Wednesday, June 15, 2016

Algonquin Power & Utilities Corp

Sound bite for Twitter and StockTwits is: Certainly not cheap. My stock price testing is all over the place. Mostly it is above the median, so now may not be a good time to buy. See my spreadsheet on Algonquin Power & Utilities Corp.

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.

Although this company still reports in CDN$, in 2014 this company started to pay dividends in US$. The other thing to mention is that they just raised the dividend by 10% in US$. Canadians did not quite get the same raise in dividends because of the exchange rate.

By reporting in CDN$ and having dividends in US$ makes it difficult to judge just how much the company is paying out in regards to earnings and cash flow. I am looking at money paid by the company in dividends compared to Net Income and Cash Flow.

However, there is another problem. Dividends paid cover only dividends paid in cash. It does not cover DRIP dividends. However, you cannot pretend that DRIP dividends do not cost anything, because they do. DRIP dividends increase the number of shares outstanding and therefore decrease the EPS and CFPS.

The Dividend Payout Ratio using cash dividends paid compared to net income was at 73% for 2015. Comparing cash dividends paid compared to cash flow, it was 29% in 2015. I am not sure where this will be in 2016. However the company in the past has paid out more in dividends that its earnings, but not more than its cash flow.

I see a couple of problems. One is that the Liquidity Ratio is low and it has been low for quite some time. The Liquidity Ratio for 2015 is at 1.08. This is better than last year when it was just 0.87. When this is under 1.00, it means that current assets do not cover current liabilities. A preferred ratio is one that is 1.50 or higher. The problem with low Liquidity Ratios is that it makes a company vulnerable in bad times.

The other problem is the low Return on Equity. The ROE for 2015 is just 5.5%. The 5 year median is 4.5%. For a dividend paying company, the preferred ROE is at least 10%.

The 5 year low, median and high median Price/Earnings per Share Ratios are 23.75, 28.18 and 32.60. The corresponding 10 year values are similar at 23.23, 27.39 and 29.34. The historical values are 23.88, 27.63 and 31.88. The current P/E Ratio is 25.09 based on a stock price of $11.79 and 2016 EPS estimate of $0.47. This stock price testing suggests that the stock price is relatively reasonable and below the median. I think that the P/E Ratios are rather high for a utility stock.

I get a Graham Price of $8.14. The 10 year low, median and high median Price/Graham Price Ratios are 1.19, 1.40 and 1.55. The current P/GP Ratio is 1.45 based on a stock price of $11.79. This stock price testing suggest that the stock price is relatively reasonable but above the median. The P/GP Ratios are also rather high for a utility stock.

This used to be an income fund so the historical median dividend yield is quite higher at 8.20%. The 5 year median Dividend Yield is at 4.55% and this is just below the current dividend yield of 4.58%. This is based on dividends of $0.54 using current exchange and a stock price of $11.67. It is interesting that in US$, the dividend yield is higher at 4.64% based on dividends of 0.42 and a stock price of $9.12. Usually, yields are very similar or exact using different currencies. This testing might be suggesting that the stock price is relatively reasonable and at the median.

I get a 10 year median Price/Book Value per Share Ratio of 1.49. The current P/B Ratio is 1.88 based on current BVPS of $6.27 and a stock price of $11.67. The current P/B Ratio is some 26% above the 10 year median. This stock price testing suggests that the stock price is relatively expensive.

If you look at Price/Cash Flow per Share Ratio the 10 year median ratio is 9.54. The current P/CF Ratio is 10.25 a value some 7% higher. This is based on CFPS estimate for 2016 of $1.15 and a stock price of $11.67. This suggests that the stock price is reasonable but above the median.

If you look at P/S Ratio, the 10 year ratio is 2.38 and the current ratio is 2.68 based on Revenue of $1,139M and Revenue per Share of $4.40 and a stock price of $11.79. The current ratio is some 47.7% higher. This stock price testing suggests that the stock price is relatively expensive.

When I look at analysts' recommendations, I find Strong Buy and Buy. Most are a Buy and the consensus is a Buy. The 12 month stock price is $13.28. This implies a total return of 18.06% with 13.49% from capital gain and 4.58% from dividends.

This article by Ryan Vanzo on Motley Fool talks about Emera selling most of their stake in this company. Emera says that they need for the money for their TECO Energy investment and that was the only reason for the sale. In this article by Demetris Afxentiou of Motley Fool says why this company should be in your portfolio. He is impressed with the high dividend yield of around 4.5% and the recent dividend increases. Mercenary Investor on Seeking Alpha thinks that this company is a value generator. See what analysts are saying on Stock Chase.

I will have only one entry for this stock this year. However, I did a more complete report on this company in 2015 and you can see that report here.

Yesterday on my other blog I wrote about not dying broke... learn more . The next thing I will write about on my other blog is about Buy Backs... learn more on Thursday, June 15, 2016 around 5 pm.

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 & Utilities Corp.

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. I have three blogs. The first talks only about specific stocks and is called Investment Talk . The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter or StockTwits.

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