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 I have not done very well with this stock. I have had it for nearly 12 years and my total return is 6.90% per year with a capital loss of 1.39% per year and dividends of 8.29% per year. The problem is the shares I bought in 2012 are at a price higher than today’s price. The company got into some problems in 2017 and the stock price fell.
The dividend yields are moderate with dividend growth as restarted. The current dividend yield is moderate (2% to 4% ranges) at 4.70%. The 5, 10 and historical dividend yields are good (5% to 6% ranges) at 6.41%, 5.29% and 6.09%. The dividends fell over 50% in 2019. In 2021, they increased the dividends by 4%. This company used to be an income trust. They transition for old income trust companies into corporations have been tough. The problem being that income trust could pay out more in dividends than corporations can. A lot of companies have had a hard time adjusting. I have data for 20 years and they increased the dividend 15 times and decreased them 3 times.
The Dividend Payout Ratios (DPR) are expected to improve. The DPR for EPS for 2020 was 55% with 5 year coverage at 240%. Analysts expect the DPRs to improve, especially the 5 year coverage one. The DPR for CFPS for 2020 was 27% with 5 year coverage at 58%. The DPR for Free Cash Flow cannot be calculated for 2020 and for 5 year coverage because of negative FCF. Analysts expect FCF to turn positive this year.
Debt Ratios could be improved. Debt is high. The Long Term Debt/Market Cap Ratio is too high at 1.46. It is low currently at 1.28 because of increase in Market Cap. The Liquidity Ratio is for 2020 is 0.96. If you add in Cash Flow after dividends, it is only 1.15 and if you add back the current portion of the debt it is still low at 1.34. The Debt Ratio is fine at 1.55. The Leverage and Debt/Equity Ratios for 2020 is 2.81 and 1.81 and they are fine.
The Total Return per year is shown below for years of 5 to 21 to the end of 2020. 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. |
|---|---|---|---|---|---|
| 2015 | 5 | -12.46% | -3.13% | -9.54% | 6.41% |
| 2010 | 10 | -5.39% | 6.34% | -1.47% | 7.81% |
| 2005 | 15 | -4.24% | 4.73% | -2.64% | 7.37% |
| 2000 | 20 | 10.26% | 21.95% | 6.56% | 15.39% |
| 1999 | 21 | 10.25% | 17.81% | 5.57% | 12.24% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 5.51, 9.24 and 12.97. The corresponding 10 year ratios are 24.24, 28.48 and 32.71. The corresponding historical ratios are 12.13, 15.22 and 18.41. The current P/E Ratio is 13.56 based on based on a stock price of $21.29 and EPS estimate for 2021 of $1.57. The current P/E Ratio is below the 10 year low ratio of 24.24. This stock price testing suggests that the stock price is relatively cheap.
I get a Graham Price of $26.89. The 10 year low, median, and high median Price/Graham Price Ratios are 1.33, 1.62 and 1.86. The current P/GP Ratio is 0.79 based on a stock price of $21.29. This ratio is below the 10 year low median ratio of 1.33. 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 1.04 based on a stock price of $21.29, Book Value of $5,722M, and Book Value per Share of 20.47. The current ratio is 39% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median Price/Cash Flow per Share Ratio of 11.30. The current P/CF Ratio is 5.72 based on a stock price of $21.29, Cash Flow per Share estimate for 2021 of $3.72 and Cash Flow of $1,040M. The current ratio is 49% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I get an historical median dividend yield of 6.09%. The current dividend yield is 4.70% based on dividends of $1.00 and a stock price of $21.29. The current dividend yield is 23% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively expensive. The problem with this test is that this company used to be an income trust, which can pay higher dividends than a corporation and the dividends were cut by 56% in 2019.
I get an historical median dividend yield of 5.29%. The current dividend yield is 4.70% based on dividends of $1.00 and a stock price of $21.29. The current dividend yield is 11% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable but above the median. The problem with this test is that this company cut the dividends by 56% in 2019.
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 $21.29, Revenue estimate for 2021 of $5,773M and Revenue per Share of $20.66. The current ratio is 46% below the 10 year median ratio 2.17. This stock price testing suggests that the stock price is relatively cheap.
Results of stock price testing is that the stock price is probably cheap. Unfortunately, there are problems with dividend yield tests and so these are not really usable. The P/S Ratio test shows the stock price as relatively cheap as does all the other tests.
Is it a good company at a reasonable price? I own this stock and I plan to keep it even though it has recently gone through a few tough years. It is repositioning itself as a dividend growth stock with a dividend increase in 2021. They plan to continue to increase their dividends. So, currently I think it is a good company at a reasonable price.
When I look at analysts’ recommendations, I find Strong Buy (6), Buy (8) and Hold (1). The consensus would be a Strong Buy. The 12 month stock price consensus is $23.33. This implies a total return of 14.28% based on a stock price of $21.29.
Analysts on Stock Chase have quite varying views on this stock, but most are positive. Ambrose O'Callaghan on Motley Fool thinks this is a buy and hold stock for Millennials. Executive Summary on Simply Wall Street gives this stock 3 stars out of 5 and list 4 risks. A writer on Simply Wall Street thinks this stock is trading at a fair price, so there is not much current room for the stock price to grow. The company gives an update on its future on Newswire.
AltaGas Ltd owns and operates a diversified basket of energy infrastructure businesses. Business is conducted through four segments: Midstream, power, utilities and corporate. Revenue is derived from customers in both Canada and the United States, with United States 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 31, 2021 around 5 pm. Tomorrow on my other blog I will write about Preferred Shares.... learn more on March 30, 2021 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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