Sound bite for Twitter and StockTwits is: Dividend Growth Utility. Results of stock price testing is that the stock price is probably reasonable and maybe cheap. Debt Ratios need to be improved. The Dividend Payout Ratios (DPR) is good with the important one for AEPS. The dividend yields are good with dividend growth restarted. See my spreadsheet on AltaGas Ltd.
Is it a good company at a reasonable price? I plan to hold the shares I have, but I will not be buying anymore because I have enough. I still believe I will do fine with this stock. It is encouraging that the company has restarted dividend growth. The stock price is reasonable and is probably cheap.
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 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 this year, this company has a much better Liquidity Ratio than in past years. The Liquidity Ratio for 2022 is 1.36 and the company has a 5 year median of 0.98. In 2022 this ratio is getting close to the safety on of 1.50 at 1.43.
If you had invested in this company in December 2012, for $1,007.10 you would have bought 30 shares at $33.57 per share. In December 2022, after 10 years you would have received $462.24 in dividends. The stock would be worth $701.40. Your total return would have been $1,163.64.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $33.57 | $1,007.10 | 30 | 10 | $462.24 | $701.40 | $1,163.64 |
You can see from the following chart that this company has mostly been doing better over the past 5 years than over the past 10 years. The exceptions are dividends and Cash Flow.
| Year | Item | Tot. Growth | Per Year |
|---|---|---|---|
| 5 | Revenue Growth | 451.09% | 40.68% |
| 5 | AEPS Growth | 57.14% | 9.46% |
| 5 | Net Income Growth | 1216.83% | 168.16% |
| 5 | Cash Flow Growth | -1.15% | -0.23% |
| 5 | Dividend Growth | -98.82% | -12.84% |
| 5 | Stock Price Growth | -22.41% | 150.38% |
| 10 | Revenue Growth | 871.34% | 25.53% |
| 10 | AEPS Growth | 62.61% | 4.98% |
| 10 | Net Income Growth | 291.76% | 26.11% |
| 10 | Cash Flow Growth | 268.28% | 13.92% |
| 10 | Dividend Growth | -31.13% | -2.67% |
| 10 | Stock Price Growth | -43.58% | -3.55% |
The dividend yields are good with dividend growth restarted. The current dividend yields are good (5% to 6% ranges) at 5.07%. The 5, 10 and historical dividend yields are also good at 5.62%, 5.25% and 5.80%. The dividends were cut in 2019. The company then started to raise them again in 2021. The last dividend increase was in 2023 and it was for 5.7%. The dividends are still 49% below the 2018 dividends.
The Dividend Payout Ratios (DPR) is good with the important one for AEPS. The DPR for EPS for 2022 is 75% with 5 year coverage at 139%. The DPR for Adjusted Earnings per Share (AEPS) for 2022 is 57% with 5 year coverage at 88%. The DPR for Funds from Operations (FFO) is 25% with 5 year coverage at 34%. The DPR for Cash Flow per Share (CFPS) is 25% with 5 year coverage at 38%. There is a lot of disagreement on what the Free Cash Flow (FCF) is with some site showing the FCF negative.
Debt Ratios need to be improved. The Long Term Debt/Market Cap Ratio is too high 1.32. This means that the market cap is lower than the Long Term Debt. If you look at Long Term Debt/Covering Assets, the ratio is 0.70 and this is fine. The Liquidity Ratio at 1.36 is a bit low. If you add in Cash Flow after dividends it is still low at 1.43. I prefer this to be at 1.50 or higher. The Debt Ratio is a bit low at 1.47 and I would prefer this to be at 1.50 or higher. The Leverage and Debt/Equity Ratios are too high at 3.15, and 2.15. I prefer these to be below 3.00 and 2.00.
The Total Return per year is shown below for years of 5 to 23 to the end of 2022. 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. |
|---|---|---|---|---|---|
| 2017 | 5 | -12.84% | 0.78% | -3.96% | 4.74% |
| 2012 | 10 | -2.67% | 1.84% | -3.55% | 5.39% |
| 2007 | 15 | -4.33% | 5.80% | -0.82% | 6.61% |
| 2002 | 20 | 6.98% | 17.71% | 4.66% | 13.05% |
| 1999 | 23 | 9.76% | 17.80% | 6.09% | 11.71% |
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 22.49, 26.26 and 30.03. The corresponding historical ratios are 13.02, 15.83 and 18.70. The current ratio is 11.38 based on a stock price of $22.07 and EPS estimate for 2023 of $1.94. 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.
I have Adjusted Earnings per Share (AEPS) data. The 5-year low, median, and high median Price/Adjusted Earnings per Share Ratios are 11.50, 14.25 and 16.57. The corresponding 10 year ratios are 17.91, 24.11 and 28.16. The current P/AEPS Ratio is 11.38 based on a stock price of $22.07 and AEPS estimate for 2023 of $1.94. 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. This is an important test for this section.
I have Adjusted Funds from Operations (AFFO) data. The 5-year low, median, and high median Price/ Adjusted Funds from Operations Ratios are 4.47, 6.17 and 7.27. The corresponding 10 year ratios are 6.79, 7.90 and 9.94. The current ratio is 5.56 based on AFFO estimate for 2023 of $3.97 and a stock price of $22.07. 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.
I get a Graham Price of $32.04. The 10-year low, median, and high median Price/Graham Price Ratios are 0.96, 1.21 and 1.50. The current P/GP Ratio is 0.73 based on a stock price of $22.07. This ratio is below the low ratio 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 is 1.28. The current P/B Ratio is 1.01 based on a stock price of $22.07, Book Value of $6,870M and Book Value per Share of $24.40. The current ratio is 30% 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 of $25.20. This analyst calculate the Book Value differently that I do and their calculation gets a 10 year median ratio of 1.08. The Book Value per Share estimate gets a P/B Ratio of 0.88, Book Value $7,095M with a stock price of $22.07. This P/B Ratio is 16% 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 5.38 based on a Cash Flow per Share estimate for 2023 of $4.10, Cash Flow of $1,154M and a stock price of $22.07. This ratio is 49% 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 5.80%. The current dividend yield is 5.07% based on a dividend of $1.12 and a stock price of $22.07. This dividend yield is 13% 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 5.25%. The current dividend yield is 5.07% based on a dividend of $1.12 and a stock price of $22.07. This dividend yield is 3% 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 1.73. The current P/S Ratio is 0.46 based on a stock price of $22.07, Revenue estimate for 2023 of $13,443 and Revenue per Share of $47.75. The current ratio is 73% below the 10 year median ratio.
Results of stock price testing is that the stock price is probably reasonable and maybe cheap. There are problems with my favourite test of dividend yield because this works best for dividend growth stocks and not well for stocks that cut their dividends. Of course, it is bad sign when companies cut dividends. The P/S Ratio test seems a reasonable test and says the stock price is cheap. Most of the tests show the stock price as relatively cheap.
When I look at analysts’ recommendations, I find Strong Buy (5), Buy (10) and Hold (1). The consensus would be a Strong Buy. The 12 month stock price consensus is $30.94. This implies a total return of $45.27% with 40.19% from capital gains and 5.07% from dividends based on a current stock price of $22.07.
One analyst on Stock Chase says it is his top pick, but another says Do Not Buy as there are better peer stocks available. Most analysts like this stock. Stock Chase give this stock 4 stars out of 5. It is not on the Money Sense list. Karen Thomas on Motley Fool reviews this stock and has an optimistic view. Robin Brown on Motley Fool says to buy this stock for passive income. The company put out a Press Release on their 2022 results.
Simply Wall Street on Yahoo Finance talks about this company’s dividend. Simply Wall Street gives this stock 3 stars out of 5. Simply Wall Street puts out 2 warnings on this stock of debt is not well covered by operating cash flow; and Dividend of 5.11% is not well covered.
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 Hydro One Ltd (TSX-H, OTC-HRNNF) ... learn more on Friday, March 31, 2023 around 5 pm. Tomorrow on my other blog I will write about PC Optimum Points .... learn more on Thursday, March 30, 2023 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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