Is it a good company at a reasonable price? The stock price seems reasonable. I have no plans to sell my shares at this point, but this stock has not done well for a while. It is a utility so you expect low growth (5%) via capital gains, but growth over the past 5 years is very low (0.3%). For 2021 that had good growth in Revenue (8.7%), EPS (10.7%), and capital gains of 18%. Dividend growth has really slowed and it is currently at 1%.
I own this stock of Canadian Utilities Ltd (TSX-CU, OTC-CDUAF). I started to follow this stock in January of 2009 because it was on the Dividend Achievers list, the Dividend Aristocrats list and was also on Mike Higgs’ dividend growth list at that time. The Dividend Aristocrats list is now an index on the TSX. ATCO (TSX-ACO-X) owns 88% of this stock, so you would not buy both these stocks. It is still on the Canadian Dividend Aristocrats list. Money Sense gives it a C rating. See Money Senses list of 100 top Canadian Dividend Stocks.
When I was updating my spreadsheet, I noticed this is another stock I seemed to have paid too much for. I have had it for 4 years and my total return is 4.60% per year with 0.38% from capital gains and 4.22% from dividends. On the plus side I am making between 4% and 5% on my investment and 4.4% at the current value of my investment. If you look at the chart on Total Returns below, you will see that total return over the past 5, 10 and 15 years have been low (under 8% per year).
I note that analysts expected EPS of $2.02, an 53% increase, but EPS went down by 8% to $1.21. However, the adjusted EPS (AEPS) was better at 2.17. The EPS is expected to be $2.21 in 2022 and the AEPS is expected to be $2.27 in 2022.
On this stock, my spreadsheet looks at what would be the dividend yield after 5 years if you paid the high price or low price 5 years ago. 5 years ago, the dividend yield was on the high price was 3.23% and after 5 years your yield would be 4.37%. 5 years ago, the dividend yield was on the low price was 4.23% and after 5 years your yield would be 5.73%. Today the yield is 4.54%. If dividend keep increasing at the 6.24% rate, in 5 years’ time, at a purchase price of $39.14, the yield would be 6.14%.
If you had invested in this company in December 2011, $1015.41 you would have bought 33 shares at $30.77 per share. In December 2021, after 10 years you would have received $448.79 in dividends. The stock would be worth $1,210.74. Your total return would have been $1,659.56.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $30.77 | $1,015.41 | 33 | 10 | $448.79 | $1,210.74 | $1,659.56 |
The dividend yields are moderate with dividend growth low. The current dividend yield is moderate (2% to 4% ranges) at 4.41%. The 5, 10 and historical dividend yield are also moderate 4.76%, 3.99% and 3.76%. The current dividend increase rate is low (below 8% per year) with increases at 6.24% per year over the past 5 years. The last dividend increase was in 2022 and it was for 1%. The dividends increase in 2021 was also just 1%. Increases seem nominal.
The Dividend Payout Ratios (DPR) need improving and are moving that way. The DPR for EPS for 2021 is 145% with 5 year coverage at 87%. The DPR for EPS is expected to fall to 80% in 2022. These rates are getting high because they are increasing the dividend while the EPS is going down. The DPR for AEPS is better at 81% for 2021 with 5 year coverage at 76%. The DPR for AEPS for 2022 is expected to be around 77%.
The DPR for Cash Flow per Share (CFPS) for 2021 is 29% with 5 year coverage at 26%. This is good as anything at or below 40% is good. The DPR for Free Cash Flow (FCF) for 2021 is 96% with 5 year coverage at 137%. The problem with FCF is that there is no agreement on what FCF is, but all seem to show DPRs that are too high.
Debt Ratios need improving. The Long Term Debt/Market Cap Ratio for 2021 is better than last years at 0.91. The Liquidity Ratio is low at 1.22, but if you add in cash flow after dividends, it is good at 2.10. The Debt Ratio is fine if a bit low at 1.48. I prefer these ratios to be at 1.40 or higher. The Leverage and Debt/Equity Ratios for 2021 are 3.09 and 2.09. I prefer these to be below 3.00 and 2.00 respectively.
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 | 6.24% | 4.76% | 0.27% | 4.48% |
| 2011 | 10 | 8.13% | 5.74% | 1.78% | 3.96% |
| 2006 | 15 | 7.74% | 6.56% | 2.91% | 3.66% |
| 2001 | 20 | 6.82% | 9.86% | 5.56% | 4.30% |
| 1996 | 25 | 6.44% | 11.28% | 6.48% | 4.80% |
| 1991 | 30 | 5.58% | 12.05% | 6.74% | 5.31% |
| 1988 | 33 | 5.20% | 11.45% | 6.28% | 5.16% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 19.36, 25.32 and 27.44. The corresponding 10 year ratios are 15.51, 17.61 and 19.70. The corresponding historical ratios are 10.93, 13.04 and 10.93. The current P/E Ratio is 18.23 based on a stock price of $40.29 and EPS estimate for 2022 of $2.21. 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.
In testing the Adjusted Earnings per Share (AEPS) ratios, I find that the 5 year low, median, and high median P/AEPS Ratios are 13.83, 15.93 and 17.90. The corresponding 10 year ratios are 14.26, 16.74 and 18.52. The current P/AEPS Ratio is 17.59 based on a stock price of $40.29 and AEPS for 2022 of $2.29. The current ratio is above the 10 year high median ratio. This stock price testing suggests that the stock price is relatively expensive.
I get a Graham Price of $31.01. The 10 year low, median, and high median Price/Graham Price Ratios are 1.20, 1.38 and 1.51. The current P/GP Ratio is 1.30 based on a stock price of $40.29. 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 2.10. The current P/B Ratio is 2.08 based on a stock price of $40.29, Book Value of $5,208M and Book Value per Share of $19.34. The current ratio is 0.6% 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 6.10. The current ratio is 6.81 based on Cash Flow per Share estimate for 2022 of $5.92, Cash Flow of $1,595M, and a stock price of $40.29. 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.
I get an historical median dividend yield of 3.76%. The current dividend yield is 4.41% based on dividend of $1.7768 and a stock price of $40.29. The current yield is 17% above the historical 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 3.66%. The current dividend yield is 4.41% based on dividend of $1.7768 and a stock price of $40.29. The current yield is 20.3% 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 2.75. The current P/S Ratio is 2.94 based on Revenue estimate for 2022 of $3,693, Revenue per Share of $13.71 and a stock price of $40.29. The current ratio is 6.9% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
Results of stock price testing is that the stock price is probably reasonable. The 10 year dividend yield tests say the stock price is cheap, but the P/S Ratio test says it is reasonable above the median. Most of the other testing is saying that the stock is reasonable and above or below the median.
Last year I said that the results of stock price testing were that the stock price was probably reasonable. The dividend tests say the stock price is cheap and they may be right as dividend payments and increases show the confidence in the future of the management. However, the last increase was for just 1%. They are probably doing the increase because they have over a 40 year history of dividend increases. The P/S Ratio for 2022 is 1% below the 10 year median ratio. Most of the other testing is showing the stock price as reasonable and below the median.
When I look at analysts’ recommendations, I find Strong Buy (1), Buy (1) and Hold (6). The consensus would be a Hold. The 12 month stock price is $39.71. This implies a total return of 2.97% with a 1.44% capital loss and dividends of $2.97% based on a stock price of $40.29. Since the stock markets are down year to date, this may not be an unreasonable position.
When I look at analysts’ recommendations last year, I found Strong Buy (1), Buy (1), Hold (6) and Sell (1). So, it is a rather mixed bag. The consensus would be a Hold. The 12 month stock price consensus is $35.86. This implies a total return of 6.06% with 1.10% from capital gains and 4.96% from dividends based on a stock price of 35.47. Most of the total return is again expected from dividends. What happened was a current price of 40.29 and a total return of 18.55% with 13.59% from capital gains and 4.96% from dividends.
The last two analysts’ ratings on this stock on Stock Chase says their recommendation is a Hold. Stock Chase gives this stock 3 stars out of 5. Adam Othman on Motley Fool says that this stock is a dividend king after growing its dividends over the past 50 years. He admits that the DPR is too high but says the company has been through difficult times before. Rajiv Nanjapla on Motley Fool thinks this company is well positioned to continue its dividend growth. The company talks about its fourth quarter results on Newswire. The company talks about its first quarter of 2022 results on Newswire. A Simply Wall Street report on Yahoo Finance talks about Revenues for this company which have been upgraded.
Canadian Utilities Ltd, a subsidiary of holding company Atco, offers gas and electricity services. The company's main divisions include electricity (generation, transmission, and distribution), pipelines & liquid (natural gas and water), and Retail Energy. Headquartered in Calgary, Alberta, the firm mainly operates in Canada and Australia, along with some operations in the United States and Mexico. Its web site is here Canadian Utilities Ltd.
The last stock I wrote about was about was Mullen Group Ltd (TSX-MTL, OTC-MLLGF) ... learn more. The next stock I will write about will be Pizza Pizza Royalty Corp (TSX-PZA, OTC-PZRIF) ... learn more on Wednesday, May 25, 2022 around 5 pm. Tomorrow on my other blog I will write about Retiring and Investing.... learn more on May 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.
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