Is it a good company at a reasonable price? A negative is that they have not provided a good total return for shareholders over the past 15 years to the end of 2022. Share price has gone down last year and is down by 11% year to date. The dividend increases have been slowing with the last two increases at 3% and the increases for the past 5 years at 7% per year. The positives are the high yield and the fact that insiders are buying. I suppose you could buy for passive income. The stock price is currently cheap.
I do not own this stock of ATCO Ltd (TSX-ACO.X, OTC-ACLLF). I started to look at this stock in 2009 because it was a dividend paying stock that was on everyone’s list. At that time this stock was on the Dividend Achievers list, the Dividend Aristocrats list and was on Mike Higgs’ list. ATCO (TSX-ACO-X) owns 52.3% (2021) Canadian Utilities (TSX-CU), so you would not buy both these stocks.
When I was updating my spreadsheet, I noticed that estimates for 2023 and 2024 have gone up since last year. For example, the estimates last year for Revenue for 2023 and 2024 were $4858M and $4858M and now the estimates for 2023 and 2024 are $5,062 and $5,207 for 2023 and 2024. The estimates last year for AEPS for 2023 and 2024 were $3.43 and $3.60 and now the estimates for AEPS for 2023 and 2024 are $3.60 and $3.63. Last year the estimate for EPS for 2023 and 2024 were $3.44 and $3.60 for EPS and now the estimates for EPE for 2023 and 2024 are $3.57 and $3.60.
I noticed that there is insider buying. I follow 5 insiders, the CEO, CFO, an officer, Chairman and a Director. Over the past year, all have increased the shares that they own.
The current dividend yield is good with dividend growth low. The current dividend yield is good (5% to 6% ranges) at 5.05%. The 5, 10 and historical dividend yields are moderate (2% to 4% ranges) at 4.17%, 3.18% and 2.16%. This stock had dividend yields in the 1% to 2% ranges until 2018 when they started to go higher. The stock price has not gone anywhere lately, but dividends have continued to increase, but at a lower level. The dividends have been increasing at a low rate (less than 8% per year) at 7.1% per year over the past 5 years. The last dividend increase was in 2023 and it was for 3%.
The Dividend Payout Ratios (DPR) are fine. The DPR for 2022 for Earnings per Share (EPS) is 57%. The DPR for Adjusted Earnings per Share (AEPS) is 50%. The DPR for 2022 for Cash Flow per Share (CFPS) is 10%. The DPR for 2022 for Free Cash Flow (FCF) is 25%.
| Item | Cur | 5 Years |
|---|---|---|
| EPS | 57.00% | 57.01% |
| AEPS | 49.89% | 51.99% |
| CFPS | 9.91% | 10.23% |
| FCF | 25.22% | 43.05% |
Debt Ratios are fine. The Long Term Debt/Market Cap Ratio for 2022 is high at 2.07 which means it is twice what the stock is worth according to the market. However, if you compare the Long Term Debt to corresponding Assets on the balance sheet, the ratio is 0.51 and is fine. The Liquidity Ratio for 2022 is good at 1.55. The Debt Ratio is good at 1.53. The Leverage and Debt/Equity Ratios for 2022 are fine at 2.89 and 1.53.
| Type | Year End | Ratio Curr |
|---|---|---|
| Lg Term A | 0.51 | 0.52 |
| Lg Term R | 2.07 | 2.47 |
| Intang/GW | 0.20 | 0.28 |
| Liquidity | 1.55 | 1.59 |
| Liq. + CF | 2.98 | 3.11 |
| Debt Ratio | 1.53 | 1.52 |
| Leverage | 2.89 | 2.92 |
| D/E Ratio | 1.53 | 1.52 |
The Total Return per year is shown below for years of 5 to 34 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 | 7.11% | 2.67% | -1.19% | 3.86% |
| 2012 | 10 | 10.92% | 3.68% | 0.49% | 3.19% |
| 2007 | 15 | 10.04% | 5.84% | 2.90% | 2.94% |
| 2002 | 20 | 9.70% | 10.75% | 7.10% | 3.65% |
| 1997 | 25 | 10.71% | 10.01% | 6.76% | 3.25% |
| 1992 | 30 | 12.10% | 13.07% | 9.16% | 3.91% |
| 1988 | 34 | 11.20% | 13.41% | 9.54% | 3.87% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 12.40, 14.01 and 15.73. The corresponding 10 year ratios are 12.35, 14.07 and 16.21. The corresponding historical ratios are 9.04, 10.59 and 12.31. The current P/E Ratio is 10.54 based on a Stock Pric of $37.64 and EPS estimate for 2023 of $3.57. 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 also have Adjusted Earnings per Share (AEPS) data. The 5-year low, median, and high median Price/Adjusted Earnings per Share Ratios are 10.85, 12.96 and 14.55. The corresponding 10 year ratios are 11.61, 13.41 and 15.89. The current P/AEPS Ratio is 10.48 based on a stock price of $37.64 and AEPS estimate for 2023 of $3.59. 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 $56.11. The 10-year low, median, and high median Price/Graham Price Ratios are 0.75, 0.89 and 1.08. The current P/GP Ratio is 0.67 based on a stock price of $37.64. 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 10-year median Price/Book Value per Share Ratio of 1.32. The current P/B Ratio is 0.97 based on a Book Value of $4,469M, Book Value per Share of $38.97 and a stock price of $37.64. The current P/B Ratio is 27% 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 2023 of $39.80. This implies a P/B Ratio of 0.95 with a Stock Price of $37.64, and Book Value of $4,534M. The current P/B 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 2.76. The current P/CF Ratio is 2.28 based on Cash Flow per Share estimate for 2023 of $16.50, Cash Flow of $1,880M and a stock price of $37.64. The current ratio is 17% 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 2.16%. The current dividend yield is 5.05% based on a dividend of $1.9024 and a stock price of $37.64. The current dividend yield is 134% 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 3.18%. The current dividend yield is 5.05% based on a dividend of $1.9024 and a stock price of $37.64. The current dividend yield is 59% 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 1.17. The current P/S Ratio is 0.85 based on a stock price of $37.64, Revenue estimate for 2023 of $4,968M and Revenue per Share of $44.44. The current ratio is 28% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
Results of stock price testing is that the stock price is probably cheap. The dividend yield tests say this and it is confirmed by the P/S Ratio test. Most of my other testing on the stock price is returning a current cheap stock price.
When I look at analysts’ recommendations, I find Strong Buy (2), Buy (3) and Hold (3). The consensus would be a Buy. The 12 month stock price is $49.00. This implies a total return of 35.23% with 30.18% from capital gains and 5.05% from dividends.
There are two analysts’ comments onStock Chase for 2023 and both are a buy. Stock Chase gives this stock 4 stars out of 5. It is still on the dividend lists of Money Sense, Maple Money, and Aristocrat. Christopher Liew on Motley Fool thinks this is a defensive stock holding. Kay Ng on Motley Fool thinks this is a good aristocrat stocks to hold. The company put out a Press Release on their 2022 results. The company put out a Press Release on their second quarter of 2023 results.
Simply Wall Street via Yahoo Finance looked at recent insider buying at this company. They gave out 1 warnings of debt is not well covered by operating cash flow. Simply Wall Street gives this stock 4 stars out of 5.
Atco Ltd is a Canadian holding company that offers gas, electric, and infrastructure solutions. Atco's primary segments include Structures and Logistics; Utilities; Energy Infrastructure; Neltume Ports and Corporate and Other. Geographically, it derives most of its revenue from Canada. Its web site is here ATCO Ltd.
The last stock I wrote about was about was Exchange Income Corp (TSX-EIF, OTC-EIFZF) ... learn more. The next stock I will write about will be Capital Power Corp (TSX-CPX, OTC-CPRHF) ... learn more on Monday, August 28, 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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