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.
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