Just Energy Group Inc.

Sound bite for Twitter and StockTwits is: High risk, price reasonable. See my spreadsheet on Just Energy Group Inc.

I do not own this stock of Just Energy Group Inc. (TSX-JE, NYSE-JE). I started to follow this is July 2010. It was one of the high yield income trusts that people were talking about, so I decided to check it out.

The first thing to note is that the company has a negative book value. The book value has been negative since 2009. This means that theoretically if the company broke up or went bankrupt, there would be no value. It would be worth less than zero. It would not be my first choice to buy such a company.

This company did not decrease their dividends when they changed from an income trust to a corporation. They did decrease them in 2012 when they determined that the distributable cash payout ratio was over 100%. They also started to pay quarterly dividends rather than month dividends. Between 2013 and 2016 they decreased their dividends by some 60%. The distributable cash payout ratio for 2016 is at 53%. (Their financial year ends in March each year, so I am dealing with the year end of March 2016.)

If you want to look at dividend decline for the last 5 and 10 years, the dividends have decline by 16.6% and 5.7% per year over the past 5 and 10 years.

Dividend yields have generally been quite high. Today is no different. The current dividend yield is 7.33% based on dividends of $0.50 and a stock price of $6.82. The historical high is over 19.5% and the historical median is 8.4%. The 5 year median is 9.8%. These are all very high. This tells you that the company is a risky buy.

The company is expected to earn $2.86 this year compared to $0.43 last year and $0.28 next year. The extra seems to come down to the change in fair value of derivative instruments. This seems just a one shot deal so it has no bearing on what can be earned. The distributable cash is expected to be $0.92 this year compared to $0.94 last year and $1.00 next year.

The debt ratios are awful with the Liquidity Ratio at 0.87 meaning current assets cannot cover current liabilities. You only get to 0.99 if you add in cash flow after dividends. With a negative book value, the Debt Ratio is just 0.66 which means the assets cannot cover the liabilities.

The only things to grow are outstanding shares growing at 1.5% and 3.3% per year over the last 5 and 10 years and Revenue. Revenue is up by 6.8% and 13% per year over the past 5 and 10 years. Revenue per Share is up by 5.3% and 9.4% per year over the past 5 and 10 years. Earnings, distributable cash, stock price and cash flow are all down or only up marginally.

It makes more sense to look at Price/Distributable Cash Ratios than Price/Earnings per Share Ratios for this company because of the onetime abnormal earnings for this year.. The 5 year low, median and high median P/DC Ratios are 7.09, 9.13 and 11.83. The corresponding 10 year values are 7.39, 9.48 and 11.55. The current P/DC Ratio is 7.41. This would suggest that the stock price is reasonable and below the median.

Since this stock has negative book value I cannot do any stock price testing using Graham Price or Book Value. We can do testing using the dividend yield. The current dividend yield is 7.33% using dividends of $0.50 and a stock price $6.82. The historical median dividend yield is 8.42% a value some 13% higher. This stock price testing suggests that the stock price is reasonable but above the median.

When I look at analysts' recommendations, I find Buy and Hold recommendations. I am surprise there is no sell recommendations after all it has a negative book value. Most of the recommendations are a Hold and the consensus recommendation is a Hold. The 12 month stock target is $8.90. This implies a total return of 37.83% with 30.50% from capital gains and 7.33% from dividends.

This News Release says that the September dividend is still at $0.125 or $.50 per annum. I think that the dividend could be at risk. Perhaps it is not at risk for next year. This article in Kentucky Post News talk about this company issuing unsecured senior subordinate debentures at 6.75%. This article on Breaking Financial News talks about Royal Bank rising their 12 months stock price to $9.00. See what analysts think of this stock at Stock Chase. A couple of analysts think it is good for shorting.

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 Smart REIT (TSX-SRU.UN, OTC-CWYUF)... learn more . The next stock I will write about will be Telus Corp. (TSX-T, NYSE-TU)... learn more on Wednesday, September 21, 2016 around 5 pm. Tomorrow on my other blog I will write about Going to ETFs 2... learn more on Tuesday, September 20, 2016 around 5 pm.

Tomorrow on my other blog I will write also about Accord Financial Corp (TSX-ACD, OTC- ACCFF)... learn more on Tuesday, September 20, 2016 around 5 pm. I haven't got time to publish separately before the end of the year.

Just Energy's business involves the sale of natural gas and/or electricity to residential and commercial customers under long-term fixed-price and price-protected contracts. Just Energy derives its margin or gross profit from the difference between the fixed price at which it is able to sell the commodities to its customers and the fixed price at which it purchases the associated volumes from its suppliers. The company also offers "green" products through its Just Green program. Through its subsidiary Terra Grain Fuels, the Fund produces and sells wheat-based ethanol. Its web site is here Just Energy Group Inc.

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.