Is it a good company at a reasonable price? The stock price is probably reasonable. It is not a dividend growth stock and because of that I would not be interested in this utility. The dividend yield is a decent one. The Dividend Payout Ratio is too high to expect a dividend increase anytime soon. Debt is high.
I do not own this stock of Northland Power Inc (TSX-NPI, OTC-NPIFF). This company is into generating electric power. I have a lot invested in pipelines and I would like to have more invested in electric power as part of my utility’s investments. I read a report on this stock that said it was a good defensive stock to buy. That is, it is a good stock to hold in a stock market correction. I can certainly see the logic of using utility stocks as defensive stocks.
When I was updating my spreadsheet, I noticed that last year, analysts thought that this company might start to raise their dividends in 2023. Now they do not think dividends will be raise then or in 2024. Analysts are expecting Earnings of $2.80, $1.65, $1.70 over the next 3 years. However, AFFO is expected to be $1.57, $1.66, $1.71 over the same time frame.
If you had invested in this company in December 2000, for $1,004.08 you would have bought 56 shares at $17.93 per share. In December 2021, after 10 years you would have received $631.68 in dividends. The stock would be worth $2,125.20. Your total return would have been $2,756.88.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $17.93 | $1,004.08 | 56 | 10 | $631.68 | $2,125.20 | $2,756.88 |
The dividend yields are moderate with dividend growth low. The current dividend yield is moderate (2% to 4% ranges) at 3.26%. The 5 year median dividend yield is also moderate at 4.54%. The 10 year mediate dividend yield is good (5% and 6% ranges) at 5.19%. The historical dividend yield is high (7% and higher) at 7.52%. The dividend increases have been low (below 8% per year) at 2.13% per year over the past 5 years. In the past 5 years there has been only one dividend increase and it was in 2018 and it was for 11%. Over the past 24 years, dividends have increased in 8 years and decreased in 2 years.
The company used to be an income trust and as such it had high dividends. Since having to change to a corporation they had basically kept the dividends flat with only one increase in 2018. The Dividend Payout Ratios (DPR) are expected to be fine in the future.
The Dividend Payout Ratios (DPR) are expected to be fine. The DPR for EPS for 2021 is 146% with 5 year coverage at 90%. The DPR for EPS for 2022 is expected to be around 43%. The DPR for Free Cash Flow (FCF) calculated by the company in 2021 is 86% with 5 year coverage at 72%. This DPR is expected to be around 76% in 2022. The DPR for Cash Flow per Share (CFPS) for 2021 is 21% with 5 year coverage at 19%. The FCF calculated by Morningstar and WSJ is negative, so no DPR can be calculated.
Some Debt Ratios are too high. The Long Term Debt/Market Cap for 2021 is 0.81 and is fine. The Liquidity Ratio for 2021 is 1.01. If you add in cash flow after dividends it is good at 1.96. The Debt Ratio for 2021 is low at 1.30 and I prefer it to be 1.50 or higher. The Leverage and Debt/Equity Ratios are 4.34 and 3.34 and are too high. I prefer them to be under 3.00 and under 2.00, respectively.
The Total Return per year is shown below for years of 5 to 24 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 | 2.13% | 14.45% | 10.25% | 4.20% |
| 2011 | 10 | 1.06% | 12.43% | 7.79% | 4.65% |
| 2006 | 15 | 0.66% | 13.07% | 7.36% | 5.71% |
| 2001 | 20 | 1.02% | 12.57% | 6.22% | 6.35% |
| 1997 | 24 | 2.93% | 12.44% | 5.71% | 6.73% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 13.68, 19.14 and 26.46. The corresponding 10 year ratios are 13.41, 16.03 and 18.38. The corresponding historical ratios are 13.41, 16.03 and 18.26. The current P/E Ratio is 13.16 based on a stock price of $36.85 and EPS estimate for 2022 of $2.80. The current ratio is below the low ratio of the 10 year median ratios. This stock price testing suggests that the stock price is relatively cheap.
The company also supplies Free Cash Flow (FCF) or AFFO data. The 5-year low, median, and high median Price/FCF are 12.42, 16.30 and 17.03. The corresponding 10 year ratios are 13.23, 15.83 and 17.73. The current P/FCF Ratio is 23.47 based on FCF estimate for 2022 of $1.57 and a stock price of $36.85. The current ratio is above the high of the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
I get a Graham Price of $32.53 . The 10-year low, median, and high median Price/Graham Price Ratios are 1.93, 2.20 and 2.59. The current P/GP Ratio is 1.13 based on a stock price of $36.85. The current ratio is below the low ratio of the 10 year median ratio. 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 4.68. The current P/B Ratio is 2.19 based on a Book Value of $3,812M, Book Value per Share of $16.80 and a stock price of $36.85. The current ratio is 53% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I also have a Book Value per Share estimate for 2022 of $10.90. The P/B Ratio here would be 3.38 based on a stock price of $36.85 and Book Value of $2,473M. This ratio is 28% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I get a 10-year median Price/Cash Flow per Share Ratio of 5.64. The current P/CF Ratio is 6.38 based on Cash Flow per Share (CFPS) estimate for 2022 of $5.78, Cash Flow of $1,311M and a stock price of $36.85. The current ratio is 13% 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 7.52%. The current dividend yield is 3.26% based on a stock price of $32.68 and Dividends of $1.20. The current dividend yield is 57% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively expensive. Problem is current flat dividends and company used to be an income trust.
I get a 10 year median dividend yield of 5.19%. The current dividend yield is 3.26% based on a stock price of $32.68 and Dividends of $1.20. The current dividend yield is 37% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively expensive. Problem is current flat dividends and company used to be an income trust.
The 10-year median Price/Sales (Revenue) Ratio is 3.30. The current P/S Ratio is 3.45 based on Revenue estimate for 2022 of $2,424M Revenue per Share of $10.68 and a stock price of $32.68. The current P/S Ratio is 4.5% 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 P/S Ratio test says this. The dividend yield tests are not good because this company used to be an income trust with very high dividends. A couple of the stock price tests say that the stock price is cheap and a couple say it is reasonable and above the median.
When I look at analysts’ recommendations, I find Strong Buy (6), Buy (7) and Hold (2). The consensus would be a Strong Buy. The 12 month stock price consensus is $48.00. this implies a total return of 33.51% with 30.26% from capital gains and 3.26% from dividends based on a current stock price of $36.85.
Analysts on Stock Chase gives mixed recommendations from Do not Buy to Top Pick. Stock Chase gives this stock 4 stars out of 5. Nicholas Dobroruka on Motley Fool thinks this is a high dividend stock you could hold for years. Staff on Motley Fool gives their stock picks for November 2022. The company put out a Press Release for their fourth quarter of 2021. The company has a Press Release on their third quarter of 2022.
Simply Wall Street on Yahoo Finance talks about this stock. Simply Wall Street has 4 warnings on this company of earnings are forecast to decline by an average of 17.1% per year for the next 3 years; has a high level of debt; unstable dividend track record; and shareholders have been diluted in the past year.
Northland Power develops, constructs, and operates maintainable infrastructure assets across a range of clean and green technologies, such as wind (offshore and onshore), solar, and supplying energy through a regulated utility. Northland's growth opportunities are global and span North America, Europe, Latin America, and Asia. Its web site is here Northland Power Inc.
The last stock I wrote about was about was Chesswood Group Ltd (TSX-CHW, OTC-CHWWF) ... learn more. The next stock I will write about will be FirstService Corp (TSX-FSV, NASDAQ-FSV) ... learn more on Monday, November 21, 2022 around 5 pm.
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