I do not own this stock of Innergex Renewable Energy (TSX-INE, OTC-INGXF) but I used to. In 2006 I bought Innergex Power on a buy rating and favorable report from TD although it has only been going from 2003. In 2008 I sold Innergex as I did not think that it is a stock I want to hold as dividends increased less than the rate of inflation.
When I was updating my spreadsheet, I noticed debt ratios were not good. The Long Term Debt/Market Cap Ratio for 2017 is 1.95 moving to a current 1.87. Any time this ratio is over 1.00 it is a problem. It means that the company’s debt is above the market value of the stock. The Liquidity Ratio is 0.90. This means that the current assets cannot cover the current liabilities and with cash flow after dividends, the ratio is still low at 1.39. The preferred ratio is 1.50.
The other debt ratios are no better with the Debt Ratio low at just 1.12 in 2017 moving to a current one of 1.21. It is preferred to have this ratio at 1.50 also for safety sake. The Leverage and Debt/Equity Ratios are higher than what would be preferred. In 2017 they were 9.31 and 8.31.
This stock used to be an income trust until 2010. As an income trust the dividend yields would have been higher than a corporation. As an income trust median dividend yield was 7.75% and since 2010 median dividend yield has been 5.51%. This is not a big of a difference as was the case on other income trusts that became corporations.
The dividend yields are high with the current dividend yield at 4.72% and 5, 10 and historical medians at 5.56%, 5.74% and 6.08%. The median dividend yield since 2010 is 5.57%. Dividend growth has been low with the 5 year dividend growth at just 2.46% per year. Part of the reason dividend growth is low as there were no dividend increases in 2012 and 2013. But the increases that occurred with low in 2% and 3% ranges with the last increase in 2018 at 3%.
The Dividend Payout Ratio for 2017 is 298%. I cannot calculate 5 year coverage as there has been too many years of earning losses. The DPR for 2018 is expected to be higher at 450%. The DPR for cash flow is better with the 2017 DPR for CFPS at 24% and 5 year coverage at 36%. The DPR for CFPS is expected to rise to 49% in 2018 and this is too higher. The preferred DPR for CFPS is 40% or less.
The Total Return per year is shown below for years of 5 to 14. 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.
There is not much in dividend growth but shareholders have had good total returns.
| Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|
| 5 | 2.46% | 12.06% | 6.83% | 5.23% |
| 10 | -0.41% | 11.97% | 5.87% | 6.10% |
| 14 | 0.34% | 10.25% | 4.03% | 6.22% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 19.53, 22.20 and 24.86. The corresponding 10 year ratios are -15.48, -16.81 and -18.13. The historical ratios are 9.78, 10.73 and 11.69. We are talking about a Utility Stock here, so the ones that make some sense are the historical ratios. The current P/E Ratio is 96.00 based on a stock price of $14.40 and 2018 EPS estimate of $0.15. This stock price testing suggests that the stock price is relatively expensive.
Since we are getting near to 2019, it is of some interest to look at P/E Ratio for 2019. That P/E Ratio is 38.92 based on a current stock price of $14.40 and 2019 EPS of $0.37. This ratio is still high and this stock price testing suggests that the stock price is relatively expensive.
I get a Graham Price of $4.57. The 10 year low, median, and high median Price/Graham Price Ratios are 1.40, 1.51 and 1.62. These are high ratios for a utility. The current P/GP Ratio is 3.15 based on a stock price of $14.40. This stock price testing suggests that the stock price is relatively expensive.
I get a 10 year median Price/Book Value per Share Ratio of 2.15. The current P/B Ratio is 2.32 based on Book Value of $829M, Book Value per Share $6.20 and a stock price of $14.40. The current ratio is some 8% higher than the 10 year ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get an historical median dividend yield of 6.08% and a median dividend yield since 2010 of 5.57%. The current dividend yield is 4.72% based on dividends of $0.68 and a stock price of $14.40. The current yield is some 15% below the median yield since 2010. This stock price testing suggests that the stock price is relatively reasonable but above the median.
The 10 year median Price/Sales (Revenue) Ratio is 4.78. The current P/S Ratio is 3.48 based on 2018 Revenue estimate of $554, Revenue per Share of $4.14 and a stock price of $14.40. This stock price testing suggests that the stock price is relatively reasonable and below the median.
The stock price testing using P/E Ratio is probably not the best one for this, but the company does not seem to know how to make a profit. This is a problem for stock price testing. Most of my testing involves EPS except for the dividend yield test and P/S Ratio test. These are the only tests were the stock price is showing as reasonable.
When I look at analysts’ recommendations, I find Strong Buy (1), Buy (3), Hold (5) and Underperform (1). The consensus would be a Hold. The 12 month stock price consensus is $15.19. This implies a total return of 10.21% with 5.49% from capital gains and 4.72% from dividends based on a current price of $14.40.
LNR Staff on Lake Norman Review likes this company’s growing cash flow. I wished they could grow EPS too. Renee Jackson on Marea Informative talks about recent price target downgrades. . Ambrose O'Callaghan on Motley Fool likes this for its growing revenue. Again, I just wished it could grow EPS too. See what analysts are saying about this stock on Stock Chase.
Innergex Renewable Energy Inc develops, owns, and operates renewable power generating facilities, essentially focused on the hydroelectric, wind power sectors and solar photovoltaic sectors. Its web site is here Innergex Renewable Energy.
The last stock I wrote about was about was PFB Corp. (TSX-PFB, OTC-PFBOF) ... learn more. The next stock I will write about will be Crescent Point Energy Corp. (TSX-CPG, NYSE-CPG) ... learn more on Monday, November 26, 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.
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. I am on Instagram. Or you can just Google #walktoronto spbrunner8166 to see my pictures.
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