EnerCare Inc.

Sound bite for Twitter and StockTwits is: Dividend growth utility. Price seems to be coming up in the relatively reasonable category. This would not be my first choice as a utility stock. I do not like the low Liquidity Ratio and the high Dividend Payout Ratios. I think it is overvalued judging by the high P/GP Ratio. See my spreadsheet on EnerCare Inc.

I do not own this stock of EnerCare Inc. (TSX-ECI, OTC-CSUWF). I started to follow this stock in 2009 when it was an income trust. This was one of a few income trusts that I followed because it was recommended by MPL communications.

What I do not like is the debt ratios and especially, the Liquidity Ratio. Bad debt ratios help a company get into trouble in bad times. There are always going to be bad times. The Liquidity Ratio for 2016 is 0.43. If this is not 1.00, then current assets cannot cover current liabilities. If you add in cash flow after dividends it is only 0.57. If you add back in the current portion of the long term debt, it is 0.86. If you then add back in the cash flow after dividends it reaches just 1.15. I like this ratio to be at least 1.50 or higher for safety's sake.

They have restarted dividend increases in 2015. That first increase was for 22.8%. Later increases were lower with the latest one in 2017 at 3.9%. The dividend increases for the past 5 year is at 6.53% per year. The dividends have declined by 2.9% per year over the past 10 years.

As shown above the dividend increases are low over all increasing at just 6.5% per year lately. Dividends are good. The current dividend yield is 4.69%. This dividend yield is based on dividends of $0.96 and a stock price of $20.45. The 5 year median dividend yield is 5.70%.

Another thing I do not like is that the Dividend Payout Ratio is still too high. Yes, it used to be an income trust and they could spend more on dividends than the EPS. However, it is not an income trust anymore. It must get its Dividend Payout Ratio for EPS under control. The DPR for EPS for 2016 was 143% with 5 year coverage of 234%. This is far too high. Analysts expect that they will be able to have a DPR under 100% in 2019. However, you cannot really trust analyst estimates that far out. They cut the dividend by 50% in 2009. This was obviously not enough.

The Dividend Payout Ratio for CFPS is also too high. The one for 2016 is 50.8%. The 5 year coverage is 42%. The 5 year coverage is not too bad as generally it is thought that the DPR for CFPS should be 40% or less.

The 5 year low, median and high median Price/Earnings per Share Ratios are 23.84, 27.80 and 31.76. The corresponding 10 year ratios are 25.89, 33.14 and 42.63. The historical ones are 27.94, 34.44 and 39.57. To me these seem quite high for a utility stock. The current P/E Ratio is 35.26 based on a stock price of $20.45 and 2017 EPS of $0.58. This stock price testing suggests that the stock price is relatively reasonable but above the median.

I get a Graham Price of $8.63. The low, median and high median Price/Graham Price Ratios are 1.87, 2.18 and 2.72. The current P/GP Price is 2.37 based on a stock price of $20.45. These are also very high ratios for a utility stock. This stock price testing suggests that the stock price is reasonable, but above the median.

The 10 year median Price/Book Value per Share Ratio is 3.03. The current P/B Ratio is 3.58 based on a stock price of $20.45, Book Value of $954.M and BVPS of $5.71. The current P/B Ratio is some 18% above the 10 year median ratio. The stock price testing suggests that the stock price is reasonable, but above the median. For the price to be relatively expensive, the current P/B Ratio would have to be 20% above the 10 year median ratio.

Because this used to be an income trust company, the dividend yield tests do not work as well as for other companies. The 5 year median dividend yield is 5.70%. The median dividend yield since 2011 is 6.53%. The current dividend yield is 4.69% a value some 17% below the 5 year median. The current dividend yield is 28% lower than the median dividend yield since 2011. This stock price testing suggests that the stock price is relatively expensive.

The 10 year median Price/Sales (or Revenue) Ratio is 1.93. The current P/S Ratio is 1.68 based on a stock price of $20.45 and 2017 Revenue estimate of $1,267M and Revenue per Share at $7.44. The current P/S ratio is some 13% lower than the 10 year median. This stock price testing suggests that the stock price is relatively reasonable and below the median.

When I look at analysts' recommendations, I find Buy and Hold recommendations. Most are Buy recommendations and the consensus recommendation would be a Buy. The 12 month stock price is $24.42. This implies a total return of 24.11% with 19.41% from capital gains and 4.69% from dividends.

Chris MacDonald of Motley Fool likes this stock because it is boring and has a high dividend yield. Sarah Dixon on Clayton News Review says this company has a Return on Equity of 10.26%, Return on Invested Capital of 3.31% and Return on Assets of 2.81%. Ploutos Investing on Seeking Alpha likes this stock and is invested in it. See what analysts are saying about this stock on Stock Chase. They mostly like the company.

EnerCare Inc. owns a portfolio of waterheaters and other portfolio assets, which they rent to primarily residential customers. They rent out waterheaters in the GTA and southern Ontario. EnerCare also owns EnerCare Connections Inc., a leading sub-metering company, with metering contracts for condominium and apartment suites in Ontario, Alberta and elsewhere in Canada. Its web site is here EnerCare Inc.

The last stock I wrote about was about was Newfoundland Capital Corp. (TSX-NCC, OTC-none)... learn more. The next stock I will write about will be BlackBerry Ltd. (TSX-BB, NASDAQ-BBRY)... learn more on Wednesday, August 16, 2017 around 5 pm. Tomorrow on my other blog I will write about The West... learn more on Tuesday, August 15, 2017 around 5 pm.

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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