I do not own this stock of Algonquin Power & Utilities Corp (TSX-AQN, NTSE-AQN). 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.
The most notable thing is that they have changed their reporting currency in 2018 to US$. They started to pay dividends in US$ in 2014 but did not report in US$ until this year. This is a utility company. What you generally want in a utility company is consistency. Unfortunately, this company is not consistent at all. See the chart below.
They have not got a good record of dividend growth. Part of this is because the company used to be an income trust and decreased the dividends by some 78% when the company changed to a corporation. The thing is that income trust can pay more than earnings in dividends but corporations cannot. They however also decreased the dividends 2002 after going public in 1997 as an income trust. They started to increase dividends again 2011 and have increased them since. Also in 2014 they started to pay dividends in US$.
Currently dividends are good with moderate dividend growth. The current dividend is 4.81% and the last dividend increase was in 2018 and it was for 10%. The 5, 10 and historical median dividends yield are 4.58%, 4.60% and 7.81%. This long term yield is high because company used to be an income trust.
As far as I can see they cannot afford their dividends. The Dividend Payout Ratio has never been below 100%. A lot of income trust companies had tax pools extending into the future after they became corporations. However, these companies do need to get their DPR down. Analysts expect that the DPR for this company will be less than 100% in 2019. This is just their estimates and analysts have been expecting before than the company will get their DPR below 100%.
The Long Term Debt/Market Cap Ratio for 2017 is 0.64 which is fine. However, last year’s was 1.25 and currently the ratio is 0.92. You do not want this near 1.00 as it is not good for long term debt to be higher than the Market Cap.
The Liquidity Ratio for 2017 is 0.88. This means than current assets cannot cover current liabilities. Unfortunately, lots of utilities have low Liquidity Ratios. If you add in cash flow after dividends, the Liquidity Ratio is still low at 1.21 but it is acceptable. The Debt Ratio is better at 1.65.
Leverage and Debt/Equity Ratios for 2017 are 3.30 and 1.99 respectively. They are high but unfortunately utilities tend to have their ratios rather high.
The Total Return per year is show below for years of 5 to 19. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See charts below.
As you can see long term total returns were mostly dividends and very low capital gains. On the other hand income trusts tend to have high distributions and slow growth. But the stock price in 1997 was higher than the stock prices from 2006 to 2014 inclusive.
| Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|
| 5 | 10.03% | 20.45% | 15.50% | 4.95% |
| 10 | -6.68% | 9.32% | 5.27% | 4.05% |
| 15 | -0.27% | 8.87% | 2.81% | 6.06% |
| 19 | -0.83% | 7.88% | 1.49% | 6.38% |
The 5 year low, median and high median Price/Earnings per Share Ratios are 23.61, 27.16 and 30.53. The corresponding 10 year values are 23.16, 26.55 and 29.39. The historical values are 23.77, 27.39 and 30.87. The current P/E Ratio is 24.23 based on a currently stock price of $12.60 and 2018 EPS of $0.52. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a Graham Price of $9.46. The 10 year low, median and high median Price/Graham Price Ratios are 1.19, 1.40 and 1.58. The current P/GP Ratio is 1.33 based on a stock price of $12.60. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 10 year median Price/Book Value per Share of 1.49. The current P/B Ratio is 1.65 based on Book Value of $3,301M, Book Value per Share of $7.65 and a stock price of $12.60. The current P/B Ratio is some 10.5% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get 5 and 10 median dividend yields of 4.75% and 4.70% respectively. The current dividend yield is 5.36% based on dividends of $0.52 and a stock price of $9.57. The current dividend yield is higher than the 5 and 10 year median dividends yields by 13% and 14% respectively. This stock price testing suggests that the stock price is relatively reasonable and below the median. This testing is in US$ as dividends are paid in US$.
The 10 year median Price/Sales (Revenue) Ratio is 2.38. The current P/S Ratio is 2.37 based on a stock price of $12.60, 2018 Revenue estimate of $2,287M and Revenue per Share of $5.30. The current ratio is below the 10 year median by 0.19%. This stock price testing suggests that the stock price is relatively reasonable and below the median.
When I look at analysts’ recommendations I find Strong Buy (3), Buy (7) and Hold (2). The consensus would be a Buy. The 12 month stock price consensus is $14.48. This implies a total return of 20.28% with 14.92% from capital gain and 5.36% from dividends.
Haris Anwar on Motley Fool compared this stock to Fortis. I think that Fortis has been much more stable over the long term than Algonquin Power. See my report on Fortis Inc. (TSX-FTS, OTC-FRTSF)... here. James Anderson on Registrar Journal talks about recent analyst recommendations for this stock. The consensus is a Buy. See what analysts are saying about this stock on Stock Chase. Analysts like this stock and others compare it to Fortis.
Algonquin Power & Utilities Corp is a renewable energy and regulated utility company. It is engages in hydroelectric, wind, thermal and solar power facilities, and sustainable utility distribution businesses. Its web site is here Algonquin Power & Utilities Corp.
The last stock I wrote about was about was Alcanna Inc. (TSX-CLIQ, OTC-LQSIF)... learn more. The next stock I will write about will be CI Financial Corp (TSX-CIX, OTC- CIFAF)... learn more on Wednesday, June 20, 2018 around 5 pm. Tomorrow on my other blog I will write about New Computer.... learn more on Tuesday, June 19, 2018 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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