I do not own this stock of Capital Power Corp (TSX-CPX, OTC-CPRHF). Capital power Corp is in John Heinzl’s yield Hog model portfolio. In Money Sense annual list of the 100 best dividend stocks for 2021, this stock was rated an A.
When I was updating my spreadsheet, I noticed that the Dividend Payout Ratios for EPS is much too high. In 2020 it is 254% with 5 year coverage at 151%. Analyst do not expect this to be below 100% until 2023.
The dividend yields are good with dividend growth low. The current dividend yield is good (5% to 6% ranges) at 5.04%. The 5, 10 and historical dividend yield are also good at 6.60%, 6.27% and 5.99%. The dividend growth over the past 5 years is low (below 8%) at 6.7% per year. The last dividend increase was for 6.8% and it was made in 2021.
The Dividend Payout Ratios (DPR) need improving for the EPS. The DPR for EPS for 2020 is 254% with 5 year coverage at 151%. Analysts do not expect this ratio to be under 100% until 2023. For most of its history (from 2009 IPO) the DPR for EPS has been over 100%. The DPR for CFPS for 2020 is 28% with 5 year coverage at 31%. (This is good as any ratio at 40% or less is good.) The DPR for Free Cash Flow for 2020 is 78% with 5 year coverage at 150%. However, sites do not agree on what the FCF is.
Debt Ratios need improving. The Long Term Debt/Market Cap Ratio is 0.84 which I think is fine, but some analysts like this ratio to be 0.50 or less. The Liquidity Ratio for 2020 is 1.01. If you add in Cash Flow after Dividend it is 1.30. This is low, as I prefer it to be 1.50 or higher. The Debt Ratio is 1.49. Leverage and Debt/Equity Ratios are 4.58 and 3.07 and this are too high. I prefer them to be below 3.00 and below 2.00, respectively.
The Total Return per year is shown below for years of 5 to 11 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 | 6.73% | 22.01% | 14.51% | 7.51% |
| 2010 | 10 | 4.48% | 9.28% | 3.99% | 5.28% |
| 2009 | 11 | 4.06% | 10.09% | 4.58% | 5.51% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 21.73,23.18 and 26.77. The corresponding 10 year ratios are 21.89, 25.43 and 28.67. The corresponding historical ratios are 21.89, 25.56 and 28.67. The current P/E Ratio is 21.83 based on a stock price of $43.44 and EPS estimate for 2021 of 1.99. The current ratio is below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I get a Graham Price of $29.53. The 10 year low, median, and high median Price/Graham Price Ratios are 0.89, 1.10 and 1.19. The current P/GP Ratio is 1.47 based on a stock price of $43.44. The current ratio is above the high 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
I get a 10 year median Price/Book Value per Share Ratio of 1.03. The current P/B Ratio is 2.23 based on a stock price of $43.44, Book Value of $1,947M and Book Value per Share of $8.34. The current ratio is 116% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive. The Book Value per Share has gone down by 4.8% per year over the past 5 years. This is never a good sign.
I get a 10 year median Price/Cash Flow per Share Ratio of 5.19. The current P/CF Ratio is 6.34 based on Cash Flow per Share estimate for 2021 of $6.85, Cash Flow of $779M and a stock price of $43.44. The current ratio is 22% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
I get an historical median dividend yield of 5.99%. The current dividend yield is 5.04% based on dividends of $2.19 and a stock price of $43.44. The current dividend yield is 16% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get an historical median dividend yield of 6.27%. The current dividend yield is 5.04% based on dividends of $2.19 and a stock price of $43.44. The current dividend yield is 19.6% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable but above the median.
The 10 year median Price/Sales (Revenue) Ratio is 1.66. The current P/S Ratio is 2.63 based on Revenue estimate for 2021 of $1,876M, Revenue per Share of $16.51 and a stock price of $43.44. The current ratio is 58.5% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
Results of stock price testing is that the stock price is probably expensive. I know that the Dividend yield tests do not show this, but the company cannot afford the dividends that they are paying. The P/S Ratio says that the stock price is expensive. The P/B Ratio test and the P/CF Ratio test shows the stock as expensive. The P/E Ratio shows the stock price as cheap, but EPS is expected to go up by 158% to $1.99. Although this is reasonable given the EPS made year to date, the EPS on this company tends to be quite volatile.
Is it a good company at a reasonable price? I think that the stock price is on the expensive side. Although a lot of utilities have debt, I think that some of the debt ratios need to be improved. I also do not like the fact that they cannot afford the current dividend when looking the EPS. In fact, they have never been able to afford the dividends when looking at the EPS. On the other hand, shareholders have done well with this stock and the company does not seem likely currently to cut or stop increasing dividends.
When I look at analysts’ recommendations, I find Strong Buy (1), Buy (5) and Hold (7). The consensus would be a Buy. The 12 month stock price consensus is $44.85. This implies a total return of 8.29% with 3.25% from capital gains and 5.04% from dividends.
Analysts on Stock Chase thinks this stock is a buy. Sneha Nahata on Motley Fool says it trades well below its peer group average, making it a solid buy, even at current levels. 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 a large portion of the total return on this stock is from dividends. A writer on Simply Wall Street does not like the combination of a low ROE and high debt. Griffin Milks on YouTube talks about this stock and his review starts at the 4:20 mark.
Capital Power Corp is a North American power producer whose principal activities are developing, acquiring, and operating power plants. Through its subsidiary, Capital Power owns and operates a portfolio of natural gas, coal, wind, solar, and solid fuel energy generating facilities. These are located throughout Western and Central Canada and the U.S. Its web site is here Capital Power Corp.
The last stock I wrote about was about was ATCO Ltd (TSX-ACO.X, OTC-ACLLF) ... learn more. The next stock I will write about will be High Liner Foods (TSX-HLF, OTC-HLNFF) ... learn more on Monday, August 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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