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 the Long Term Debt is still too high. The Long Term Debt/Market Cap Ratio for 2018 is 1.68. The current ratio is lower but still a bad ratio at 1.32. It is best if this ratio is at 0.50, but you certainly do not want it above 1.00. I do not like the other debt ratios either. The Liquidity Ratio for 2018 is 1.35 falling to a current 1.02. The Debt Ratio for 2018 is 1.18 and falling to a current 1.16. Both these ratios should be 1.50 or higher.
Also, even though the Book Value is not declining the Book Value per Share is. It is the Book Value per Share that is important to shareholders. Book Value per share is down by 0.64% and 3.98% per year over the past 5 and 10 years.
This stock used to be an income trust and as such had quite high yields, topping out at 15%. The current yield is in the moderate range (2% to 4% ranges) at 4.36%. However, the 5, 10 and historical median yields are the good range (over 5%) at 5.25%, 6.38% and 7.71%.
The dividend growth has been low because there has been only one increase which occurred in 2018, since 2009. There have been no increases in 2019. Most old income trust companies paid out a lot more than they can as corporations. This company has been trying to get the DPR for EPS down to a reasonable ratio. They are getting there, so there might be dividend growth in the future.
The Dividend Payout Ratios are getting better and current ones are to fine with the DPR EPS Ratio a bit high still. The DPR for 2018 is 82% with a 5 year coverage of 268%. The problem is years with EPS losses, and EPS below the dividends. The DPR for CFPS for 2018 is 19% with 5 year coverage at 27%. The DPR for FCF is at 39% for 2018 with 5 year coverage that cannot be calculated due to too many years of negative FCF in the last 5 years.
Debt Ratios are not what I like to see. The Long Term Debt/Market Cap Ratio for 2018 is 1.68. This is much too high. The current one is 1.32 due to a rise in the stock price. The Liquidity Ratio is 1.35 for 2018 with 5 year median at 1.35 also. If you add in cash flow after dividends the ratio goes to 2.52 with a 5 year median of 1.94. The Debt Ratio is 1.18 in 2018 with 5 year median of 1.19. These ratios are too low. Leverage and Debt/Equity Ratios for 2018 are 6.71 and 5.71 with 5 year medians of 4.05 and 3.05. The current ratios are too high.
The Total Return per year is shown below for years of 5 to 21 to the end of 2018. 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 chart below.
A lot of the past total return was in dividends. Dividends will be much lower in the future going forward.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2013 | 5 | 2.13% | 13.26% | 6.99% | 6.28% |
| 2008 | 10 | 1.06% | 13.89% | 6.46% | 7.43% |
| 2003 | 15 | 1.36% | 11.64% | 4.12% | 7.52% |
| 1998 | 20 | 1.56% | 10.51% | 3.23% | 7.28% |
| 1997 | 21 | 3.36% | 11.68% | 3.76% | 7.93% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 13.68, 15.65 and 17.62. The corresponding 10 year ratios are 13.69, 16.03 and 18.38. The corresponding historical ratios are 13.68, 15.65 and 17.89. The current P/E Ratio is 15.47 based on a stock price of $27.53 and 2019 EPS estimate of $1.78. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a Graham Price of $13.04. The 10 year low, median, and high median Price/Graham Price Ratios are 2.13, 2.50 and 2.69. The current P/GP Ratio is 2.11 based on a stock price of $27.53. 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 4.16. The current P/B Ratio is 6.48 based on a Book Value of $765M, Book Value per Share of $4.25 and a stock price of $27.53. The current ratio is some 56% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
I get an historical median dividend yield of 7.71%. The current dividend yield is 4.36% based on dividends of $1.20 and a stock price of $27.53. The current yield is 43% below the historical one. This stock price testing suggests that the stock price is relatively expensive.
I get a 10 year dividend yield of 6.38%. The current dividend yield is 4.36% based on dividends of $1.20 and a stock price of $27.53. The current yield is 31% below the 10 year median dividend yield. This stock price testing suggests that the stock price is relatively expensive.
The 10 year median Price/Sales (Revenue) Ratio is 4.00. The current P/S Ratio is 2.99 based on 2019 Revenue estimate of 1,660M, Revenue per Share of $9.21 and a stock price of $27.53. The current ratio is 26% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
Results of stock price testing is that the stock price is that the stock price might be reasonable. The results of the stock price testing are all over the place mostly fluctuating from cheap to expensive. The P/S Ratio is probably a good one, but you not only have to grow your revenue, but you have to be able to make a profit from your revenue. Part of the problem is the increasing number of outstanding shares which have increased by 6.3% and 11.2% per year over the past 5 and 10 years.
Is it a good company at a reasonable price? The price probably is reasonable. However, I have a problem with the debt ratios and the company’s ability to make a profit which is reflected in the very high P/B Ratio. The P/GP Ratio testing says it is relatively cheap, but the ratios are very high. I might consider the company if it survives the next recession.
When I look at analysts’ recommendations, I find Strong Buy (2), Buy (4), Hold (1), and Sell (1). The consensus would be a Buy. The 12 month stock price consensus is $29.63. This implies a total return of 11.99% with 7.63% from capital gains and 4.36% from dividends.
See what analysts are saying on Stock Chase. The analysts like this stock. Victoria Hetherington on Motley Fool thinks this stock is a strong buy in the Green Economy. A writer on Simply Wall Street talks about the company’s high ROE. This is not the way I calculate it. I get a current one of 22% but the 5 year ROE is at 11% per year. I do not consider NCI or Preferred Shares as part of the Book Value. A writer on Simply Wall Street talks about the company producing an higher than expected quarterly earnings. The company on Globe Newswire talks about their third quarterly results..
Northland Power Inc is an operator of power producing facilities. These facilities generate electricity from natural gas or use renewable sources, such as wind and solar power. Most of the electricity produced by Northland Power comes from its thermal facilities. Additionally, almost all of Northland Power's power generation takes place in Canada. The company also owns assets in Mexico, the Netherlands, and Germany. Its web site is here Northland Power Inc 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 Wednesday, December 06, 2019 around 5 pm. Tomorrow on my other blog I will write about Dividend Stocks December 2019.... learn more on Tuesday, December 03, 2019 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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