Is it a good company at a reasonable price? The price is probably expensive, but it would still be in the reasonable ranges. I think that the company is good and probably quite safe. I intend to continue to hold my shares. However, it does have a heavy debt load. Sometimes companies have gotten into trouble in recessions because of a heavy debt load. On the other hand, heavy debt load is what most utilities have.
I own this stock of Emera Inc (TSX-EMA, OTC-EMRA). I found this company in Mike Higg’s site. Mike’s site has a spreadsheet showing Dividend Paying Canadian Growth stocks. I first bought this stock in 2005, as I wanted to buy something for my Locked in RRSP. I think that this was an appropriate stock and has good value. I was using up excess cash in my account.
When I was updating my spreadsheet, I noticed that Emera is paying a higher and higher portion of earnings in dividends. Last year analysts expected this to improve. Again, this year analysts expect improvement. For example, the Dividend Payout Ratio for Adjusted Funds from Operations (AFFO) is 116%. Analysts expect the DPR for AFFO to be 62% in 2022. Last year analyst expected the DPR for AFFO to be 70% in 2021, but it came in at 116%.
What the company says in its annual statement about dividend growth and Dividend Payout Ratios: Emera has provided annual dividend growth guidance of four to five per cent through 2024. The Company targets a long-term dividend payout ratio of adjusted net income of 70 to 75 per cent and, while the payout ratio is likely to exceed that target through and beyond the forecast period, it is expected to return to that range over time.
I have done well with this stock. My total return over the almost 17 years I have held this stock is 12.12% per year with 7.22% from capital gains and 4.90% from dividends. This is a good return.
If you had invested in this company in December 2011, $1024.24 you would have bought 31 shares at $33.04 per share. In December 2021, after 10 years you would have received $612.17in dividends. The stock would be worth $1,959.82. Your total return would have been $2,571.99.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $33.04 | $1,024.24 | 31 | 10 | $612.17 | $1,959.82 | $2,571.99 |
The dividend yields are moderate with dividend growth low. The current dividend yield is moderate (2% to 4% ranges) at 4.37%. The 5, 10 and historical dividend yields are also moderate at 4.80%, 4.45% and 4.77%. The current dividend increases are low (below 8%) at 5.24% per year over the past 5 years. The most recent increase was in in 2021 and it was for 3.9%.
The Dividend Payout Ratios (DPR) are too high but are expected to improve. The DPR for EPS for 2021 is 130% with 5 year coverage at 92.5%. Analyst expect the DPR for EPS to be 87.5% this year and then decline to 85% in 2023. The DPR for Adjusted EPS for 2021 is 91.6% with 5 year coverage at 95.9%. Analysts expect this DPR to be 86% in 2022. The DPR for Cash Flow per Share for 2022 is 50% with 5 year coverage at 41%. I like this DPR to be at 40% or less. Analysts expect he DPR or CFPS to be 36% in 2022. According to Morningstar the Free Cash Flow is negative and is expected to be so in the near future. The WSJ also says that the FCF is negative.
The company has a lot of debt and debt ratios that are not good, but utilities usually do have a lot of debt. The Long Term Debt/Market Cap Ratio for 2021 is 0.86 and is fine. It used to be higher. The Liquidity Ratio is very low at 0.6 and if you add in Cash Flow after dividends it is still too low at 0.75. If this ratio is less than 1.00, it means that current assets cannot cover current liabilities. Unfortunately, the Liquidity Ratio has always been too low. However, if you look at Assets/Current Liabilities Ratio it is quite good at 7.02. The Debt Ratio is also too low at 1.42 and I prefer this to be at 1.50 or higher. The Leverage and Debt/Equity Ratios are too high at 3.94 and 2.77. I prefer them to be below 3.00 and 2.00.
The Total Return per year is shown below for years of 5 to 29 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 | 5.24% | 11.42% | 6.85% | 4.57% |
| 2011 | 10 | 6.97% | 11.04% | 6.70% | 4.34% |
| 2006 | 15 | 7.34% | 11.40% | 7.10% | 4.30% |
| 2001 | 20 | 5.70% | 11.25% | 6.89% | 4.36% |
| 1996 | 25 | 4.79% | 10.45% | 6.11% | 4.33% |
| 1992 | 29 | 4.50% | 11.25% | 6.30% | 4.95% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 15.56, 18.37 and 21.17. The corresponding 10 year ratios are 16.61, 18.81 and 20.62. The corresponding historical ratios are 13.41, 15.36 and 17.08. The current P/E Ratio is 19.88 based on a stock price of $60.63 and EPS estimate for 2022 of $3.05. The current ratio is between the median and high of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable but above the median.
The company also gives an Adjusted EPS. Adjusted EPS exclude special items to get at what the real EPS should be. The 5 year low, median, and high median Price/ Adjusted Earnings per Share Ratios are 16.58, 19.25 and 22.54. The corresponding 10 year ratios are 15.88, 17.12 and 19.91. The current P/Adj EPS is 19.62. The current P/Adj EPS Ratio is above the high of the 10 year median ratios. This stock price testing suggests that the stock price is relatively expensive.
I get a Graham Price of $82.15. The 10 year low, median, and high median Price/Graham Price Ratios are 1.11, 1.26 and 1.37. The current P/GP Ratio is 1.27 based on a stock price of $60.63. The current ratio is between the median and high 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 10 year median Price/Book Value per Share Ratio of 1.66. The current P/B Ratio is 1.82 based on a stock price of $60.63 and Book Value of $10,116M and Book Value per Share of $33.30. 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.
There is also an estimate for the Book Value per Share for 2022. The P/B Ratio for 2022 is 1.76 based on a Book Value per Share estimate for 2022 of 34.40, Book Value of $8,981M and a stock price of $60.63. This ratio is 6% 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 8.24. The current P/CF Ratio is 8.28 based on Cash Flow per Share estimate for 2022 of $7.32, Book Value of $1,911M and a stock price of $60.63. The current ratio is 0.5% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and at the median.
I get an historical median dividend yield of 4.77%. The current dividend yield is 4.37% based on dividends of $2.65 and a stock price of $60.63. The current dividend yield is 8% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a 10 year median dividend yield of 4.45%. The current dividend yield is 4.37% based on dividends of $2.65 and a stock price of $60.63. The current dividend yield is 2% 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 2.08. The current P/S Ratio is 2.48 based on Revenue estimate for 2022 of $6,377M, Revenue per Share of $24.43 and a stock price of $60.63. The current ratio is 19% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median. It is almost expensive.
Results of stock price testing is that the stock price is probably expensive, but might still be in a reasonableness range. The dividend yield test is showing the stock price as reasonable but above the median. However, the P/S Ratio testing does not confirm this. Most of the other tests are showing the stock price as reasonable, but above the median.
When I look at analysts’ recommendations, I find Strong Buy (1), Buy (4), Hold (10), Underperform (1) and Sell (1). The consensus would be a Hold. The 12 month stock price is $61.97. This implies a total return of 6.58% with 2.21% from capital gains and 4.37% from dividends based on a stock price of $60.63.
When I looked at analysts’ recommendations last year, I found Strong Buy (3), Buy (7), Hold (6) and Sell (1). The consensus would be a Buy. The 12 month stock price consensus is $58.62. This implies a total return of 17.61% with 4.90% from dividends and 12.71% from capital gains based on a stock price of $52.01. What happened was a total return of 21.47% with 16.57% from capital gains and 4.90% from dividends based on a stock price of $52.01.
What I said last year about the results of stock price testing is that the stock price is probably reasonable. Both the dividend yield tests show the stock price is reasonable and below the median. The P/S Ratio test does not confirm this, but the difference is only 5% above the 10 year median ratio. Most of the other tests, except the P/E Ratio test show the stock price as reasonable and below the median.
Analysts on Stock Chase like this company, but one feels it is overpriced. Daniel Da Costa on Motley Fool thinks this stock with a yield of 4.2% will earn you a good return on your capital. Christopher Liew on Motley Fool thinks this stock is recession proof. See the company’s Press Release on its fourth quarter. A Simply Wall Street report on Yahoo finance thinks this stock has an intrinsic value of $78.98 CDN$. They give 4 warnings of Interest payments are not well covered by earnings, Dividend of 4.29% is not well covered by earnings, Profit margins (8.9%) are lower than last year (17%) and Shareholders have been diluted in the past year.
Emera is a geographically diverse energy and services company investing in electricity generation, transmission, and distribution as well as gas transmission and utility energy services. Emera has operations throughout North America and the Caribbean countries. Its web site is here Emera Inc.
The last stock I wrote about was about was IGM Financial Inc (TSX-IGM, OTC-IGIFF) ... learn more. The next stock I will write about will be Bombardier Inc (TSX-BBD.B, OTC-BDRBF) ... learn more on Friday, March 11, 2021 around 5 pm. Tomorrow on my other blog I will write about Something to Buy March 2022.... learn more on Thursday, March 10, 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.
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