Is it a good company at a reasonable price? I realize that this stock seems currently out of favour, but I am not willing to give up on it just yet. For utility stocks I expect half my return from dividends and half from capital gains. I still expect that long term, this stock will deliver this. The stock price seems reasonable at the present time.
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. ATCO (TSX-ACO-X) owns most of this stock, so you would not buy both these stocks. I bought some of this stock in 2017 and in 2019.
When I was updating my spreadsheet, I noticed that my return is still very low. My total return to date after almost 7 years is 4.89% with 0.52% from capital gains and 4.37% from dividends. I am getting the dividends I expected, but not the capital gains. A reasonable capital gain for me would be around 3% to 4% per year.
If you had invested in this company in December 2012, for $1,007.16 you would have bought 28 shares at $35.97 per share. In December 2022, after 10 years you would have received $405.76.20 in dividends. The stock would be worth $1,026.20. Your total return would have been $1,431.96.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $35.97 | $1,007.16 | 28 | 10 | $405.76 | $1,026.20 | $1,431.96 |
The current dividend yield is moderate with dividend growth low. The current dividend yield is moderate (2% to 4% ranges) at 4.72%. The 5, 10 and historical median dividend yields are also moderate at 4.76%, 4.20% and 3.78%. The dividend increases are low (below 8%) at 4.4% per year over the past 5 years. The last dividend increase was 1% and it occurred in 2023. (The 2022 dividend increase was also 1%.)
The Dividend Payout Ratios (DPR) are fine and going in the right direction. The DPR for 2022 for Earnings per Share (EPS) was 86% with 5 year coverage at 86%. The DPR for 2022 for Adjusted Earnings per Share (AEPS) was 73% with 5 year coverage at 78%. The DPR for 2022 for Cash Flow per Share (CFPS) was 25% with 5 year coverage at 26%. The DPR for 2022 for Free Cash Flow (FCF) was 62% with 5 year coverage at 103%. The DPRs, especially for EPS has been higher than usual and that is probably why the last 2 increases were lower than usual.
| Item | Cur | 5 Years |
|---|---|---|
| EPS | 86.25% | 86.19% |
| AEPS | 73.12% | 77.82% |
| CFPS | 24.81% | 26.49% |
| FCF | 61.87% | 103.15% |
Some Debt Ratios are not what I would like, but the fact remains that utilities tend to have a high level of debt. The Long Term Debt/Market Cap ratio for 2022 is high but still fine at 0.95. It is better if it was closer to 0.50, but utilities tend to have high debt levels. The Liquidity Ratio for 2022 is fine at 1.42, but would be better at 1.50. The Debt Ratio is fine at 1.47, but would be better at 1.50. The Leverage and Debt/Equity Ratios are too high at 3.11 and 2.11. They would be better below 3.00 and 2.00.
| Type | Ratio |
|---|---|
| Lg Term | 0.95 |
| Intan/GW | 0.07 |
| Liquidity | 1.42 |
| Liq. + CF | 2.68 |
| Debt Ratio | 1.47 |
| Leverage | 3.11 |
| D/E Ratio | 2.11 |
The Total Return per year is shown below for years of 5 to 33 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 | 4.44% | 4.18% | -0.41% | 4.59% |
| 2012 | 10 | 7.22% | 4.09% | 0.19% | 3.91% |
| 2007 | 15 | 7.21% | 7.06% | 3.10% | 3.97% |
| 2002 | 20 | 6.65% | 9.91% | 5.40% | 4.51% |
| 1997 | 25 | 6.25% | 9.58% | 5.26% | 4.32% |
| 1992 | 30 | 5.56% | 12.39% | 6.78% | 5.61% |
| 1988 | 34 | 5.08% | 11.36% | 6.09% | 5.27% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 16.31, 18.21 and 201.12. The corresponding 10 year ratios are 16.21, 18.09 and 19.98. The corresponding historical ratios are 11.08, 13.09 and 15.31. The current P/E Ratios is 16.14 based on a stock price of $36.48 and EPS estimate for 2023 of $2.26. 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 also have Adjusted Earnings per Share (AEPS) data. The 5-year low, median, and high median Price/Adjusted Earnings per Share Ratios are 13.82, 15.44 and 17.06. The corresponding 10 year ratios are 13.93, 16.74 and 18.52. The current P/AEPS is 15.72 based on a stock price of $36.48 and AEPS estimate for 2023 of $2.32. This 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.
I get a Graham Price of $31.73. The 10-year low, median, and high median Price/Graham Price Ratios are 1.03, 1.19 and 1.39. The current P/GP Ratio is 1.15 based on a stock price of $36.48. 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 2.10. The current P/B Ratio is 1.89 based on a Book Value of $5,208, Book Value per Share of $19.28 and a stock price of $36.48. The current ratio is 3.5% 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 Book Value per Share (BVPS) estimate for 2023 of $19.80. Because the analyst calculated the book value differently than I do, the 10 year median P/B Ratio is 1.50. This BVPS implies a Book Value of $5,247M, and a P/B Ratio of 1.84 with a stock price of $36.48. This current P/B Ratio of 1.84 is 23% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
I get a 10-year median Price/Cash Flow per Share Ratio of 5.99. The current P/CF Ratio is 5.42 based on a Cash Flow per Share estimate for 2023 of $6.73, Cash Flow of $1,808M and a stock price of $36.48. The current ratio is 9% 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 3.78%. The current dividend yield is 4.92% based on a stock price of $36.48 and dividends of $1.7944. The current dividend yield is 30% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively cheap. I get a 10 year median dividend yield of 4.20%. The current dividend yield is 4.92% based on a stock price of $36.48 and dividends of $1.7944. The current dividend yield is 17% above the historical 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 2.72. The current P/S Ratio is 2.47 based on Revenue estimate for 2023 of $3,994M, Revenue per Share of $14.79 and a stock price of $36.48. The current ratio is 9% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
Results of stock price testing is that the stock price is probably reasonable. The 10 year dividend yield test says this and it is confirmed by the P/S Ratio test that says the same. The other testing was a mixture of expensive to cheap, but with most at reasonable.
When I look at analysts’ recommendations, I find Strong Buy (1), and Hold (8). The consensus would be a Hold. The 12 month stock price consensus is $39.78. This implies a total return of 13.96% with 9.05% from capital gains and 4.92% from dividends.
When I look at analysts’ recommendations last year, I found 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. What happened was a stock price movement to $36.48 for a loss of 6.49% with capital loss of 9.46% and dividends of 2.97%.
Lately on Stock Chase there fewer reviews and none in 2023. This is never a good sign. Stock Chase gives this stock 1 star out of 5. It was on the Money Sense list until 2023 when it was taken off. It is on the Maple Money list for 2023 and the Aristocrat list for 2023. Vineet Kulkarni on Motley Fool says this stock is one of 3 top yielding Canadian dividend stocks. Tony Dong on Motley Fool likes this company’s history of delivering reliable dividends. The company put out a press release on Newswire about their 2022 results. The company put out a press release on Newswire about their first quarter results for 2023.
Simply Wall Street via Yahoo Finance reviews this stock. They say that things are looking bullish after the first quarter of 2023 report. They say the company beat both earnings and revenue forecasts and price target remained the same. Simply Wall Street put out 2 warnings on this company of earnings are forecast to decline by an average of 2.4% per year for the next 3 years; and debt is not well covered by operating cash flow.
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 Friday, May 26, 2023 around 5 pm. I taking a day trip and will not publish tomorrow.
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 site for an index to these blog entries and for stocks followed. 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. I am on Instagram. Or you can just Google #walktoronto spbrunner8166 to see my pictures.
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