Sound bite for Twitter and StockTwits is: Dividend Paying Utility. The stock price is relatively cheap and has fallen some 50% in this bear market. I am hoping with the latest dividend decrease and the DPR in a good place this stock will be a dividend growth stock. See my spreadsheet on AltaGas Ltd.
I own this stock of AltaGas Ltd (TSX-ALA, OTC-ATGFF). When I bought this stock in 2009 it was on many dividend growth stock lists. In 2009, I saw that this stock also had good growth in Revenues, Earnings, Dividends, and Stock Prices over the last 5 and 10 years. The stock had a fairly strong balance sheet. I took a small position in this stock, and planned to wait and see how things go with this stock before buying more. I bought more in 2010 and 2012.
When I was updating my spreadsheet, I noticed that although there are more insider buys and insider sells over the past year, insiders started to do a lot of insider buying under $14.00. Also, there is big increases in the number of shares outstanding. Shares have increased by 16% and 13% per year over the past 5 and 10 years. For shareholders the most important figures are the per share figures. The increases can make a lot of difference. The Revenue has increase by 18% and 16% per year over the past 5 and 10 years but the Revenue per Share increases are quite low at 1.8% and 2.2% per year over the past 5 and 10 years.
This company has decreased the dividend twice in the last 10 years. They used to be an income trust. Income Trust can pay out more in dividends than earnings. However, corporations cannot pay out in dividends more than in earnings. With this second decrease, they have brought the DPR into a more reasonable place. Hopefully, this will be a dividend growth stock going forward.
The dividend yields are good to high with dividend growth negative. The current dividend yield is high (7% and above). This used to be an income trust, so dividends yields have often been high as income trust could pay out a lot in dividends. The current yield is 9.70%. The 5, 10 and historical are good (5% and 6% ranges) They are 6.41%, 5.29% and 6.21%. Most of what I have earned on this stock has been in dividends.
The Dividend Payout Ratios are improving from a low position. The DPR for EPS for 2019 is 35% with 5 year coverage at 520%. Analysts expect that this DPR will move to 77% in 2020 and stay lower than it has been. The DPR for CFPS for 2019 is 32% with 5 year coverage at 66%. This DPR is also expected to move lower than in previous years. The Free Cash Flow has been negative for the past 3 years. Analysts expect that it will turn positive in 2020 and be high enough to sufficient cover the dividend and continue to do so in the coming years.
Debt Ratios are not great but are improving. The Long Term Debt/Market Cap was 1.07 in 2019. With the stock market moving lower, this will not improve much in the short term, but debt is going down. The Liquidity Ratio for 2019 is 0.70. If you add in cash flow after dividends and add back in the current portion of long term debt it is 1.15. This is a low value and it is better at 1.50 or higher. The Debt Ratio for 2019 is 1.59 and a good value. Leverage and Debt/Equity Ratios for 2019 are 2.69 and 1.69 and are fine.
The Total Return per year is shown below for years of 5 to 20 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 | -10.48% | -8.82% | -14.52% | 5.70% |
| 2009 | 10 | -7.79% | 9.09% | 0.51% | 8.58% |
| 2004 | 15 | -1.46% | 7.52% | -1.04% | 8.56% |
| 1999 | 20 | 10.86% | 18.03% | 6.15% | 11.89% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 28.32, 31.83 and 35.53. The corresponding 10 year ratios are 24.24, 28.48 and 32.71. The corresponding historical ratios are 12.74, 15.60 and 18.61. The current P/E Ratio is 7.92 based on a stock price of $9.90 and 2020 EPS estimate of $1.25. This stock price testing suggests that the stock price is relatively cheap.
I get a Graham Price of $23.20. The 10 year low, median, and high median Price/Graham Price Ratios are 1.25, 1.43 and 1.63. The current P/GP Ratio is 0.43 based on a stock price of $9.90. 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 1.71. The current P/B Ratio is 0.51 based on Book Value of $5,429M, Book Value per Share of $19.46 and a stock price of $9.90. The current ratio is 70% below the 10 year ratio. This stock price testing suggests that the stock price is relatively cheap.
I get an historical median dividend yield of 6.21%. The current dividend yield is 9.70% based on a stock price of $9.90 and dividends of $0.96. The current dividend yield is 56% above the historical dividend yield. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median dividend yield of 5.29%. The current dividend yield is 9.70% based on a stock price of $9.90 and dividends of $0.96. The current dividend yield is 83% above the 10 year dividend yield. This stock price testing suggests that the stock price is relatively cheap.
The 10 year median Price/Sales (Revenue) Ratio is 2.17. The current P/S Ratio is 1.17 based on a stock price of $9.90, Revenue estimate for 2020 of $6,545M, and Revenue per Share of $23.45. The current ratio is 46% below the 10 year ratio. This stock price testing suggests that the stock price is relatively cheap.
Results of stock price testing is that the stock price is relatively cheap. We are in a bear market and this stock on all tests is showing as cheap. This cannot be surprising as the stock price has fallen 50% this year.
Is it a good company at a reasonable price? I will continue to hold the shares I have for this company. It has not been easy for this company to switch from an income trust to a corporation. However, I am hoping that it will become a dividend growth company. Price is currently cheap.
When I look at analysts’ recommendations, I find Strong Buy (4), Buy (4) and Hold (7). The consensus would be a Buy. The 12 month stock price is $20.53. This implies a total return of 117.07% with 107.37% from capital gains and 9.70% from dividends based on a stock price of $9.90.
See what analysts are saying about this stock on Stock Chase. There are mixed reviews on this stock. Nelson Smith on Motley Fool thinks this stock is ridiculously cheap and a buy. A writer on Simply Wall Street does not like the debt load or the unstable dividend. He does not understand the problems that old income trust companies have faced. A writer on Simply Wall Street said the stock was fairly priced at $18.61 in August 2019. Brian Anderson on Smarter Analysts said that a Raymond James analyst has maintained its Hold rating on this company in March 2020 when stock was priced at $15.53.
AltaGas Ltd owns and operates a diversified basket of energy infrastructure businesses. Business is conducted through three segments: Midstream, power, and utilities. Revenue is derived from customers in both Canada and the United States, with Canadian customers contributing the most. Its web site is here AltaGas Ltd.
The last stock I wrote about was about was TC Energy Corp (TSX-TRP, NYSE-TRP) ... learn more. The next stock I will write about will be BCE Inc (TSX-BCE, NYSE-BCE) ... learn more on Wednesday, March 25, 2020 around 5 pm. Tomorrow on my other blog I will write about Fortis Inc.... learn more on Tuesday, March 24, 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.
No comments:
Post a Comment