I own this stock of Emera Inc (TSX-EMA, OTC-EMRA). I found this company in Mike Higg’s 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.
When I was updating my spreadsheet, I noticed that they have a lot of debt and it is not well covered. The Liquidity Ratio is really low at just 0.45. If this is not 1.00, it means that current assets cannot cover current liability. Even if you add in cash flow after dividends and add back the current portion of the long term debt, I only get to 0.91. The ratio of current liabilities to total assets is high and that is good. (It is 7.92 for 2020.) However, the number of years to pay off debt using cash flow is 7.5 years and the ideal is 3 years.
The dividend yields are moderate with dividend growth moderate. The current dividend yield is moderate (2% to 4% ranges) at 4.90%. The 5, 10 and historical dividend yields are also moderate at 4.80%, 4.32% and 4.79%. The current dividend growth is moderate (8% to 14% ranges) at 8.28% per year over the past 5 years. The last dividend increase was low (under8%) at 4.1% and it was in 2020. The 5 year growth is higher because of good dividend increases in 2015 and 2016.
The Dividend Payout Ratios (DPR) are probably fine. The DPR for EPS for 2020 is 65% with the 5 year coverage at 93%. However, the company has a dividend reinvestment plan where shareholders can buy extra shares with their dividends. So, the real DPR for EPS is around 43% with 5 year coverage at 66%. The DPR for CFPS is 44% with 5 year coverage 40%. The DPR for Free Cash Flow cannot be calculated because it is negative in 2020 and has been negative since 2016.
Debt Ratios need improving. The Long Term Debt/Market Cap Ratio for 2020 is 0.91. This is an improvement as it has been above 1.00 since 2016. When this ratio is above 1.00, it means that the long term debt is high than the stock’s market cap. The Liquidity Ratios have been awful since 2016. The current liquidity Ratio is 0.45 and with Cash Flow after dividends and the current portion of the debt added back it only reaches 0.91 as I have noted above. The Debt Ratio at 1.42 is lower than what I like, which is a ratio of 1.50 or higher. The Leverage and Debt/Equity Ratios are too high at 3.81 and 2.68 as I would like them to be under 3.00 and under 2.00. These sorts of company have lots of debt, but I believe Emera has too much.
The Total Return per year is shown below for years of 5 to 28 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 | 8.28% | 9.33% | 4.59% | 4.75% |
| 2010 | 10 | 7.85% | 10.07% | 5.61% | 4.46% |
| 2005 | 15 | 7.06% | 10.96% | 6.50% | 4.46% |
| 2000 | 20 | 5.55% | 10.02% | 5.75% | 4.27% |
| 1995 | 25 | 4.73% | 10.88% | 6.04% | 4.84% |
| 1992 | 28 | 4.52% | 11.07% | 5.94% | 5.13% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 15.56, 18.37 and 18.37. The corresponding 10 year ratios are 14.95, 17.12 and 18.75. The corresponding historical ratios are 13.06, 15.05 and 16.96. The current P/E Ratio 18.25 based on a stock price of $52.01 and EPS estimate for 2021 of $2.85. This stock price testing suggests that the stock price is relatively but above the median.
I get a Graham Price of $45.71. The 10 year low, median, and high median Price/Graham Price Ratios are 1.11, 1.25 and 1.37. The current P/GP Ratio is 1.14 based on a stock price of $52.01. This stock price testing suggests that the stock price is relatively and below the median.
I get a 10 year median Price/Book Value per Share Ratio of 1.72. The current P/B Ratio is 1.60 based on a Book Value of $8193M, Book Value per Share of 432.59 and a stock price of $52.01. The current ratio is 7.25% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively and below the median.
I get a 10 year median Price/Cash Flow per Share Ratio of 8.24. The current P/CF Ratio is 7.45 based on as tock price of $52.01, Cash Flow per Share estimate for 2021 of $6.97 and Cash Flow of $1,460M. The current ratio is 9.4% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively and below the median.
I get an historical median dividend yield of 4.79%. The current dividend yield is 4.90% based on a stock price of $52.01 and dividends of $2.55. The current yield is 2.4% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively and below the median.
I get a 10 year median dividend yield of 4.32%. The current dividend yield is 4.90% based on a stock price of $52.01 and dividends of $2.55. The current yield is 13.6% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively and below the median.
The 10 year median Price/Sales (Revenue) Ratio is 1.99. The current P/S Ratio is 2.09 based on Revenue estimate for 2021 of $6,247M, Revenue per Share of $24.85 and a stock price of $52.01. The current ratio is 5% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively but above the median.
Results of stock price testing is that the stock price is probably reasonable. Both the dividend yield tests show the stock price is reasonable and below the median. The P/S Ratio test does not confirm this, but the difference is only 5% above the 10 year median ratio. Most of the other tests, except the P/E Ratio test show the stock price as reasonable and below the median.
Is it a good company at a reasonable price? The stock price seems reasonable. I own this stock and plan to continue to hold it. My total return is 11.90% with 6.93% from capital gains and 4.97% from dividends. It is a dividend growth stock that is a power utility.
When I look at analysts’ recommendations, I find Strong Buy (3), Buy (7), Hold (6) and Sell (1). The consensus would be a Buy. The 12 month stock price consensus is $58.62. This implies a total return of 17.61% with 4.90% from dividends and 12.71% from capital gains.
A possible reason for the sell is that if you believe interest rates will rise and utilities traditionally have done poorly with rising interest rates, you may think that the stock is a sell. Another reason could be that the analyst is worried about the debt of this company. The Liquidity Ratio is awful. This is just speculation on my part as to why there is a sell recommendation and it seems out of line with comments I have read online.
The last two entries are Buy and Top Pick on Stock Chase. Stock Chase gives this stock 5 stars out of 5. Ambrose O'Callaghan on Motley Fool thinks this is a good defensive stock to buy. The Executive Summary on Simply Wall Street gives this stock 4 stars out of 5 and list 4 risks. A writer on Simply Wall Street says why this stock interests him. The blogger Dividend Earner has also review this stock.
Emera is a 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 Inc (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 Wednesday, March 10, 2021 around 5 pm. Tomorrow on my other blog I will write about What I Blog About.... learn more on Tuesday, March 09, 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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