I own this stock of Canadian Utilities Ltd (TSX-CU, OTC-CDUAF). I started to follow this stock in January of 2009 because it was on the Dividend Achievers list, the Dividend Aristocrats list and was also on Mike Higgs’ dividend growth list at that time. The Dividend Aristocrats list is now an index on the TSX. ATCO (TSX-ACO-X) owns 88% of this stock, so you would not buy both these stocks.
When I was updating my spreadsheet, I noticed until 2011, the dividend increases were in the low range (below8%). From 2012 to 2018, they were in the moderate range (8% to 14% ranges) with most begin in the 9 and 10% ranges. The last two dividend increases have been lower with the one for 2019 at 7.5% and the one for 2020 at just 3%. I do have records going back to 1988 which shows that this company has a long history of dividend increases.
The dividend yields have been moderate with dividend growth moderate. The current dividend is in the good range of (5% to 6% ranges) at 5.76%. The 5, 10 and historical dividend yields are moderate (2% to 4% ranges) at 3.67%, 3.16% and 3.71%. The dividend growth has been in the moderate range (8% to 14% ranges) lately as you can see from the chart below. However, the last increase which was in 2020 was lower at 3%.
The Dividend Payout Ratios (DPR) are fine. The DPR for EPS for 2019 is 52% with 5 year coverage at 72%. The DPR for CFPS is 25% with 5 year coverage at 21%. For Free Cash Flow, none of the 3 sites I looked at agree on what it is. Using Morningstar from WebBroker I get a DPR for FCF of 188% with 5 year coverage of 297%. Using FCF is a new way of looking at dividend coverage, but has not turned out to be a great way when people disagree what the FCF is. It would seem using FCF is all the rage currently.
Debt Ratios are fine. The Long Term Debt/Market Cap is ok for 2019 at 0.82, but rises currently to 1.07 because of the decline of the stock price. It is common for utilities to have a lot of debt, but this ratio can look bad in a bear market. At this point, I am not concerned. The Liquidity Ratio for 2019 is very good at 2.32, although this has varied greatly over time. The 5 year median is just 1.32. The Debt Ratio for 2019 is 1.53 with a 5 year median at 1.52. The Leverage and Debt/Equity Ratios are 2019 are 2.90 and 1.90 and are fine. The 5 year median are 2.92 and 1.92.
The Total Return per year is shown below for years of 5 to 31 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 | 9.58% | 2.68% | -0.87% | 3.55% |
| 2009 | 10 | 9.14% | 9.94% | 6.00% | 3.94% |
| 2004 | 15 | 8.04% | 10.52% | 6.57% | 3.95% |
| 1999 | 20 | 7.09% | 11.43% | 7.20% | 4.23% |
| 1994 | 25 | 6.38% | 12.65% | 7.79% | 4.85% |
| 1989 | 30 | 5.54% | 11.35% | 6.78% | 4.57% |
| 1988 | 31 | 5.41% | 11.76% | 6.93% | 4.83% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 14.91, 17.24 and 19.56. The corresponding 10 year ratios are 14.35, 16.00 and 17.76. The corresponding historical ratios are 10.73, 12.93 and 14.86. The current P/E Ratio is 15.34 based on a stock price of $30.21 and 2020 EPS estimate of $1.97. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a Graham Price of $29.61. The 10 year low, median, and high median Price/Graham Price Ratios are 1.13, 1.26 and 1.42. The current P/GP Ratio is 1.02 based on a stock price of $30.21. 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 2.19. The current P/B Ratio is 1.53 based on a stock price of $30.21, Book Value of $5,405M and a Book Value per Share of $19.78. The current P/B Ratio is 30% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median P/CF Ratio of 6.35. The current P/CF Ratio is 5.52 based on 2020 CFPS estimate of $5.47 and a stock price of $30.21. The current ratio is 13% 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 3.71%. The current dividend yield is 5.76% based on dividends of $1.74 and a stock price of $30.21. The current dividend yield is 55% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median dividend yield of 3.16%. The current dividend yield is 5.76% based on dividends of $1.74 and a stock price of $30.21. The current dividend yield is 83% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively cheap.
The 10 year median Price/Sales (Revenue) Ratio is 2.66. The current P/S Ratio is 2.34 based on 2020 Revenue estimate of $3,532M, Revenue per Share of $12.93, and a stock price of $30.12. The current ratio is 12% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
Results of stock price testing is that the stock price is probably cheap to reasonable. The dividend yield test is showing the stock price as cheap, but the P/S Ratio does not confirm that, but the P/S Ratio says that the stock price is relatively reasonable and below the median. The P/B Ratio is a good test and it says that the stock is relatively cheap. There are no problems with any of the tests that I can see.
Is it a good company at a reasonable price? Certainly, the stock price is reasonable and it might even be on the cheap side. This is a good dividend growth utility stocks with a long reputation of giving out more in dividends each year.
When I look at analysts’ recommendations, I find Strong Buy (1), Buy (1), and Hold (7). The consensus would be a Hold. The 12 month stock price is $36.31. This implies a total return of $25.96% based on a stock price of $30.21, with 20.19% from capital gains and 5.76% from dividends. The expected total return does not match an analyst recommendation of Hold.
See what analysts are saying on Stock Chase. Reviews are mixed but there are few reviews of this important Canadian Utility. The problem with Stock Chase is the current owners bought it from the originators of this site and now want you to pay for information. Nelson Smith on Motley Fool thinks would be a great stock for retiring baby boomers. Aditya Raghunath on Motley Fool also thinks this is a great stock for retirees. A writer on Simply Wall Street has some concern about this company’s debt levels. A writer on Simply Wall Street says that the P/E Ratio has been rising lately but it is still below the industry’s average. For people who like such things on Yahoo Finance is the transcript from a recent earnings conference call.
Canadian Utilities Ltd, a subsidiary of holding company Atco, offers gas and electricity services. The company's main divisions include electricity (generation, transmission, and distribution), pipelines and liquid (natural gas and water), and Retail Energy. Headquartered in Calgary, Alberta, the firm mainly operates in Canada and Australia, along with some operations in the United States, United Kingdom, and Mexico. Its web site is here Canadian Utilities Ltd.
The last stock I wrote about was about was Mullen Group Ltd (TSX-MTL, OTC-MLLGF) ... learn more. The next stock I will write about will be Pizza Pizza Royalty Corp (TSX-PZA, OTC-PZRIF) ... learn more on Wednesday, May 20, 2020 around 5 pm. Tomorrow on my other blog I will write about How I Handle Booms and Busts .... learn more on Tuesday, May 12, 2020 around 5 pm.
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