Sound bite for Twitter and StockTwits is: Dividend Growth Utility. Price is current reasonable but above the median. However, this is changing and is currently going lower as is the whole TSX. Shareholders have done well with this stock, but I find debt worrisome at the moment but it is being dealt with by the company. See my spreadsheet on Emera Inc.
I own this stock of Emera Inc (TSX-EMA, OTC-EMRA). I found this company in Mike Higgs’ site. Mike’s site has a spreadsheet showing Dividend Paying Canadian Growth stocks. I first bought this stock in 2005, as I wanted to buy something for my Locked in RRSP. I think that this was an appropriate stock and has good value. I was using up excess cash in my account.
When I was updating my spreadsheet, I noticed that I have done very well with this stock. My total return to date is 13.36% per year with 8.84% from capital gain and 4.52% from dividends. Shareholders in general have done well with total returns.
However, I have been worried about debt and debt ratios. The Long Term Debt/Market Cap Ratio hit a high of 1.55 in 2016 and has been declining and is expected to be at 0.93 this year. More worrisome is the Liquidity Ratio where even after adding in cash flow after dividends and current portion of the long term debt it only reaches 94. Doing a current calculation, using estimates, the ratio meets 1.00. If this Ratio is below 1.00, it means that current assets cannot cover current liabilities.
The dividend yields are moderate with dividend growth low to moderate. The current dividend yield is moderate (2% to 4% ranges) as is longer term median ratios. The current dividend 4.35%, with 5, 10 and historical median dividend yields at 4.69%, 4.26% and 4.77%. The last dividend increase was low (below 8%) at 4.3%. Since 2016 when there was a 20% increase, the increases have been low. Dividend increases have been volatile but in the moderate range over the last while. See chart below.
The Dividend Payout Ratios need to improve. They currently seem to be going in the right direction. The DPR for EPS for 2019 is 86% with 5 year coverage at 94%. This is too high as it is best for utilities for it to be 80% or less. Since Free Cash Flow was negative in 2019 (WSJ and Morningstar agreeing), I cannot calculate the DPR. Same problem for the 5 year coverage. However, the DPR for FCF is expected to be positive in 2020 with a DPR of 49% and Dividend Coverage Ratio of 2.03. This would be fine.
Debt Ratios need to improve. The Long Term Debt/Market Cap Ratio is 1.01 in 2019 and is too high. It becomes 0.96 in 2020 because of rising stock price. (But who know what is going to happen in the short term with the corvid 19 virus.) I had mentioned about my problem with the Liquidity Ratio. They cannot cover their current liabilities however you look at the accounting. The Debt Ratio is low at 1.37. It is better at 1.50 or above. The Leverage and Debt/Equity Ratios at 4.21 and 3.08 are also too high. But these tend to be high for utilities.
The Total Return per year is shown below for years of 5 to 27 to the end of 2019. 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.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2014 | 5 | 10.00% | 12.26% | 7.62% | 4.63% |
| 2009 | 10 | 8.71% | 12.97% | 8.33% | 4.64% |
| 2004 | 15 | 6.84% | 11.69% | 7.36% | 4.34% |
| 1999 | 20 | 5.40% | 11.56% | 7.01% | 4.56% |
| 1994 | 25 | 4.66% | 11.57% | 6.61% | 4.96% |
| 1992 | 27 | 4.53% | 11.27% | 6.29% | 4.98% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 15.56, 18.37 and 21.17. The corresponding 10 year ratios are 14.95, 17.57 and 20.62. The corresponding historical ratios are 13.41, 15.36 and 21.11. The current P/E Ratio is 20.06 based on a stock price of $56.37 and 2020 EPS estimate of $2.81. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a Graham Price of $4.39. The 10 year low, median, and high median Price/Graham Price Ratios are 1.11, 1.28 and 1.44. The current P/GP Ratio is 1.27 based on a stock price of $56.37. 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 Ratio of 1.84. The current P/B Ratio is 1.81 based on a stock price of $56.37, Book Value of $7,556M, and Book Value per Share of $31.16. The current ratio is 1.8% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get an historical median dividend yield of 4.77%. The current dividend yield is 4.35% based on dividends of $2.45 and a stock price of $56.37. The current dividend yield is 8.9% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a 10 year median dividend yield of 4.26%. The current dividend yield is 4.35% based on dividends of $2.45 and a stock price of $56.37. The current dividend yield is 2% above the 10 year median dividend yield. This stock price testing suggests that the stock price is relatively reasonable and below the median.
The 10 year median Price/Sales (Revenue) Ratio is 1.99. The current P/S Ratio is 2.17 based on 2020 Revenue estimate of $6,307M, Revenue per Share of $26.01 and a stock price of $56.37. The current ratio is 8.9% above the 10 year ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
Results of stock price testing is that the stock price is probably reasonable, but close or above the median. We are currently in a down market or maybe a correction. This stock is into reasonable territory, but the longer this correction last it could get into cheaper territory. I do not see a problem with any of the above testing.
Is it a good company at a reasonable price? I do like this company and have no intention of selling my shares. However, the debt levels are worrisome, but the company seems to be trying to get the debt under better control. This is a dividend growth company. I have 26 years of data and only one year when the dividends did not increase which was 2003.
When I look at analysts’ recommendations, I find Strong Buy (3), Buy (2), Hold (3), Underperform (1) and Sell (1). This shows there is little in the way of consensus. However, the consensus score is showing as a Hold. The 12 month stock price of $61.20. This implies a total return of 12.91% with 8.57% from capital gains and 4.35% from dividends.
See what analysts are saying on Stock Chase. Most still like this company. Cindy Dye on Motley Fool thinks this is a great stock that has consistently rewarded its shareholders. A writer on Simply Wall Street says shareholders have been well rewarded by this stock. A writer on Simply Wall Street says the company has a ROE in line with other utilities, but rely on debt to do this. Gary Stephens on Modern Reader say that National Bank has lowered its EPS estimate for 2020.
Emera is geographically diverse energy and services company investing in electricity generation, transmission, and distribution as well as gas transmission and utility energy services. Emera has operations throughout North America and the Caribbean countries. Its web site is here Emera Inc.
The last stock I wrote about was about was IGM Financial (TSX-IGM, OTC-IGIFF) ... learn more. The next stock I will write about will be Bombardier Inc (TSX-BBD.B, OTC-BDRBF) ... learn more on Monday, March 2, 2020 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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