Wednesday, March 30, 2022

AltaGas Ltd

Sound bite for Twitter and StockTwits is: Dividend Growth Utility. The stock price is probably reasonable. Dividend payments have gone from monthly to quarterly. Dividend Payout Ratios is expected to be fine in 2022 from being too high. They have a lot of debt and this is always a risk for utilities. See my spreadsheet on AltaGas Ltd.

Is it a good company at a reasonable price? I think that the stock price is current reasonable. I think that his stock will do well in the future and I have no plans to sell my shares.

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 that there was a big increase in Revenue. The Revenue increases come from Commodity sales contracts and Midstream service contracts. Revenue increased 89%. However, EPS dropped by 53%. They sell assets, but the decreased was really due to increase in Cost of Sales. They also have a normalized or adjusted EPS and this was up 25%.

I own this stock and have for some 12 years. My total return is 9.28% per year with 2.35% from capital gains and 6.93% from dividends.

If you had invested in this company in December 2011, $1, 18.88 you would have bought 32 shares at $31.84 per share. In December 2021, after 10 years you would have received $503.61 in dividends. The stock would be worth $681.28. Your total return would have been $1,184.89.

Cost Tot. Cost Shares Years Dividends Stock Val Tot Ret
$31.84 $1,018.88 32 10 $503.61 $681.28 $1,184.89

The dividend yields are currently moderate with dividend growth restarting at a low level. The current dividend yield is moderate (2% to 4% ranges) at 3.75%. This is because of a recent dividend decrease. The 5, 10 and historical dividend yields are good (5% to 6% ranges) at 5.97%, 5.25% and 5.97%. Dividends were decreased 56% in 2019. They restarted dividend increased in 2021 and in 2022 change the dividends from monthly to quarterly (cycle 3). The last dividend increase was in 2022 and it was for 6%.

The Dividend Payout Ratios (DPR) are fine or will be. The DPR for EPS for 2021 is 132% with 5 year coverage at 224%. However, the DPR for EPS is expected to fall to 59% in 2022. The DPR for Cash Flow per Share for 2021 is 26% with 5 year coverage at 48%. The DPR for CFPS for 2022 is expected to be 27%. The DPR for Free Cash Flow for 2021 cannot be calculated because of a negative FCF. The DPR for FCF is expected to be 43% in 2022.

Because this is a utility, some analysts look at Adjusted Funds from Operations (AFFO). The DPR for AFFO for 2021 is 27% with 5 year coverage at 45%. The company also puts out a Funds from Operations (FFO) value. The DPR for FFO for 2021 is 23% with 5 year coverage at 41%. The company also publishes an Adjusted (or normalized) EPS. The DPR for the Adj EPS for 2021 is 56% with 5 year coverage at 113%. The DPR for Adj EPS for 2022 is expected to be 57%.

Debt Ratios are fine. The Long Term Debt/Market Cap is high at 1.00, which is too high. However, this is a utility so I also look at Long Term Debt/Covering Assets which is fine at 0.64. The Liquidity Ratio for 2021 is 0.99. Even adding in Cash Flow after dividends are only to 1.15. The Debt Ratio for 2021 is good at 1.54. The Leverage and Debt/Equity Ratios are fine at 2.84 and 1.84 respectively.

The Total Return per year is shown below for years of 5 to 22 to the end of 2021. 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.
2016 5 -13.12% 0.46% -4.23% 4.70%
2011 10 -2.82% 3.79% -1.52% 5.32%
2006 15 -3.99% 6.80% 0.28% 6.52%
2001 20 9.95% 20.54% 7.07% 13.47%
1999 22 18.13% 7.13% 11.00%

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 24.74, 28.75 and 32.77. The corresponding historical ratios are 12.74, 15.60 and 18.61. The current P/E Ratio is 15.60 based on a stock price of $28.24 and EPS estimate for 2022 of $1.81. The current P/E ratio is below the low of the 10 year median ratios. This stock price testing suggests that the stock price is relatively cheap. However, there is a wide range in the P/E Ratios because EPS has been inconsistent. If you look at historical ratios, the current ratio shows that the stock price is reasonable and at the median.

The company does provide Adj EPS Ratios. The 5 year low, median, and high median Price/Earnings per Share Ratios are 11.50, 14.60 and 17.70. The corresponding 10 year ratios are 22.47, 25.31 and 29.54. The current P/Adj EPS Ratio is 15.26. This is below the low of the 10 year median ratios. This stock price testing suggests that the stock price is relatively cheap. There is also a big variation between the 5 and 10 year ratios.

We also have Adjusted Funds from Operations (AFFO) Ratios. The 5 year low, median, and high median Price/Earnings per Share Ratios are 4.47, 6.17 and 7.27. The corresponding 10 year ratios are 8.45, 9.55 and 11.11. The current P/AFFO Ratio is 7.98. This is below the low of the 10 year median ratios. This stock price testing suggests that the stock price is relatively cheap. There is also a big variation between the 5 and 10 year ratios.

I get a Graham Price of $28.68. The 10 year low, median, and high median Price/Graham Price Ratios are 1.33, 1.57 and 1.73. The current P/GP Ratio is 0.98 based on a stock price of $28.24. The current ratio is below the low of the 10 year median ratios. 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 1.56. The current P/B Ratio is 1.40 based on a stock price of $28.24, Book Value of $5,662M and Book Value per Share of $20.20. The current ratio is 10% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.

I get a 10 year median Price/Cash Flow per Share Ratio of 10.60. The current P/CF Ratio is 7.26 based on Cash Flow per Share Ratio of 3.89, Cash Flow of $1,090M and a stock price of $28.24. The current ratio is 31% 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 5.97%. The current dividend yield is 3.75% based on dividends of $1.06 and a stock price of $28.24. The current dividend yield is 37% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively expensive.

I get a 10 year median dividend yield of 5.25%. The current dividend yield is 3.75% based on dividends of $1.06 and a stock price of $28.24. The current dividend yield is 38% below the 10 year median dividend yield. This stock price testing suggests that the stock price is relatively expensive.

The 10 year median Price/Sales (Revenue) Ratio is 2.17. The current P/S Ratio is 1.17 based on Revenue estimate for 2022 of $8,149M, Revenue per Share of $29.08 and a stock price of $28.24. The current ratio is 46% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.

Results of stock price testing is that the stock price is probably reasonable. However, the testing goes from cheap to expensive. The dividend yield says the stock price is expensive and the P/S Ratio says it is cheap. The reason being the recent increase in revenues and the decreases in dividends. Dividend deceases are never a good sign. The P/GP Ratio, P/B Ratio and P/CF Ratio tests are showing the stock as either cheap or reasonable.

Last year I said that the results of stock price testing were that the stock price was 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.

When I look at analysts’ recommendations, I find Strong Buy (6), Buy (9). The consensus would be a Strong Buy. The 12 month stock price consensus would be $31.70. This implies a total return of 16.01% with 12.25% from capital gains and $3.75% from dividends based on a current stock price of $28.24.

When I look at analysts’ recommendations last year, I found 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% with 9.58% from capital gains and 4.70% from dividends based on a stock price of $21.29.

The last two comments on Stock Chase says buy. Stock Chase gives this stock 5 stars out of 5. One analyst mentions that the company went through a difficult time in the last decade, but is well positioned now. Karen Thomas on Motley Fool says this is one of the best dividend stocks now. Motley Fool says this stock is a potential stagflation hedge. The company did a Press Release on its fourth quarter results. Simply Wall Street on Yahoo Finance says that the company has a low ROE and lots of debt and that is not attractive. They are right about low ROE and large debt. Simply Wall Street lists 3 risks for this stock of Debt is not well covered by operating cash flow; Dividend of 3.81% is not well covered by earnings or forecast to be in the next 3 years; and Profit margins (2.2%) are lower than last year (8.7%). As far as I can see, their dividend will be covered nicely by EPS in 2022.

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 Friday, April 1, 2022 around 5 pm. Tomorrow on my other blog I will write about Mullen Group .... learn more on Thursday, March 31, 2022 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.

See my website for stocks followed and investment notes. I have three blogs. The first talks only about specific stocks and is called Investment Talk. The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter or StockTwits. I am on Instagram. Or you can just Google #walktoronto spbrunner8166 to see my pictures.

Monday, March 28, 2022

TC Energy Corp

Sound bite for Twitter and StockTwits is: Dividend Growth Utility. The stock price is probably on the expensive side. The Dividend Payout Ratios (DPR) need to improve as they are a bit too high. This is a risk. They also have a lot of debt, another risk. See my spreadsheet on TC Energy Corp.

Is it a good company at a reasonable price? I still like this company and I will continue to hold my shares. I generally like utility stocks for their stolid dividends and increases above inflation. However, the stock price for this utility maybe getting on the expensive side at the moment.

I own this stock of TC Energy Corp (TSX-TRP, NYSE-TRP). I bought the stock in 2000 at an opportune time. The company had been cutting their dividend payments in order to re-organize and get the company into shape for long term profitability. This company’s stock fell hard because of this. People who depend on dividends for their income can be an unforgiving lot and can get really upset at company when a trusted company cuts its dividends.

When I was updating my spreadsheet, I noticed that Adjusted EPS went up from $4.20 to $4.27, but EPS went down from $4.74 to $1.86. this seems to be due to an impairment charge in 2021. I have owned this stock since 2000 and have bought more since. My total return is 10.55% per year with 5.44% from capital gains and 5.11% from dividends.

If you had invested in this company in December 2011, $1,024.19 you would have bought 23 shares at $44.53 per share. In December 2021, after 10 years you would have received $562.01 in dividends. The stock would be worth $1,353.09. Your total return would have been $1,915.10.

Cost Tot. Cost Shares Years Dividends Stock Val Tot Ret
$44.53 $1,024.19 23 10 $562.01 $1,353.09 $1,915.10

The dividend yields are good with dividend growth currently moderate. The current dividend yield is good (5% to 6% ranges) at 5.01%. The 5 year dividend yield is also good at 5.00%. But these yields are just inside the good range. The 10 year and historical median dividend growth is moderate (2% to 4% ranges) at 4.19% and 4.31%. The dividend growth over the past 5 years has been moderate (8% to 14% ranges) at 8.64% per year. However, dividend yields prior to the last 5 years were low (under 8%). The last dividend increase was in 2022 and it was for 3.45%. It is only between 2016 and 2020 that the dividend growth is above 8%.

The Dividend Payout Ratios (DPR) need to improve. The DPR for EPS for 2021 is 184% with 5 year coverage at 81%. This stock also gives out an Adjusted EPS and that’s DPR for 2021 is 80% with 5 year coverage at 75%. The DPR for Cash Flow per Share for 2021 is 47% with 5 year coverage at 41%. I like to see the last DPRs for CFPS at 40% or less. The DPR for Free Cash Flow for 2021 is 309% with 5 year coverage not calculable because of negative FCF. There is disagreement on what the FCF is, but other calculations do not help the DPRs.

Debt Ratios are could be improved, but unfortunately, utilities companies tend to have a lot of debt. The Long Term Debt/Market Cap Ratio is 0.65 and is good. The debt ratio is a bit low at 1.47. The 5 year median ratio is also 1.47. I prefer this to be 1.50 or better. The Leverage and Debt/Equity Ratios are a bit high at 3.12 and 2.12. I prefer them to be at below 3.00 and below 2.00.

The Liquidity Ratio is too low at 0.57. This means that current assets cannot cover current liabilities. Even adding in Cash Flow after Dividends, this ratio is just 0.61. If you add back the current portion of Long Term Debt and Notes Payables, the ratio is still low at 1.13. I prefer it to be at 1.50 or better. However, the Assets/Current Liabilities Ratio is quite good at 7.99. This means that they have lots of assets to cover their current liabilities. Problem can occur if they need cash when it is not easy to get (like in a recessionary period).

The Total Return per year is shown below for years of 5 to 33 to the end of 2021. 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.
2016 5 8.64% 4.30% -0.57% 4.87%
2011 10 7.50% 7.50% 2.82% 4.68%
2006 15 6.77% 6.67% 2.50% 4.17%
2001 20 6.90% 10.86% 5.59% 5.27%
1996 25 4.64% 7.88% 3.65% 4.23%
1991 30 5.28% 8.74% 4.12% 4.62%
1988 33 5.02% 9.44% 4.50% 4.93%

The 5 year low, median, and high median Price/Earnings per Share Ratios are 12.34, 13.95 and 16.48. The corresponding 10 year ratios are 17.80, 18.85 and 19.91. The corresponding historical ratios are 12.31, 13.99 and 16.04. The current P/E Ratio is 16.56 based on a stock price of $71.85 and EPS for 2022 of $4.34. The current ratio is below the low of the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.

I get a Graham Price of $54.45. The 10 year low, median, and high median Price/Graham Price Ratios are 1.27, 1.45 and 1.53. The current P/GP Ratio is 1.32 based on a stock price of $71.85. The current ratio is between the low and the median ratios of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable and below the median.

I get a 10 year median Price/Book Value per Share Ratio of 2.11. The current P/B Ratio is 2.37 based on a Book Value of $29,784M, Book Value per Share of $30.37 and a stock price of $71.85. The current ratio is 12% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.

Analysts have put out an estimate for the Book Value per Share for 2022 and it is $30.80. Based on this BVPS estimate, Book Value of $30,209M and a stock price of $71.85, I get a P/B Ratio of 2.33. This P/B Ratio is 11% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.

I get a 10 year median Price/Cash Flow per Share Ratio of 6.84. The current P/CF Ratio is 10.09 based on Cash Flow per Share estimate for 2022 of $7.12, Cash Flow of $6,983M and stock price of $71.85. The current ratio is 17% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.

I get an historical median dividend yield of 4.31%. The current dividend yield is 5.01% based on a stock price of $71.85 and Dividends of $3.60. The current yield is 16% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable and below the median.

I get a 10 year median dividend yield of 4.19%. The current dividend yield is 5.01% based on a stock price of $71.85 and Dividends of $3.60. The current yield is 19.6% above the 10 year median dividend yield. This stock price testing suggests that the stock price is relatively reasonable and below the median.

The 10 year median Price/Sales (Revenue) Ratio is 3.85. The current P/S Ratio is 4.79 based on Revenue estimate for 2022 of $14,722, Revenue per Share of $15.01 and a stock price of $71.85. The current ratio is 24% 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 on the expensive side but could still be reasonable. There is a divergence between the testing on dividend yield is P/S Ratio. Dividend yield tests say the stock price is reasonable and below the median and P/S Ratio test says the stock price is expensive. A number of the test show the stock price being reasonable but above the median, like the P/CF Ratio test.

There is a reason, and there generally is, why there is divergence between the dividend yield test and the P/S Ratio test. Although Revenue has been increasing, Revenue per Share has not. Revenue per Share is down by 1.2% per year over the past 5 years and only up by 0.5% per year over the past 10 years. This is because number of outstanding shares is increasing.

Last year I had tests results from stock price testing of a stock price that was probably reasonable and maybe cheap. The dividend yield tests are showing the stock price as cheap, but the P/S Ratio test does not confirm that and suggests that the stock price is reasonable and a bit above the median. So, we had a relatively cheaper stock price last year than this year.

When I look at analysts’ recommendations, I find Strong Buy (1), Buy (5), Hold (16) and Underperform (2). The consensus is Hold. The consensus 12 month stock price is $68.89 (with a range from $56.00 to $79.00). A 12 month stock price of $68.89 implies a total return of 2.28% with a capital loss of 2.73% and dividends of $5.01 based on a current stock price of $71.85.

When I look at analysts’ recommendations last year, I found Strong Buy (7), Buy (11) and Hold (5). The consensus was a Buy. The 12 month stock price consensus was $68.32. This implies a total return of 19.27% with 13.49% from capital gains and 5.78% from dividends based on a current stock price of $60.20. What happened was a total return of 25.13% with 19.35% from capital gains and 5.78% from dividends based on a stock rise from $60.20 to $71.85. So, there stock estimate was pretty good.

Analysts on Stock Chase seem to like this stock but think it is expensive. Stock Chase gives this stock 5 stars out of 5. Adam Othman on Motley Fool thinks you should buy this stock for its passive dividend income and because it has raised it dividends for the past 22 years. Sneha Nahata on Motley Fool thinks this is a low risk stock for your retirement portfolio. In a News Release the company talks about their fourth quarter results. Simply Wall Street on Yahoo Finance talks about who owns this company.

The risks by Simply Wall Street are debt is not well covered by operating cash flow, dividend of 5.23% is not well covered by earnings or forecast to be in the next 3 years, large one-off items impacting financial results, Profit margins (13.6%) are lower than last year (34.3%) and substantial insider selling in the past 3 months. It would take 5 years to pay off debt by cash flow and 3 years is ideal, so not that bad. Insider selling is not really selling, as officers are not picking up stock options, and also, CEO and CFO have increased their shares in past year. The Adjusted EPS is to look at EPS without large one-off items and can cover dividends. I just like to look at things closer.

TC Energy operates natural gas, oil, and power generation assets in Canada and the United States. Its web site is here TC Energy Corp.

The last stock I wrote about was about was TransAlta Corp (TSX-TA, NSYE-TAC) ... learn more. The next stock I will write about will be AltaGas Ltd (TSX-ALA, OTC-ATGFF) ... learn more on Wednesday, March 30, 2022 around 5 pm. Tomorrow on my other blog I will write about Value Investors.... learn more on Tuesday, March 29, 2022 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.

See my website for stocks followed and investment notes. I have three blogs. The first talks only about specific stocks and is called Investment Talk. The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter or StockTwits. I am on Instagram. Or you can just Google #walktoronto spbrunner8166 to see my pictures.

Friday, March 25, 2022

TransAlta Corp

Sound bite for Twitter and StockTwits is: Dividend Growth Utility. The stock price is showing as expensive on a number of tests. Analysts’ estimates are mostly lower for 2022. I do not like the debt ratios and this is a risk. The last dividend increase was for 11%, so management seems to be feeling good about the future. However, I doubt the risk of buying this stock is not worth the potential rewards. See my spreadsheet on TransAlta Corp.

Is it a good company at a reasonable price? Most of the testing is showing the stock as expensive as it hasn’t done well in some aspects over the past 5 and 10 years. For example, it has a declining book value. Analysts’ estimates are down for 2022 with the exception that earnings are expected to be positive from a loss in 2021. I do not regret selling. I do not think the company has proven yet that it can be a profitable company for investors. It also has a lot of debt and this is a risk.

I do not own this stock of TransAlta Corp (TSX-TA, NSYE-TAC). I bought this stock in 1987. It was a utility stock and utility stocks were considered to be good investments. I sold some in 2000 as the stock price was below what I had paid for it. I bought some more in February 2009 because it was relatively cheap and it seemed to be recovering. I sold more in August 2012 as this company was doing poorly again. By September 2019, I had finally had enough and saw no hope in this stock doing better. I noticed that MPL Communications had given up hope in 2014.

When I was updating my spreadsheet, I noticed Revenue was expected to go down 3% to $2,034M, but instead went up 30% to $2,721M. However, interestingly, analysts expect a drop in Revenue for 2022 to $2,223M. The difference seems to be a category called Merchant Revenue. Merchant Revenue is revenues from non-contracted capacity (i.e., merchant) are comprised of energy payments, at market price, for each MWh produced and are recognized upon delivery.

I remember at a Money Show some time ago, I think it was 2016, a presenter said at that time that this company has been destroying shareholder’s value for the past 20 years. I thought it was a little harsh at that time, but now I think he might have been on to something.

If you had invested in this company in December 2011, $1,008.96 you would have bought 48 shares at $21.02 per share. In December 2021, after 10 years you would have received $241.20 in dividends. The stock would be worth $674.40. Your total return would have been $915.60.

If you had invested in this company in December 2016, $1,003.05 you would have bought 135 shares at $7.43 per share. In December 2021, after 5 years you would have received $111.38 in dividends. The stock would be worth $1,896.75. Your total return would have been $2,008.13.

Cost Tot. Cost Shares Years Dividends Stock Val Tot Ret
$21.02 $1,008.96 48 10 $241.20 $674.40 $915.60
$7.43 $1,003.05 135 5 $111.38 $1,896.75 $2,008.13

The dividend yields are low with dividend growth resuming in 2020. The current dividend yield is low (below 2%) at 1.63%. The 5 and 10 year median dividend yields are moderate (2% to 4% ranges) at 2.05% and 3.86%. The historical median dividend yield is good (5% to 6% ranges) at 5.43%. Most of the life of this company, dividend yields were in the moderate to good ranges, but the company spend basically from 2014 to 2017 cutting the dividends. Dividend increases were restarted in 2020. The last dividend increase was in 2022 and it was for 11%.

The Dividend Payout Ratios (DPR) are currently fine but dividends have dropped some 86% since 2013. The DPR for EPS for 2021 are not-calculable because of earnings losses. The 5 year coverage is not calculable due to earnings losses. The DPR for EPS for 2022 is expected to be 56%. The DPR for Cash Flow per Share for 2021 is 6% with 5 year coverage also at 4%. Because this is a utility, I also have Funds from Operations (FFO) and Adjusted Funds from Operations (AFFO) values. The DPR for 2021 for FFO is 44% with 5 year coverage at 6%. The DPR for 2021 for AFFO is 9% with 5 year coverage at 11%. The DPR for Free Cash Flow for 2021 is 9% with 5 year coverage at 12%.

Debt Ratios are not great and this is a risk. The Long Term Debt/Market Cap ratio is fine at 0.64 with a current one higher at 0.75. It would be nice it was at 0.50 or lower. The Liquidity Ratio for 2021 is 1.14, but if you add in cash flow after dividends it is 1.63. I like this ratio to be 1.50 or higher. The Debt Ratio is low at 1.39 and I like this to be 1.50 or higher. The Leverage Debt/Equity Ratios are 3.56 and 2.56. I prefer these to be below 3.00 and below 2.00.

The Total Return per year is shown below for years of 5 to 34 to the end of 2021. 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.
2016 5 -9.96% 15.33% 13.59% 1.74%
2011 10 -17.12% -1.16% -3.95% 2.79%
2006 15 -10.89% -0.71% -4.18% 3.47%
2001 20 -8.28% 2.42% -2.13% 4.55%
1996 25 -6.61% 4.81% -0.82% 5.63%
1991 30 -5.54% 7.03% 0.13% 6.89%
1987 34 -4.72% 6.58% -0.07% 6.64%

The 5 year low, median, and high median Price/Earnings per Share Ratios are negative and unusable. The corresponding 10 year ratios are also negative and unusable. The corresponding historical ratios are 14.90, 14.23 and 21.19. The current P/E Ratio 34.08 based on a stock price of $12.27 and EPS estimate for 2022 of $0.36. This stock price testing suggests that the stock price is relatively expensive.

This stock has also got Price/Funds from Operations values. The 5 year low, median, and high median P/FFO Ratios are 2.22, 2.92 and 3.74. The corresponding 10 year ratios 2.35, 3.24 and 4.27. The current P/FFO Ratio is 3.43 based on last 12 months FFO of $3.58 and a stock price of $12.27. The current ratio is between the median and high ratios of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable but above the median.

This stock has also got Price/Adjusted Funds from Operations values. The 5 year low, median, and high median P/AFFO Ratios are 4.25, 5.83 and 6.95. The corresponding 10 year ratios 4.48, 6.14 and 7.91. The current P/AFFO Ratio is 6.60 based on AFFO estimate for 2022 of $1.86 and a stock price of $12.27. The current ratio is between the median and high ratios of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable but above the median.

I get a Graham Price of $3.92. The 10 year low, median, and high median Price/Graham Price Ratios are 1.01, 1.34 and 1.62. The current P/GP Ratio is 3.13 based on a stock price of $12.27. 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 1.30. The current P/B Ratio is 6.47 based on Book Value of $640M, Book Value per Share of $2.36 and a stock price of $12.27. The current ratio is 300% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive. Also, a P/B Ratio of 6.47 is very high considering a good one would be around 1.50. This is because the Book Value has declined a lot over the past 10 years (and 5 years).

There is also an estimate Book Value per Share for 2022. That Book Value per Share for 2022 is $2.50. This implies a total Book Value of $677.5M, and P/B Ratio of 4.91 with a stock price of $12.27. This ratio is 277% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.

I get a 10 year median Price/Cash Flow per Share Ratio of 3.40. The current ratio is 3.71 based on Cash Flow per Share estimate for 2022 of $3.31, Cash Flow of $897M and a stock price of $12.27. The current ratio is 9% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.

I get an historical median dividend yield of 5.43%. The current dividend yield is 1.63% based on dividends of $0.20 and a stock price of $12.27. The current dividend is 70% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively expensive.

I get a 10 year median dividend yield of 3.86%. The current dividend yield is 1.63% based on dividends of $0.20 and a stock price of $12.27. The current dividend is 58% below the 10 year median dividend yield. This stock price testing suggests that the stock price is relatively expensive.

The 10 year median Price/Sales (Revenue) Ratio is 1.05. The current P/S Ratio is 1.50 based on Revenue estimate for 2022 of $2,223M, Revenue per Share of $8.20 and a stock price of $12.27. The current ratio is 42% 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 is relatively expensive. The P/S Ratio test is showing the stock price as relatively expensive. The Dividend Yield tests are also showing the stock price as expensive, but these are not good tests for declining dividends. However, declining dividends are not a good sign. The P/CF Ratio test is showing the stock price as reasonable. This is also true of the P/FFO Ratio and P/AFFO Ratio tests. But where we have an estimate for the AFFO, it is lower than last year’s AFFO.

The reason why so many of the tests are coming up with the stock price being expensive is because of declining values per share. EPS is down by 48% per year over the past 5 years. Also, analysts do not expect the company will do as well in 2022 as it did in 2021. For example, they expect the Revenue to decline by 18% to $2,223 in 2022. This is compared to the increase in Revenue by 30% in 2021 to $2,721.

Last year, the results of stock price testing were that the stock price is probably expensive. The actual price is not that high for this stock if you look at price before 2011. However, it has had a good run lately. It went up 66% in 2019 and another 16% so far this year. Another problem is that future estimates are rather low. Analysts do not expect great things from this company in the near future. If you buy this stock, you even do not get a really good dividend yield until it fully recovers.

When I look at analysts’ recommendations, I find Strong Buy (4), Buy (6), and Hold (2). The consensus would be a Strong Buy. The 12 months stock price is $16.08. This implies a total return of 32.68% with 1.63% from dividends and 31.05% from capital gains.

When I look at analysts’ recommendations last year, I found Strong Buy (4), Buy (5), Hold (2) and Underperform (1). The consensus was a Buy. The 12 month stock price consensus was $12.96. This implies a total return of 17.43% with 15.82% from capital gains and 1.61% from dividends based on a stock price of $11.19. What happened was a move to $12.27 which implies a total return of 11.26% with 9.65% from capital gains and 1.61% from dividends. It was not a bad estimate.

There are mixed analysts’ views on Stock Chase. The latest analyst says Do Not Buy because of management and legacy problems. Stock Chase gives this stock 4 stars out of 5. Andrew Walker on Motley Fool says that TransAlta has done a good job of cleaning up the balance sheet in recent years and is on track to generate strong free cash flow in 2022 and beyond. Demetris Afxentiou on Motley Fool says that given its reliable business and investment into its renewable subsidiary, there is a huge long-term upside. The company in a Press Release talk about fourth quarter results. Simply Wall Street on Yahoo Finance looks at insider ownership.

TransAlta Corp is an independent power producer based in Alberta, Canada. The company owns more than 70 power plants in Canada, the Western United States, and Australia. Its web site is here TransAlta Corp.

The last stock I wrote about was about was Enbridge Inc (TSX-ENB, NYSE-ENB) ... learn more. The next stock I will write about will be TC Energy Corp (TSX-TRP, NYSE-TRP) ... learn more on Monday, March 28, 2022 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.

See my website for stocks followed and investment notes. I have three blogs. The first talks only about specific stocks and is called Investment Talk. The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter or StockTwits. I am on Instagram. Or you can just Google #walktoronto spbrunner8166 to see my pictures.

Wednesday, March 23, 2022

Enbridge Inc

Sound bite for Twitter and StockTwits is: Dividend Growth Utility. The stock price may be currently expensive. The company did better in 2021 than was expected. They have a lot of debt and this is a risk. See my spreadsheet on Enbridge Inc.

Is it a good company at a reasonable price? This is a utility stock that I have owned for sometime and currently I plan to hold on to my current shares. It may not be at a reasonable price at this time. I also have no plans to buy any more of this stock in the future because I own enough of it.

I own this stock of Enbridge Inc (TSX-ENB, NYSE-ENB). I first bought this stock in 2005 and then bought more in 2008 and 2009. This stock was on the Dividend Achievers, the Dividend Aristocrats list and also on Mike Higgs’ list of Canadian Dividend Growth stocks. Enbridge is considered to be a low risk stock.

When I was updating my spreadsheet, I noticed the company did better in Revenue than analysts had expected. Analysts expected a 13% increase in revenue to $44,311. However, increase was to $47,071, a 20% increase. EPS was expected to be $2.67 (78% increase) and it came in at $2.87 (94% increase). The Adjusted EPS was expected at $2.65 (9.5% increase) and came in at $2.74 (23% increase).

I have had this stock for some 16 years and I have made a total return of 12.78% per year with 8.06% from capital gains and 4.72% from dividends.

If you had invested in this company in December 2011, $1,028.43 you would have bought 27 shares at $38.09 per share. In December 2021, after 10 years you would have received $604.77 in dividends. The stock would be worth $1,055316. Your total return would have been $1,659.93.

Cost Tot. Cost Shares Years Dividends Stock Val Tot Ret
$38.09 $1,028.43 27 10 $604.77 $1,055.16 $1,659.93

The dividend yields are good with dividend growth moderate. The dividend yield is currently good (5% to 6% ranges) at 6.04%. The 5 year median dividend yield is also good at 6.25%. The 10 year and historical dividend yield is moderate (2% to 4% ranges) at 4.48% and 3.56%. The dividend increases over the past 5 years was 9.52% per year and is at a moderate rate (8% to 14% ranges). The last dividend increase was low at 2.99% and it was for 2022.

The Dividend Payout Ratios (DPR) are too high generally, expect for the DPR for AFFO. The DPR for EPS for 2021 was 116% with 5 year coverage at 145%. These are, of course, too high. The company also has Adjusted EPS, and the DPR for Adj EPS for 2021 was also too high at 122% with 5 year coverage at 118%. Analyst do not see this DPR being below 100% in the near future. As this is a Utility, we also have the DPR for Adjusted Funds from Operations (AFFO). That DPR for 2022 is fine at 67% with 5 year coverage at 66%. The DPR for Free Cash Flow for 2021 is 582% with 5 year coverage at 261%. However, analysts see this being lower in 2022 with a DPR of 81%.

Debt Ratios are mixed, but utilities often have high debt and could get into problems if they have to raise cash at the wrong time. The Long Term Debt/Market Cap Ratio is 0.86. It is fine, but it would be nice if it was lower. The Liquidity Ratio is 0.49 and even if you add in Cash Flow after dividends, we only get to 0.63. Even if you add in the current portion of the Long Term Debt, we just get up to 0.74. The Assets/Current Liabilities Ratio is good at 9.26. The Debt Ratio is good at 1.60. The Leverage and Debt/Equity Ratios are fine at 2.66 and 1.66.

The Total Return per year is shown below for years of 5 to 31 to the end of 2021. 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.
2016 5 9.52% -1.12% -7.11% 5.99%
2011 10 13.05% 5.76% 0.26% 5.50%
2006 15 12.44% 9.92% 4.52% 5.40%
2001 20 11.94% 12.09% 6.67% 5.42%
1996 25 10.86% 14.87% 8.72% 6.15%
1991 30 9.03% 13.30% 7.82% 5.48%
1990 31 8.72% 10.59% 6.23% 4.35%

The 5 year low, median, and high median Price/Earnings per Share Ratios are 23.03, 30.82 and 35.21. The corresponding 10 year ratios are 24.39, 30.88 and 36.90. The corresponding historical ratios are 11.01, 18.66 and 35.89. The current P/E Ratio is 19.05 based on a stock price of $56.97 and EPS estimate for 2022 of 2.99. The current ratio is below the low of the 10 year median ratios. This stock price testing suggests that the stock price is relatively cheap.

I get a Graham Price of $41.13. The 10 year low, median, and high median Price/Graham Price Ratios are 1.35, 1.63 and 1.98. The current P/GP Ratio is 1.36 based on a stock price of $56.97. This ratio is between the low and median of the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.

I get a 10 year median Price/Book Value per Share Ratio of 2.16. The current P/B Ratio is 2.17 based on a Book Value of $53,079M, Book Value per Share of $26.20 and a stock price of $56.97. The current ratio is 1% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and at the median.

I get a 10 year median Price/Cash Flow per Share Ratio of 10.18. the current P/CF Ratio is 9.69 based on a stock price of $56.97, Cash Flow per Share estimate for 2022 of $5.88 and Cash Flow of $11,913M. The current ratio is 5% 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 3.56%. The current dividend yield is 6.04% based on a dividend of $3.44 and a stock price of $56.97. The current dividend yield is 156% above 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 4.48%. The current dividend yield is 6.04% based on a dividend of $3.44 and a stock price of $56.97. The current dividend yield is 35% above the 10 year median dividend yield. This stock price testing suggests that the stock price is relatively cheap.

The 10 year median Price/Sales (Revenue) Ratio is 1.60. The current P/S Ratio is 2.32 based on Revenue estimate for 2022 of $46,491M, Revenue per Share of $24.61 and a stock price of $56.97. The current ratio is 45% 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 possibly reasonable, but it is more likely to be expensive. The dividend yield tests show the stock price as cheap, but the P/S Ratio test show the stock price as expensive. It is always wise to take the P/S Ratio test seriously. However, all the other tests show this stock to be in a reasonable range.

When the dividend yield test and P/S Ratio tests say the opposite things there are reasons. For this stock, they are probably paying a higher dividend than they can afford. The real problem is that, although Revenue is growing, Revenue per Share is not. Revenue is growing for the last 5 and 10 years at 6% and 9% per year. However, Revenue per Share is down by 1% and 9% per year over the same time periods. It is important to pay attention to Revenue, because it is Revenue in the end that will push up earnings and cash flow.

Last year I said that the results of stock price testing were that the stock price is probably reasonable. The dividend yield tests say the stock price is cheap, but the P/S Ratio tests says it is expensive. The Dividend Payout Ratios for EPS are too high suggesting the dividend is too high. The P/S Ratios is not passed because Revenue is not expected to recover for a couple of years. The P/S Ratio for 2023 is 1.57 which is very close the current one of 1.54. I also like the P/B Ratio test and this says the stock price is cheap as do all the other tests.

When I look at analysts’ recommendations, I find Strong Buy (9), Buy (6) and Hold (10). The consensus would be a Buy. The 12 months stock price is $56.39. This implies a total return of 5.02% with 6.04% from dividends and 1.02% from capital loss based on a stock price of $56.97.

When I look at analysts’ recommendations last year, I found Strong Buy (9), Buy (12), Hold (3) and Underperform (1). The consensus is a Buy. The 12 month stock price consensus is $51.46. This implies a total return of 20.67% with 13.32% from capital gains and 7.35% from dividends based on a stock price of $45.43. What happened was a stock price more to $56.97 which resulted in a total return of 32.75% with 25.40% from capital gains and 7.35% from dividends.

From the last 4 analysts’ comments on Stock Chase there are two buys and two sells. One analyst thinks they are paying out too much in dividends. Stock Chase gives this stock 5 stars out of 5. Jitendra Parashar on Motley Fool says this is a safe stock to buy in March 2022. Sneha Nahata on Motley Fool says this is a good dividend stock to buy. The company talks about their fourth quarter in a News Release. A Zack article on Yahoo Finance says there is a lot more room for this stock to grow.

Enbridge owns extensive midstream assets that transport hydrocarbons across the U.S. and Canada. Its pipeline network consists of the Canadian Mainline system, regional oil sands pipelines, and natural gas pipelines. The firm has a small renewables portfolio primarily focused on onshore and offshore wind projects. Its web site is here Enbridge Inc.

The last stock I wrote about was about Canadian Tire Corp (TSX-CTC.A, OTC-CDNAF) ... learn more. The next stock I will write about will be TransAlta Corp (TSX-TA, NSYE-TAC) ... learn more on Friday, March 25, 2022 around 5 pm. Tomorrow on my other blog I will write about Richelieu Hardware.... learn more on Thursday, March 24, 2022 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.

See my website for stocks followed and investment notes. I have three blogs. The first talks only about specific stocks and is called Investment Talk. The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter or StockTwits. I am on Instagram. Or you can just Google #walktoronto spbrunner8166 to see my pictures.

Monday, March 21, 2022

Canadian Tire Corp

Sound bite for Twitter and StockTwits is: Dividend Growth Consumer. The stock price would seem to be reasonable. Current Dividend yield is moderate and last dividend increase was moderate. Dividend Payout Ratios are good. They do have a lot of debt. See my spreadsheet on Canadian Tire Corp.

Is it a good company at a reasonable price? I do think that this is a good company. I have had it for many years and it has done well over time. I think that the current price is reasonable. The current moderate dividend yield with a moderate increases is a very good combination.

I own this stock of Canadian Tire Corp (TSX-CTC.A, OTC-CDNAF). In 2000 when I first bought this stock, it was on the Investment Reporter's list of conservative Canadian stocks. I bought stock for my trading account in 2009 because I have done well with it in my Pension Account and it was a consumer stock.

When I was updating my spreadsheet, I noticed that the company did much better than analysts had expected for 2021. For example, analysts expected the Revenue only to increase by 0.5% to 14,946M, but it increased to $16,292 an 9.6% increase. Analysts expected the Normalized EPS to increase by 5% to $13.58, but Normalized EPS increased by 45% to 18.91. Also, EPS was expected to increase 5.6% to $13.00 but EPS increased by 49% to $18.38.

I have done well with this stock. I have had it for 22 years and have a total return of 12.76% per year with 10.80% from capital gains and 1.96% from dividends.

If you had invested in this company in December 2011, $1054.40 you would have bought 16 shares at $65.90 per share. In December 2021, after 10 years you would have received $455.60 in dividends. The stock would be worth $2,903.04. Your total return would have been $3,358.64.

Cost Tot. Cost Shares Years Dividends Stock Val Tot Ret
$65.90 $1,054.40 16 10 $455.60 $2,903.04 $3,358.64

The dividend yields are moderate with dividend growth good. The current dividend yield is moderate (2% to 4% ranges) at 2.78%. The 5 year median dividend yield is also moderate at 2.50%. The 10 year and historical median dividend yields are low (below 2%) at 1.84% and 1.69%. The dividend growth is good (15% and over) for the last 5 years at 15.36% per year. The last dividend increase was in 2022 and it was for 10.64% (a moderate increase). The one in 2021 was only at 3.30%. A lot of companies had lower dividend increases in 2021 due to uncertainty about the pandemic.

The Dividend Payout Ratios (DPR) are good. The DPR for EPS for 2021 is 26% with 5 year coverage at 30%. The DPR for Cash Flow per Share for 2021 is 11% and 5 year coverage at 12%. This company puts out also an Adjusted EPS (basically without special charges). The DPR for Adj EPS for 2021 is 22% with 5 year coverage at 27%. The DPR for Free Cash Flow for 2021 is 25% with 5 year coverage at 28%.

Debt Ratios are fine, but Leverage and Debt/Equity Ratios are a bit too high. The Long Term Debt/Market Cap for 2021 is 0.35 and is low and good. The Liquidity Ratio for 2021 is 1.72 and is high and good. The Debt Ratio for 2021 is 1.43 and is fine, but I prefer it to be at 1.50 or higher. The Leverage and Debt/Equity Ratios for 2021 are 3.35 and 2.35 and are too high. I prefer them to be under 3.00 and under 2.00.

The Total Return per year is shown below for years of 5 to 33 to the end of 2021. 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.
2016 5 15.36% 7.93% 5.43% 2.49%
2011 10 15.63% 13.15% 10.66% 2.49%
2006 15 13.98% 8.17% 6.47% 1.70%
2001 20 13.11% 12.35% 10.33% 2.02%
1996 25 10.36% 10.41% 8.71% 1.71%
1991 30 8.56% 8.78% 7.29% 1.49%
1988 33 9.43% 9.04% 7.46% 1.58%

The 5 year low, median, and high median Price/Earnings per Share Ratios are 10.45, 11.45, and 12.44. The corresponding 10 year ratios are 10.85, 12.59 and 14.70. The corresponding historical ratios are 10.27, 13.06 and 14.56. The current P/E Ratio is 10.45 based on a stock price if $187.06 and EPS estimate for 2022 of $17.90. The current ratio is between the low and median ratios of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable and below the median.

I get a Graham Price of $185.23. The 10 year low, median, and high median Price/Graham Price Ratios are 0.89, 1.00 and 1.14. The current P/GP Ratio is 1.01 based on a stock price of $187.06. This ratio is just above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.

I get a 10 year median Price/Book Value per Share Ratio of 1.80. The current P/B Ratio is 2.20 based on a stock price of $187.06, Book Value of $5,124M and Book Value per Share of $85.19. The current ratio is 22% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.

There is also an estimate for the Book Value per Share for 2022. The Book Value per Share estimate is $92.20. This gives a Book Value of $5,546M and a P/B Ratio of 2.03 with a stock price of $187.06. This ratio of 2.03 is 13% above the 10 year median ratio of 1.80. This stock price testing suggests that the stock price is relatively reasonable but above the median.

I get a 10 year median Price/Cash Flow per Share Ratio of 8.38. The current P/CF Ratio is 6.63 based on a stock price of $187.06, Cash Flow per Share estimate for 2022 of $28.20 and a Cash Flow of $1,696M. The current ratio is 21% 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 1.69%. The current dividend yield is 2.78% based on dividends of $5.20 and a stock price of $187.06. The current dividend yield is 64% above 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 1.84%. The current dividend yield is 2.78% based on dividends of $5.20 and a stock price of $187.06. The current dividend yield is 51% above the 10 year median dividend yield. This stock price testing suggests that the stock price is relatively cheap.

The 10 year median Price/Sales (Revenue) Ratio is 0.68. The current P/S Ratio is 0.67 based on Revenue estimate for 2022 of $16,773M, Revenue per Share of $278.87 and a stock price of $187.06. The current ratio is 1.6% 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 reasonable. The dividend yield tests say that the stock price is cheap, but the P/S Ratio tests say it is reasonable and below the median. Most of the other tests say it is reasonable and above and below the median.

Last year I said that the results of stock price testing were that the stock price was probably reasonable. The Dividend yield tests were showing the stock price as cheap, but this is not confirmed by the P/S Ratio test which says the stock price is reasonable but above the median. With the revenue, there is a great deal of uncertainty because of the C19. The rest of the tests were a mixed bag, but it is not good that the P/B Ratio testing says it is expensive.

When I look at analysts’ recommendations, I find Strong Buy (2), Buy (5) and Hold (3). The consensus would be a Buy. The 12 month stock price consensus is $231.18. This implies a total return of 26.37% with 23.59% from capital gains and 2.78% from dividends based on a stock price of $187.06.

When I looked at analysts’ recommendations last year, I found Strong Buy (2), Buy (5), Hold (4) and Sell (1). The consensus was a Buy. The 12 month stock price consensus was $190.58. This implies a total return of 7.98% with 5.39% from capital gains and 2.60% from dividends based on a stock price of $180.85. What happened was a stock price of $187.06 and a total return of 6.03% with 3.43% from capital gains and 2.60% from dividends.

The last analyst recommendation on Stock Chase is a buy but last year there were some Do not Buys. Daniel Da Costa on Motley Fool says to buy this stock before the next big rally. Joey Frenette on Motley Fool says this company is dirt cheap and will outperform the TSX this year. The company announces on newswire their fourth quarterly results. Simply Wall Street on Yahoo Finance looks at this stock. They give one warning risk of a high level of debt.

Canadian Tire sells home goods, sporting equipment, apparel, footwear, automotive parts and accessories, and vehicle fuel through a network of company, dealer, and franchisee-operated locations across Canada. Aside from the namesake banner, stores operate primarily under the Mark's, SportChek, Party City, Atmosphere, and PartSource monikers. The firm also operates and holds majority ownership of a financing arm (Canadian Tire Financial Services; 20% owned by Scotiabank) and a REIT (CT REIT; Canadian Tire owns about 70%). Its web site is here Canadian Tire Corp.

The last stock I wrote about was about was H & R Real Estate Trust (TSX-HR.UN, OTC-HRUFF) ... learn more. The next stock I will write about will be Enbridge Inc (TSX-ENB, NYSE-ENB) ... learn more on Wednesday, March 23, 2022 around 5 pm. Tomorrow on my other blog I will write about Rights of Shareholders.... learn more on Tuesday, March 22, 2022 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.

See my website for stocks followed and investment notes. I have three blogs. The first talks only about specific stocks and is called Investment Talk. The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter or StockTwits. I am on Instagram. Or you can just Google #walktoronto spbrunner8166 to see my pictures.

Friday, March 18, 2022

H & R Real Estate Trust

Sound bite for Twitter and StockTwits is: Dividend Paying REIT. The stock price seems reasonable. Dividends have been cut and this is never a good sign. Yield for this stock is a lot lower than in the past. See my spreadsheet on H & R Real Estate Trust.

Is it a good company at a reasonable price? This stock price seems reasonable. I prefer companies with lower yields and better dividend increases. It is never good when a company decreases their dividends. Personally, I would not buy at present but wait to see what happens. The spin-off of Primaris Real Estate Investment Trust does not make up for dividend decreases. The stock price went down because of the spin-off, but yield is a lot lower than in the past. The 10 year median yield is 6.13% and current yield is 3.91%.

I do not own this stock of H & R Real Estate Trust (TSX-HR.UN, OTC-HRUFF). Before I started blogging, I was following a number of REITs and this is one I had followed. It also used to be on a dividend list I followed.

When I was updating my spreadsheet, I noticed since 2020, the distribution is down by some 62%. They had also cut the distribution on 2009 by some 50%, then grew them again until 2020. Dividends are now lower than they were in 1997. (With spin-off of Primaris Real Estate Investment Trust, dividend cut seems to be around 48%.)

If you had invested in this company in December 2011, $1,000.18 you would have bought 43 shares at $23.26 per share. In December 2021, after 10 years you would have received $534.38 in dividends. The stock would be worth $698.75. Your total return would have been $1,233.13.

Cost Tot. Cost Shares Years Dividends Stock Val Tot Ret
$23.26 $1,000.18 43 10 $534.38 $698.75 $1,233.13

The dividend yields are moderate with dividend growth non-existent. The current dividend yield is moderate (2% to 4% ranges) at 3.91%. The 5, 10 and historical dividend yields are good (5% to 6% ranges) at 6.25%, 6.13% and 6.26%. Dividends were recently decreased in 2020 and then again in 2022. Decrease in dividends is 62%. Dividends are now lower than when they were started in 1997. REIT generally have good yields and low growth. However, the current yield is not in the good category.

If you consider the dividends of the spin-off of Primaris Real Estate Investment Trust (TSX: PMZ.UN) then dividends are only down 48%, not 62%. H & R said that the spin off was worth $5.57 for shareholders of H & R. Shareholders got 1 share of Primaris for each 4 shares of H & R. So Primaris $0.80 dividend is worth $0.20 per share for H & R shareholders or 0.06 per month.

The Dividend Payout Ratios (DPR) are fine, since the important DPRs is for FFO and AFFO. The DPR for EPS for 2021 is 34% with 5 year coverage at 151%. Because this is a REIT, we need to look at DPR for FFO (Funds from Operations). That DPR for 2021 is 45% with 5 year coverage at 69%. We also need to look at the DPR for AFFO (Adjusted Funds from Operations). That DPR for 202157% with 5 year coverage at 87%. The DPR for Free Cash Flow for 2021 is 65% with 5 year coverage at 74%.

Debt Ratios are fine. The Long Term Debt/Market Cap Ratio for 2021 is good at 0.83. The Liquidity Ratio is low for 2021 at 1.28. This has varied a lot and REITs do not divide the Balance Sheet up with Current and Long Term Categories. The Debt Ratio is good at 1.83. The Leverage and Debt/Equity Ratios are fine at 2.20 and 1.20 respectively.

The Total Return per year is shown below for years of 5 to 25 to the end of 2021. 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.
2016 5 -12.59% -0.28% -6.19% 5.92%
2011 10 -3.36% 2.71% -3.52% 6.24%
2006 15 -4.28% 3.17% -2.59% 5.76%
2001 20 -2.58% 9.11% 0.82% 8.29%
1996 25 0.06% 11.63% 1.96% 9.67%

The 5 year low, median, and high median Price/Earnings per Share Ratios are 12.16, 12.95 and 13.74. The corresponding 10 year ratios are 14.33, 15.95 and 17.57. The corresponding historical ratios are 12.16, 13.30 and 17.50. The current P/E Ratio is 9.71 based on a stock price of $13.30 and EPS estimate for 2022 of $1.37. The current ratio is below the low the 10 year median ratios. This stock price testing suggests that the stock price is relatively cheap.

Because this is a REIT, we need to look at Price/Funds from Operations Ratios. The 5 year low, median, and high median ratios are 10.91, 11.61 and 12.83. The corresponding 10 year ratios are 10.98, 11.74 and 12.87. The current P/FFO Ratio is 11.37 based on a stock price of $13.30 and FFO estimate for 2022 of $1.17. This ratio is between the low and median ratios of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable and below the median.

Because this is a REIT, we need to look at Price/Adjusted Funds from Operations Ratios. The 5 year low, median, and high median ratios are 13.53, 14.40 and 15.53. The corresponding 10 year ratios are 13.51, 14.56 and 16.16. The current P/AFFO Ratio is 12.31 based on a stock price of $13.30 and AFFO estimate for 2022 of $1.08. This ratio is below the low of the 10 year median ratios. This stock price testing suggests that the stock price is relatively cheap.

I get a Graham Price of $20.87. The 10 year low, median, and high median Price/Graham Price Ratios are 0.63, 0.69 and 0.76. The current P/GP Ratio is 0.64 based on a stock price of $13.30. This ratio is between the low and the median ratios of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable and below the median.

I get a 10 year median Price/Book Value per Share Ratio of 0.90. The current P/B Ratio is 0.80 based on a stock price of $13.30, Book Value of $4774M and Book Value per Share of $16.55. The current ratio is 11% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.

I get a 10 year median Price/Cash Flow per Share Ratio of 9.91. The current P/CF Ratio is 8.49 based on a stock price of $13.30, Cash Flow for the last 12 months of $452M, and Cash Flow per Share of $1.57. The current ratio is 14% 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 6.26%. The current dividend yield is 3.91% based on dividends of $0.5196 and a stock price of $13.30. The current dividend yield is 38% below the historical median ratio. This stock price testing suggests that the stock price is relatively expensive.

I get a 10 year median dividend yield of 6.13%. The current dividend yield is 3.91% based on dividends of $0.5196 and a stock price of $13.30. The current dividend yield is 36% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.

The 10 year median Price/Sales (Revenue) Ratio is 5.16. The current P/s Ratio is 4.26 based on a stock price of $13.30, Revenue estimate for 2022 of $903M and Revenue per Share of $3.13. The current ratio is 18% 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 reasonable and below the median. The P/S Ratio test shows this as do a number of the other tests. Some of the tests show the stock price is relatively cheap. Dividend yield tests are not good indicators of stock price when dividends are decreased. However, it is never a good sign when dividends are decreased.

What I said last year that the results of stock price testing was that the stock price is relatively cheap. The P/S Ratio test is showing this stock as relatively cheap. Note that if the dividend had not been cut, the dividend yield tests would show the stock price as relatively cheap. Most other tests are showing the stock as cheap or below the median. The exception is the P/E Ratio tests, but EPS is not considered to be as important the FFO and AFFO.

When I look at analysts’ recommendations, I find Strong Buy (2), Buy (3) and Hold (2). The consensus is a Buy. The 12 month stock price consensus is $15.50. This implies a total return of 20.45% with 16.54% from capital gains and 3.91% from dividends.

When I looked at analysts’ recommendations last year, I found Strong Buy (2), Buy (3) and Hold (2). The consensus would be a Buy. The 12 month stock price is $16.04. This implies a total return of 10.94% with 6.37% from capital gains and 4.585 from dividends based on a stock price of $15.08. What happened was a total loss of 5.43% with a capital loss of 11.80% and dividends of 6.37%. The stock declined because of a spin-off.

There are several entries on Stock Chase for this stock and opinions vary. Christopher Liew on Motley Fool talks about REITs being an alternative to buying real estate. Kay Ng on Motley Fool talks about the why of the stock’s decline. Spin off announced on Newswire of Primaris Real Estate Investment Trust (TSX: PMZ.UN). The company talks about the fourth quarter results via Cision on Yahoo Finance. Simply Wall Street report on Yahoo Finance reviews this stock. Simply Wall Street has 4 risk warnings of earnings are forecast to decline by an average of 31.8% per year for the next 3 years, debt is not well covered by operating cash flow, dividend of 5.23% is not well covered by earnings, and large one-off items impacting financial results. Note that FFO and AFFO is better to judge dividend coverage than earnings.

H&R Real Estate Investment Trust is a real estate investment trust principally involved in the ownership of properties in Canada and the U.S. H&R owns and manages a real estate portfolio rather equally divided between property in the Canadian provinces of Ontario and Alberta and the U.S. Its web site is here H & R Real Estate Trust.

The last stock I wrote about was about was RioCan Real Estate (TSX-REI.UN, OTC-RIOCF) ... learn more. The next stock I will write about will be Canadian Tire Corp (TSX-CTC.A, OTC-CDNAF) ... learn more on Monday, March 21, 2022 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.

See my website for stocks followed and investment notes. I have three blogs. The first talks only about specific stocks and is called Investment Talk. The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter or StockTwits. I am on Instagram. Or you can just Google #walktoronto spbrunner8166 to see my pictures

Wednesday, March 16, 2022

RioCan Real Estate

Sound bite for Twitter and StockTwits is: Dividend Growth REIT. The stock price is probably reasonable. It will probably raise its dividends. It raised them 19 times over the past 27 years. See my spreadsheet on RioCan Real Estate.

Is it a good company at a reasonable price? It is probably a reasonably good REIT. I do not have current plans of selling this stock. REITs are high yield stocks that do not seem to growth their dividends much. Mostly I like lower yielding stocks that increase their dividends, but thought I needed exposure to real estate as I do not own any real estate. I rent.

I own this stock of RioCan Real Estate (TSX-REI.UN, OTC-RIOCF). I first bought this stock in 1998 because I wanted to diversify my portfolio into REITs. It was a stock covered and recommended by MPL Communications in their Income Trust coverage. Over the years I have made several more purchases of this REIT.

When I was updating my spreadsheet, I noticed I have had this stock for some 24 years and have made a total return of 10.88% per year with 2.20% from capital gains and 8.68% from dividends. Although I have done well for the long term, I note that anyone holding this stock for 5, 10 and 15 years has made little. See chart below.

If you had invested in this company in December 2011, $1,004.34 you would have bought 38 shares at $26.43 per share. In December 2021, after 10 years you would have received $522.31 in dividends. The stock would be worth $871.72. Your total return would have been $1,394.03.

Cost Tot. Cost Shares Years Dividends Stock Val Tot Ret
$26.43 $1,004.34 38 10 $522.31 $871.72 $1,394.03

The dividend yields are moderate with dividend growth very low. The current dividend yield is moderate (2% to 4% ranges) at 3.98%. The 5, 10 and historical dividend yields were good (5% and 6% ranges) at 5.60%, 5.36% and 6.95%. After decreasing the dividends in 2021 by 33%, the company in 2022 raised the dividends by 6.25%. However, the dividends are still 29% below the dividends in 2021. They have raised their dividends 19 times over the past 27 years and decreased them once.

The Dividend Payout Ratios (DPR) are fine. The DPR for EPS for 2021 was 53% and 5 year coverage at 83%. The DPR for Cash Flow per Share is 67% with 5 year coverage at 86%. Since this is a REIT, we should look at DPR for Adjusted Funds from Operations (AFFO) which for 2021 is 74% with 5 year coverage at 96%. We should also look at DPR for Funds from Operations (FFO) which for 2021 is 63% with 5 year coverage at 77%. I do not know how valid the DPR for Free Cash Flow is. Morningstar has just restated FCF for last 5 years at a much lower level. (They changed the FCF for 2020 from $491M to $36M. WSJ has not revised their FCF.) Prior to 2021, FCF was covering dividends, now it is not according to MS.

Debt Ratios are fine. Long Term Debt/Market Cap Ratio for 2021 is 0.75 and is fine. The Liquidity Ratio is not important for Financials, but I still calculated it and for 2021 I get a ratio of 2.62. The Debt Ratio is 2.09 and this is good.

The Total Return per year is shown below for years of 5 to 28 to the end of 2021. 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.
2016 5 -6.64% 2.43% -2.94% 5.37%
2011 10 -3.17% 4.13% -1.41% 5.53%
2006 15 -1.72% 5.06% -0.61% 5.67%
2001 20 -0.36% 11.86% 3.23% 8.63%
1996 25 1.74% 14.11% 4.05% 10.06%
1995 28 3.18% 14.07% 4.33% 9.74%

The 5 year low, median, and high median Price/Earnings per Share Ratios are 9.38, 10.43 and 12.17. The corresponding 10 year ratios are 9.83, 11.05 and 12.28. The corresponding historical ratios 11.64, 12.06 and 13.36. The 15.74 based on stock price of $25.66 and EPS estimate for 2022 of $1.63. The current P/E Ratio is above the high of the 10 year median ratios. This stock price testing suggests that the stock price is relatively expensive

Since this is a REIT, we need to look at Price/Funds from Operations. The 5 year P/FFO Ratios are 12.46, 13.16 and 14.86. The corresponding 10 year ratios are 12.91, 13.97 and 16.22. The current P/FFO Ratio is 15.09 based on a stock price of $25.66 and FFO estimate for 2022 of $1.70. The current ratio is between the median and high of the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.

Since this is a REIT, we need to look also at Price/Adjusted Funds from Operations. The 5 year P/AFFO Ratios are 15.90, 16.80 and 18.88. The corresponding 10 year ratios are 15.90, 17.27 and 19.10. The current P/AFFO Ratio is 17.82 based on a stock price of $25.66 and AFFO estimate for 2022 of $1.44. The current ratio is between the median and high of the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.

I get a Graham Price of $28.50. The 10 year low, median, and high median Price/Graham Price Ratios are 0.82, 0.91 and 1.01. The current P/GP Ratio is 0.90 based on a stock price of $25.66. The current ratio is between the low and median ratios of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable and below the median.

I get a 10 year median Price/Book Value per Share Ratio of 1.01. The current P/B Ratio is 1.02 based on a Book Value $7,767M, Book Value per Share of $25.07 and a stock price of $25.66. The current ratio is 1% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.

I get a 10 year median Price/Cash Flow per Share Ratio of 17.43. The current P/CF Ratio is 16.21 based on Cash Flow for the last 12 months of $490M, Cash Flow per Share of $1.58 and a stock price of $25.66. The current ratio is 7% 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 6.95%. The current dividend yield is 3.98% based on dividends of $1.02 and a stock price of $25.66. The current dividend yield is 43% below the historical dividend yield. This stock price testing suggests that the stock price is relatively expensive.

I get an historical median dividend yield of 5.36%. The current dividend yield is 3.98% based on dividends of $1.02 and a stock price of $25.66. The current dividend yield is 26% below the historical dividend yield. This stock price testing suggests that the stock price is relatively expensive.

The 10 year median Price/Sales (Revenue) Ratio is 6.99. The current P/S Ratio is 6.64 based on a stock price of $25.66, Revenue estimate for 2022 of $1,196 and Revenue per Share of $3.86. This ratio is 5% 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 reasonable. The P/S Ratio testing says that the stock price is reasonable and below the median. The dividend yield tests are not much good because of a recent dividend cut. Most of the testing says the stock price is reasonable and above or below the median. The P/E Ratio test is not a good one either because this is a REIT and FFO is a better measurement.

What I said last year was that the results of stock price testing were that the stock price is relatively cheap. The P/S Ratio test shows this. The dividend yield test shows that it is at least reasonable by the 10 year median yield test. However, this company just lower their dividends and if it had not, it would have been reasonable or cheap by these tests. Other tests show this stock as cheap.

When I look at analysts’ recommendations, I find Strong Buy (4) and Buy (5). The consensus is a Strong Buy. The 12 months stock price consensus is $26.83. This implies a total return of 8.53% with 4.56% from capital gains and 3.98% from dividends. Even the high stock price is only $28.00 which implies a total return of 13.09% with 9.12% from capital gains and 3.98% from dividends.

When I looked at analysts’ recommendations last year, I found Strong Buy (3), Buy (2) and Hold (3). The consensus would be a Buy. The 12 month price consensus is $20.19. This implies a total return of 8.74% with 3.80% from capital gains and 4.94% from dividends based on a current stock price of $19.45. What happened was a total return of 36.87% with 31.93% from capital gains and 4.94% from dividends. So, they were way off in stock price.

Two analysts recently covered this stock in Stock Chase and one said Buy and the other Do not Buy. Vishesh Raisinghani on Motley Fool thinks growth will continue and FFO be up 5 to 7% this year. TD WebBroker says the same thing. Aditya Raghunath on Motley Fool thinks that this stock is great for passive income. The company put out a Press Release on their fourth quarterly results. Global Newswire on Yahoo Finance has published this company’s 5 year growth targets. Simply Wall Street reviews this stock via Yahoo Finance. Simply Wall Street has 4 warnings on this stock of Earnings have declined by 19.4% per year over past 5 years, Debt is not well covered by operating cash flow, Dividend of 4% is not well covered by earnings, and Significant insider selling over the past 3 months. Note that because this is a REIT, FFO coverage counts more than EPS coverage. Also note that the CEO, CFO and Chairman all increased their holdings in the past year.

RioCan Real Estate Investment Trust is a Canadian real estate investment trust which owns, develops, and operates Canada's portfolio of retail-focused, increasingly mixed-use properties. Most of its properties are located in Ontario, Canada. By geography, the company operates in Canada, which generates the majority of total revenue, and in the United States. Its web site is here RioCan Real Estate.

The last stock I wrote about was about was Home Capital Group (TSX-HCG, OTC-HMCBF) ... learn more. The next stock I will write about will be H & R Real Estate Trust (TSX-HR.UN, OTC-HRUFF) ... learn more on Friday, March 18, 2022 around 5 pm. Tomorrow on my other blog I will write about Make Friends as An Adult.... learn more on Thursday, March 17, 2022 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.

See my website for stocks followed and investment notes. I have three blogs. The first talks only about specific stocks and is called Investment Talk. The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter or StockTwits. I am on Instagram. Or you can just Google #walktoronto spbrunner8166 to see my pictures.