DPR for EPS at 44% and for CFPS at 16%. Analysts expect the DPR for EPS to rise to 60% this year then start to fall again.

If you were a long term holder of this stock and long term by my definition is not generally the common one for investors, you could have after 15 years be earning 11.45% on your original purchases price and have covered 106% of the cost of your stock via dividend payments. That is if you paid a median price of this stock.

If you had paid top price for this stock 15 years ago, you would be making 9.17% on your original purchase price and dividends would have covered 85% of your cost. If you had paid the low price on this stock 15 years ago, you would be making 15.23% on your original cost and would have covered 141% of the your cost by dividends.

The 5 and 10 years total return to date is 8.67% and 7.90% per year with 5.45% and 4.90% per year coming from capital gains and 3.21% and 3.00% per year from dividends. The market is in a bit of a funk at the moment. If you look at the total return to the end of 2014 they are better. The 5 and 10 year total return to the end of 2014 was 16.52% and 13.76% per year with 13.34% and 10.40% from capital gains and 3.26% and 3.18% per year from dividends. The shares are down some 13% this year.

Shares have increased by 1% and .4% per year over the past 5 and 10 years. Revenue growth is low to moderate. EPS growth is moderate. Cash Flow growth is good.

Revenue has grown by 6.9% and 1.5% per year over the past 5 and 10 years. Little growth is expected for 2015. EPS has grown at 6.3% and 7.6% per year over the past 5 and 10 years. EPS is expected to drop for 2015. Cash Flow per Shares has grown by 15.5% and 11.8% per year over the past 5 and 10 years.

Return on Equity is fine. However, the ROE on comprehensive income is generally lower than that on net income. This suggests that the quality of the earnings may not be as good as they seem. ROE on net Income is 13.1% for 2014 with 5 year median of 12.9%. ROE on comprehensive income is 10.6% for 2014 with 5 year median at 10.2%.

The 5 year low, median and high median Price/Earnings per Share Ratios are 14.13, 15.52 and 17.42. The current P/E Ratio is 18.19 based on a stock price of $35.47. This stock price testing suggests that the stock price is relatively expensive.

I get a Graham Price of $27.06. The 10 year low, median and high median Price/Graham Price Ratios are 1.09, 1.28 and 1.45. The current P/GP Ratio is 1.31 based on a stock price of $35.47. This stock price testing suggests that the stock price is relatively reasonable but above the relative median.

The 10 year Price/Book Value per Share Ratio is 2.29. The current P/B Ratio is 2.13 based on BVPS of $16.68 and a stock price of $35.47. The current P/B Ratio is some 7.3% lower than the 10 years median P/B Ratio. This stock price testing suggests that the stock price is relatively reasonable but below the relative median.

The historical median dividend yield is 3.74%. The current dividend yield is 3.33% based on dividends of $1.18 and a stock price of $35.47. The current dividend yield is 11% lower than the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable but above the relative median. (Do not forget that the higher the yield the better, whereas for other ratios lower is better.)

When I look at analysts' recommendations, I find Buy, Hold and Underperform recommendations. Most the recommendations are a Hold and the consensus recommendations would be a Hold. The 12 months stock price is $41.80. This implies a total return of 21.17% with 17.85% from capital gains and 3.33% from dividends. This is a rather high return with a consensus recommendation.

This PDF from Canadian Utilities Ltd.'s site talks about 40 years of dividends. In this Globe and Mail article John Heinzl talks about Canadian Utilities habit of raising dividends. Robert Baillieul of Motley Fool thinks this is a stock to hold forever because of dividends.

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. ATCO (ACO.X) owns just over 88% of this company. Its web site is here Canadian Utilities 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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