I do not own this stock of Northland Power Inc (TSX-NPI, OTC-NPIFF). This company is into generating electric power. I have a lot invested in pipelines and I would like to have more invested in electric power as part of my utility’s investments. I read a report on this stock that said it was a good defensive stock to buy. That is, it is a good stock to hold in a stock market correction. I can certainly see the logic of using utility stocks as defensive stocks.
When I was updating my spreadsheet, I noticed that debt ratios were bad. The Liquidity Ratio for 2017 was just 1.14 and the Debt Ratio for 2017 was 1.17. I like to see these at 1.50 or higher. The Leverage and Debt/Equity Ratios are also high at 7.05 and 6.05 respectively for 2017.
The Long Term Debt/Market Cap Ratio is very high at 1.53 for 2017 and at 1.63 for the third quarter of 2018. This means that the long term debt is higher than the market cap. This is not a good situation. Some analysts think that this ratio should be below 0.50 and other think at 1.00 is not so bad, but everyone thinks anything above 1.00 is bad.
The dividend yield is good. The current dividend yield is 5.37% with 5, 10 and historical yields at 6.37%, 6.45% and 7.73%. Dividends were decreased slightly in 2008 and then have been flat until this year. In 2018 they increased the dividends by 11%. Analysts think that they will also increase them in 2019 and 2020, but at a lower rate.
Until 2018 they could not afford their dividends. In 2017 the Dividend Payout Ratio was 127% for EPS with 5 year coverage at 331%. This is the lowest it has ever been. The DPR for CFPS for 2017 was better at 20% with 5 year coverage at 33%. Analysts the DPR for EPS to be around 765 in 2018.
The Long Term Debt/Market Cap Ratio is too high at 1.53 in 2017 and currently at 1.63. The Liquidity Ratio for 2017 is too low at 1.14, but if you add in cash flow after dividends it is 1.88. The current Liquidity Ratio is even lower at 1.11 with ratio after cash flow excluding dividend is 1.77. This means that the company depends on cash for to help cover the current liabilities sufficiently. The Debt Ratio is also lower than what I like at 1.17. I prefer this and the Liquidity Ratio to be 1.50 or higher. The Leverage and Debt/Equity Ratios are too high at 7.05 and 6.05 respectively.
The Total Return per year is shown below for years of 5 to 20. 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 has not been much in dividend growth, but dividend yield has been good and shareholders have had good total returns over the years.
| Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|
| 5 | 0.00% | 9.90% | 4.58% | 5.32% |
| 10 | -0.16% | 13.61% | 6.67% | 6.94% |
| 15 | 0.65% | 12.73% | 5.15% | 7.58% |
| 20 | 2.98% | 12.01% | 4.33% | 7.68% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 13.69, 16.42 and 19.15. The corresponding 10 year ratios are 11.55, 13.85 and 16.15. The corresponding historical ratios are 13.41, 15.83 and 18.26. The current P/E Ratio is 14.25 based on a stock price of $22.34 and 2018 EPS estimate of $1.57. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a Graham Price of $12.52. The 10 year low, median, and high median Price/Graham Price Ratios are 2.13, 2.50 and 2.69. The current P/GP Ratios is 1.78 based on a stock price of $22.34. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median Price/Book Value per Share Ratio of 3.80. The current P/B Ratio is 5.03 based on Book Value of $787M, Book Value per Share of $4.44 and a stock price of $22.34. The current P/B Ratio is some 33% higher than the 10 year median. This stock price testing suggests that the stock price is expensive.
I get a median dividend yield of 6.39% since 2009 when the company changed from an income trust to a corporation. The current dividend yield is 5.37% based on dividends of $1.20 and a stock price of $22.34. The current yield is some 15.9% above the median yield since 2009. 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 4.00. The current P/S Ratio is 2.54 based on 2018 Revenue estimate of $1,560M, Revenue per Share of $8.80 and a stock price of $22.34. The current ratio is some 37% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
The testing gives very different results because some of the value are high like the P/B Ratio where the10 year median is at 3.80 and current one is at 5.03. The Price/Graham Price Ratios are also very high over the past 10 years. This is because of the number of year of earnings losses. There were 4 in the last 7 years. The dividend yields are also very high because this company used to be an income trust.
The P/S Ratio is a good test and it is showing the stock as cheap. The company has had positive earnings the last two years and analysts think this will continue. The P/E Ratio is a reasonable one at 14.25 and the testing is showing this. Price is probably cheap to reasonable.
When I look at analysts’ recommendations, I find Strong Buy (1), Strong Buy (8), Hold (1) and Underperform (1) recommendations. The consensus would be a Buy. The 12 month stock price is $25.98. This implies a total return of $21.67% with 16.29% from capital gain and 5.37% from dividends.
Ricardo Crouch on Simply Wall Street talks about the ownership of this company. Caroline Biscotti on Hawthorn Caller says the company’s Piotroski Score of 5 on a sale from 0 to 9. A Lakeland Staff Writer on Lakeland Observer says that the Value Composite One (VC1) says that the stock is neither over or undervalued. Brad Macintosh on Motley Fool recommends this stock. See what analysts are saying on Stock Chase. Analysts seem to like this stock.
Northland Power Inc develops, builds, owns, and operates facilities that produce ‘clean’ (natural gas) and ‘green’ (wind, solar, and hydro) energy, providing sustainable long-term value to shareholders, stakeholders, and host communities. Its web site is here Northland Power Inc.
The last stock I wrote about was about was Chesswood Group Ltd. (TSX-CHW, OTC-CHWWF) ... learn more. The next stock I will write about will be DHX Media Ltd (TSX-DHX, OTC-DHXMF) ... learn more on December 7, 2018 around 5 pm. Tomorrow on my other blog I will write about Buy December 2018.... learn more on Thursday, December 6, 2018 around 5 pm.
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