Is it a good company at a reasonable price? I own this stock and I am going to keep what I own. I do not plan to buy anymore, but my last purchase of shares in this company occurred in December 2022. I think the amount of debt may be a problem, but this has been a continuing problem. ( I have statistics going back to the 1990’s.) I think that the stock price is current reasonable and below the median.
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 have done well with this stock. My total return is 10.93% per year with 5.46% from capital gains and 5.47% from dividends over 17.5 years. If I exclude the most recent purchase, my total return is 10.99% with 5.50% from capital gains and 5.49% from dividends. For utility stocks it is not unusual to get half your return from dividends.
When I was updating my spreadsheet, I noticed the company does have too much debt. This is a utility stock and utility stocks do have lots of debt. The Long Term Debt/Market Cap for 2022 is 1.13 and currently 1.06. This is not the first time this company has this ratio at 1.00 or higher. It means that the company’s long term debt is higher than the stock’s market cap ( or value assigned by investors).
If you had invested in this company in December 2012, for $1,007.46 you would have bought 29 shares at $37.74 per share. In December 2022, after 10 years you would have received $610.81 in dividends. The stock would be worth $1,500.75. Your total return would have been $2,111.56.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $34.74 | $1,007.46 | 29 | 10 | $610.81 | $1,500.75 | $2,111.56 |
The Liquidity Ratio is too low at 0.67. This ratio has always been very low. If this ratio is below 1.00, it means that current assets cannot cover current liabilities. I prefer it to be 1.50 or better. You must add in Cash Flow after dividends and the current portion of the long term debt for this value to be over 1.00. This is also normal for this stock. The Debt Ratio is also low at 1.40 for 2022. I prefer this to be at 1.50 or higher. The 5 year median for this ratio is 1.40 and the 10 year median is 1.41.
The dividend yield is currently good with dividend growth low. The current dividend yield is good (5% to 6% ranges) at 5.03%. The 5, 10 and historical dividend yields are moderate (2% to 4% ranges) at 4.69%, 4.46% and 4.76%. The dividend increases over the past 5 years is low (below 8%) at 4.7% per year over the past 5 years. The last dividend increase was in 2022 and it was for 4.2%.
The Dividend Payout Ratios (DPR) are a little high, but analysts do expect some improvement this year. The DPR for EPS for 2022 is 75% with 5 year coverage at 82%. The DPR for Adjusted Earnings per Share (AEPS) for 2022 is 83.7% with 5 year coverage at 87%. The DPR for Adjusted Funds from Operations (AFFO) for 2022 is 198.33% with 5 year coverage at 88%. This is expected to be at 56.8% in 2023. The DPR for Cash Flow per Share (CFPS) for 2022 is 63% with 5 year coverage at 45.5%. This is expected to be 35% in 2023. The Free Cash Flow (FCF) is often negative, so the DPR cannot be calculated.
Dividend Payout Ratios (DPR) for dividends paid in cash is fine. There is a big difference in the dividends payable and dividends paid in cash. The DPR for Net Income for dividends paid in cash is 47% with 5 year coverage at 53%. The DPR for EPS for dividends paid in cash is 49% with 5 year coverage at 57%.
The company has lots of debt and have a long history of lots of debt. The Long Term Debt/Market Cap Ratio for 2022 is too high at 1.13 and is currently lower at 1.06, but still too high. The Debt Ratio is low at 1.40 and I prefer this to be 1.50 or higher. The Leverage and Debt/Equity Ratios are 3.97 and 2.83 respectively. I prefer them to be below 3.00 and 2.00.
The Liquidity Ratio is low at 0.67 and even adding in Cash Flow after dividends, we just get to 0.70. This means that current assets cannot cover current liabilities. You must add back in the current portion of the long term debt to get above 1.00 and then it is 1.12. I prefer this to be 1.50 or higher and you must be sure that the debt can be rolled over.
The Total Return per year is shown below for years of 5 to 30 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 | 4.66% | 7.01% | 1.95% | 5.06% |
| 2012 | 10 | 6.99% | 8.98% | 4.07% | 4.92% |
| 2007 | 15 | 7.54% | 11.03% | 5.90% | 5.13% |
| 2002 | 20 | 5.84% | 11.16% | 6.05% | 5.11% |
| 1997 | 25 | 4.90% | 8.77% | 4.43% | 4.34% |
| 1992 | 30 | 4.49% | 10.79% | 5.38% | 5.41% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 15.56, 17.25 and 18.23. The corresponding 10 year ratios are 16.61, 17.81 and 19.70. The corresponding historical ratios are 13.58, 15.52 and 17.19. The current ratio is 17.19 based on a stock price of $54.85 and EPS estimate for 2023 of $3.19. This ratio is between the low and 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 also have Adjusted Earnings per Share (AEPS) data. The 5-year low, median, and high median Price/Earnings per Share Ratios are 16.58, 19.25 and 22.54. The corresponding 10 year ratios are 16.23, 17.72 and 19.00. The current P/AEPS ratio is 17.09 based on a stock price of $54.85 and AEPS estimate for 2023 of $3.21. The current ratio is between the low and 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 Graham Price of $51.74 . The 10-year low, median, and high median Price/Graham Price Ratios are 1.05, 1.17 and 1.32. The current ratio is 1.06 based on a stock price of $54.85. The current ratio is between the low and 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 1.64. The current P/B Ratio is 1.48 based on a Book Value of $10,005M, Book Value per Share of $37.06 and a stock price of $54.85. 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 also have an estimate for the Book Value per Share for 2023 of $38.90. Thus implies a P/B Ratio 1.41, with a Book Value of $10,501M and stock price of $54.85. The current ratio is 14% 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 8.24. The current P/CF Ratio is 7.05 based on Cash Flow per Share estimate for 2023 of $7.78, Cash Flow of $2,100M and a stock price $54.85. The current ratio is 14% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get an historical median dividend yield of 4.76%. The current dividend yield is 5.03% based on dividends of $2.76 and a stock price of $54.85. The current dividend yield is 5.7% above the historical median 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 4.46%. The current dividend yield is 5.03% based on dividends of $2.76 and a stock price of $54.85. The current dividend yield is 12.8% above the 10 year median dividend yield. This stock price testing suggests that the stock price is relatively reasonable and below the median.
The 10-year median Price/Sales (Revenue) Ratio is 2.09. The current P/S Ratio is 2.09 based on Revenue estimate for 2023 of $7,092M, Revenue per Share of $26.27 and a stock price of $54.85. The current ratio is at the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and at the median.
Results of stock price testing is that the stock price is probably reasonable and below the median. The dividend yield tests say this and is basically confirmed by the P/S Ratio test. All the other stock price tests say the same thing.
When I look at analysts’ recommendations, I find Strong Buy (3), Buy (5), Hold (8) and Sell (1). The consensus would be a Buy. The month stock price consensus is $58.38. This implies a total return of 11.47% with 6.44% from capital gains and 5.03% from dividends. One Do Not Buy rating on Stock Chase says that utilities tend to do well prior to economic weakness and that this stock is not currently performing well. This is from November 2022.
Analyst on Stock Chase like this company. Stock Chase gives this stock 4 stars out of 5. It is number 76 on the Money Sense list. Adam Othman on Motley Fool says it is a defensive stock to buy for dividends. Andrew Button on Motley Fool thinks this company can do well with a lot of debt. The company put out a Press Release for their 2022 results. Simply Wall Street report on Yahoo Finance talk about analysts thinking revenue will drop over the next few years. Simply Wall Street gives this company 4 stars out of 5. It also lists 3 warnings signs of interest payments are not well covered by earnings; dividend of 5.13% is not well covered; 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 10, 2023 around 5 pm. Tomorrow on my other blog I will write about Something to Buy March 2023 .... learn more on Thursday, March 9, 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.
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