Monday, September 12, 2016


Sound bite for Twitter and StockTwits is: Price reasonable, below median. On some tests the stock price looks relatively expensive, but the test I like best is that of the dividend yield as you are using current data 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. TCO (TSX-ACO-X) owns 88% Canadian Utilities (TSX-CU, so you would not buy both these stocks.

Dividends are low to moderate and the dividend increases are moderate. The current dividend is 2.47% with a 5 year median dividend yield of 1.88% and a historical median dividend yield of 2.08%. The dividend growth over the past 5 and 10 years is at 13.3% and 10.1% per year. The last dividend increase was this year and the increase was for 15.2%.

If you had bought this stock 5, 10 or 15 years ago and paid a median price, you would be earning a dividend yield of 3.8%, 5.4% or 9.5% on your original investment. If you had bought this stock 5, 20 or 15 years ago, dividends paid would cover 14.5%, 32.5% or 71.7% of the cost of your stock. If you bought this stock today and the dividends increase at 13%, then in 5, 10 or 15 years you could be earning a yield of 4.6%, 8.4% or 15.4% on your purchase price.

Last year was not a good year for this company. The EPS was just $1.33 a values some 63% lower than the previous year. However, EPS have picked up this year and if you compare the 12 month EPS to the end of the second quarter to the EPS for 2015, EPS is up by 45%.

The 5 year low, median and high median Price/Earnings per Share Ratios are 11.05, 12.40 and 13.75. The 10 year corresponding values are 9.91, 11.53 and 13.10. The historical values are 9.04, 10.59 and 12.31. The current P/E Ratio is 16.05 based on a stock price of $46.21 and 2016 EPS estimate of $2.88. This stock price testing suggests that the stock is relatively expensive.

I get a Graham Price of $43.48. 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 1.06 based on a stock price of $46.21. This stock price testing suggests that the stock price is reasonable, but above the median.

I get a 10 year median Price/Book Value per Share Ratio of 1.65. The current P/B Ratio is 1.58 a value some 4% lower. The current P/B Ratio is based on a stock price of $46.21 and BVPS of $29.18. This stock price testing suggest that the stock price is reasonable and below the median.

The current dividend yield is 2.47% based on a stock price of $46.21 and dividends of $1.14. The historical dividend yield is 2.08% a value some 19% below the current dividend yield. Also, the 5 year median dividend yield is 1.88% which is some 31% below the current dividend yield. This stock price testing suggests that the stock price is relatively cheap to reasonable.

When I look at analysts' recommendations, I find Buy, Hold and Underperform recommendations. The consensus recommendations would be a Hold. The 12 month stock price consensus is $48.25. This implies a total return of 6.88% with 4.41% from capital gains and 2.47% from dividends based on a current price of $46.21.

Kay Ng of Motley Fool likes this stock and thinks that it is reasonably priced with good potential and good dividend growth. In this article by Chris Varcoe in the Calgary Herald he talks about the annual meeting of this company and that the CEO and Chair believes in Fort McMurray rebuilding. In this article by Jeff Lewis at the G&M he talks about the founder of this company Ron Southern.

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.

The last stock I wrote about was about was Exchange Income Corp. (TSX-EIF, OTC-EIFZF)... learn more . The next stock I will write about will be High Liner Foods (TSX-HLF, OTC-HLNFF)... learn more on Wednesday, September 14, 2016 around 5 pm. Tomorrow on my other blog I will write about Defined Contribution Pensions... learn more on Tuesday, September 13, 2016 around 5 pm.

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. The company utilizes a dual share structure of voting and non-voting shares. 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.

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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