I do not own this stock of Algonquin Power & Utilities Corp (TSX-AQN, NTSE-AQN). This is a dividend paying utility stocks. I got it off a list of dividends paying utility stocks. Also, I own Emera Inc. and this company owns shares in Algonquin Power.
When I was updating my spreadsheet, I noticed the Liquidity Ratios are quite low. You have to add in cash flow after dividends and current portion of the long term debt in 2020 to just to get to 1.07. The current one is a bit better at 1.37, but I prefer this to be at 1.50 with the Liquidity Ratio and Cash Flow after Dividends. For this stock it does not reach one in 2019 or 2020 where it is 0.98 and 0.91.
The dividend yields are moderate with dividend growth moderate. The current yield is moderate (2% to 4% ranges) at 4.27%. The 5, 10 and historical dividend yields are 4.58%, 4.56% and 4.56% (since becoming a corporation). Dividends were cut by 74% when it became a corporation. The dividend increases are currently moderate (8% to 14% ranges) with the dividend increases at 8.2% per year over the past 5 years. The last increase was in 2021 for 10%.
The Dividend Payout Ratios (DPR) are high but are expected to decline in the next few years. The DPR for EPS for 2020 is 43% with 5 year coverage at 70%. Analysts expect the DPR in 2021 to be 112% before declining to 84% and then 78% in 2022 and 2023. The DPR or CFPS for 2020 is 58% with 5 year coverage at 47%. These are a bit high as I like the DPR for CFPS to be 40% or lower. The DPR for Free Cash Flow can not be calculated because the FCF is negative for 2020. The DPR for FCF is expected to be around 88% in 2022 then then declining to 68% in 2022.
Debt Ratios need improving, especially the Liquidity Ratio. The Long Term Debt/Market Cap for 2020 is 0.45. However, the debt has increased and the current ratio is higher at 0.60. The Debt Ratio at 1.75 is good. I like this to be 1.50 or higher. The Leverage and Debt/Equity Ratios are fine at 2.63 and 1.51.
The Liquidity Ratio for 2020 is 0.73. If you add cash flow after dividends it is still only at 0.91. When the Liquidity Ratio is under 1.00, it means that the current assets cannot cover the current liabilities. If you add back in the current portion of the debt it is just 1.07. I like this to be at least 1.50 or higher. The Asset/Current Liabilities ratio is good at 13.84. The Debt/Cash Flow Ratio is high 8.71 years, but Utilities tend to have a lot of debt.
The Total Return per year is shown below for years of 5 to 23 to the end of 2020 in CDN$. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See chart below.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2015 | 5 | 8.17% | 18.52% | 13.94% | 4.58% |
| 2010 | 10 | 14.19% | 20.29% | 15.36% | 4.93% |
| 2005 | 15 | -1.31% | 8.82% | 4.75% | 4.07% |
| 2000 | 20 | -1.25% | 9.01% | 3.72% | 5.30% |
| 1997 | 23 | -0.46% | 8.67% | 3.07% | 5.60% |
The Total Return per year is shown below for years of 5 to 17 to the end of 2020 in US$. 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 | 10.01% | 20.58% | 15.87% | 4.71% |
| 2010 | 10 | 11.41% | 17.12% | 12.56% | 4.55% |
| 2005 | 15 | -1.89% | 8.39% | 4.14% | 4.26% |
| 2003 | 17 | -0.44% | 9.42% | 4.24% | 5.18% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 23.61. 25.80 and 27.99. The corresponding 10 year ratios are 23.61, 26.55 and 29.39. The corresponding historical ratios are 23.61. 27.16 and 30.32. The current P/E Ratio is 27.54 based on a stock price of $19.30 and EPS estimate for 2021 of $0.70 ($0.58 US$). The current ratio is between the median and high 10 year ratios. This stock price testing suggests that the stock price is relatively reasonable but above the median. This testing is in CDN$.
I get a Graham Price of $12.75. The 10 year low, median, and high median Price/Graham Price Ratios are 1.24, 1.24 and 1.58. The current P/GP Ratio is 1.51 based on a stock price of $19.30. The current ratio is between the median and high 10 year ratios. This stock price testing suggests that the stock price is relatively reasonable but above the median. This testing is in CDN$.
I get a 10 year median Price/Book Value per Share Ratio of 1.62. The current P/B Ratio is 1.87 based on a stock price of $15.96, Book Value of $5,092M and Book Value per Share of $8.53. The current ratio is 16% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median. This testing is in US$. You will get a similar result in CDN$.
I get a 10 year median Price/Cash Flow per Share Ratio of 10.11. The current P/CF Ratio is 15.50 based on Cash Flow per Share estimate for 2021 of $1.03, Cash Flow of $510.7M and a stock price of $15.96. The current ratio is 53% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive. This testing is in US$. You will get a similar result in CDN$.
I get an historical median dividend yield of 4.56%, adjusted to when the company became a corporation. The current dividend yield is 4.27% based on a stock price of $19.30 and dividends of $0.82 ($0.68 US$). The current yield is 6.3% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable but above the median. This testing is in CDN$.
I get a 10 year median dividend yield of 4.56%. The current dividend yield is 4.27% based on a stock price of $19.30 and dividends of $0.82 ($0.68 US$). The current yield is 6.3% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable but above the median. This testing is in CDN$.
The 10 year median Price/Sales (Revenue) Ratio is 2.81. the current P/S Ratio is 4.42 based on Revenue estimate for 2021 of $2,158M, Revenue per Share of $3.61 and a stock price of $15.96. The current ratio is 57% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive. This testing is in US$. You will get a similar result in CDN$.
Results of stock price testing is that the stock price is probably on the expensive side. The dividend yield tests are saying the prices are reasonable but above the median (or on the high side). The P/S Test is saying the stock price is expensive.
Is it a good company at a reasonable price? The price is probably on the expensive side. It is a utility and analysts expect to see improvements in the Dividend Payout Ratios which are not good at present. It also has a lot of debt. This is probably why the analyst’s recommendations are all over the place. This utility has some problems. Some analysts think their problems are manageable.
When I look at analysts’ recommendations, I find Strong Buy (2), Buy (5), Hold (8) and Underperform (1). The consensus is a Hold. The 12 month stock price consensus is $20.70 ($17.13 US$). This implies a total return of 11.53% with 7.25% from capital gains and 4.27% from dividends.
This company has a few recent Top Picks on Stock Chase. Adam Othman on Motley Fool thinks this is a stock to buy and hold forever. The executive summary on Simply Wall Street list 4 risks. It gives it 4 stars out of 5 stars. A writer on Simply Wall Street is uncomfortable with the company’s debt level. A writer on Simply Wall Street is impressed with the company’s earnings growth.
Algonquin Power & Utilities Corp is a North American generation, transmission, and distribution utility. Its web site is here Algonquin Power & Utilities Corp.
The last stock I wrote about was about was Maxar Technologies Ltd (TSX-MAXR, NYSE-MAXR) ... learn more. The next stock I will write about will be Goeasy Ltd (TSX-GSY, OTC-EHMEF) ... learn more on Monday, June 14, 2021 around 5 pm.
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