Innergex Renewable Energy

Sound bite for Twitter and StockTwits is: Dividend Paying Utility. This company would not be my first choice for a utility. I like companies that can earn a profit. See my spreadsheet on 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.

Two changes were made in 2010; the first was the changed from an income trust and the second was the strategic combination of Innergex Power Income Fund and Innergex Renewable Energy. For shareholders of Innergex Power, dividends were decreased in 2010 by around 33%. In 2011, dividends were increased by 26%. Dividends are still almost 10% below what they were 2009.

This company has started to increase dividends again. There were increases in 2014 and 2015. Dividends increased by 2.6% in 2014 and by 3.4% in 2015. These rates are at least above the inflation rates. Analysts expect similar dividend increases in 2016 and 2017. Dividend growth to the end of 2014 was a decline of 0.7% and 2.8% per year. Because of low point in dividends in 2010, dividend growth is 6% per year to date.

They do not have enough in earnings to pay dividends. No one expects this to change in the near future. The Dividend Payout Ratio in regards to cash flow is fine. In 2014 the DPR for CFPS was 34% and its 5 year median is 43%.

Outstanding shares have grown by 18.6% and 12.8% per year over the past 5 and 10 years. Shares have increased due to DRIP, Share Issues, Stock Options and Conversion of Debentures. Because shares have grown so much you need to paid particular attention to the per share values. Revenue growth is good. ESP growth non-existent as there was an earnings loss in 2014. Cash Flow growth is good.

Revenue has grown by 32.8% and 25.4% per year over the past 5 and 10 years. Revenue per Share has grown at 12% and 11.1% per year over the past 5 and 10 years. Analysts expect revenue growth of 2.6% for 2015. If you look at the 12 month period to the end of 2014 and the 12 month period to the end of the third quarter, Revenue has grown by 7%.

EPS was negative in 2014 and is expect to be negative in 2015. The EPS for 2015 is expected to be a loss of $0.13. If you look at the 12 month period to the end of the third quarter, EPS is a loss of $0.27.

Cash Flow has grown by 39.6% and 25.5% per year over the past 5 and 10 years. CFPS has grown at 17.7% and 11.3% per year over the past 5 and 10 years. Analysts expect growth in Cash Flow for 2015 to be at 16.7%. However, if you look at the 12 month period to the end of 2014 and the 12 month period to the end of the third quarter, Cash Flow has down by 66%.

There have been earnings losses 6 times in the past 10 years and 4 times in the past 5 years. Needless to say this is not a great record. They are not earning enough to cover the dividends. They do have enough cash flow to pay dividends.

I am not happy with the debt ratios. The Liquidity Ratio for 2014 is 0.91 and it has a 5 year median value of 1.31. If you add in cash flow after dividends, the Liquidity Ratio is barely past 1.00 at 1.05. The Debt Ratio is 1.26 and this has a 5 year median of 1.40. I prefer both the Liquidity Ratio and Debt Ratios to be at least at 1.50. Leverage and Debt/Equity Ratios are too high. In 2014 they were 4.83 and 3.83. These are high even for a utility.

This is the first of two parts. The second part will be posted on Wednesday, December 2, 2015 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 Renewable Energy.

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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