Is it a good company at a reasonable price? What I do not like is the debt level. It is hard to know the cause of insider selling, but Net Insider Selling is at 0.04%, so not very high. Positives are that Revenue and Cash Flow is growing and shareholders have mainly done well with this stock. At the present time, the stock price would seem to be reasonable.
I do not own this stock of Capital Power Corp (TSX-CPX, OTC-CPRHF). Capital power Corp is in John Heinzl's yield Hog model portfolio. In Money Sense annual list of the 100 best dividend stocks of 2021, this stock was rated an A.
When I was updating my spreadsheet, I noticed that the CFO, an officer I was following, and the Chairman all have decreased their shareholdings over the past year. They have a new CEO, so I have no information on him.
Growth is mainly good. The problem with Net Income is that it has been quite volatile, rather than increasing or declining. Other items have also been volatile, but they are growing as shown in the chart below.
| Year | Item | Tot. Growth | Per Year |
|---|---|---|---|
| 5 | Revenue Growth | 159.27% | 20.99% |
| 5 | AEPS Growth | 253.40% | 28.72% |
| 5 | Net Income Growth | -4.17% | -0.85% |
| 5 | Cash Flow Growth | 151.34% | 20.24% |
| 5 | Dividend Growth | 37.62% | 6.59% |
| 5 | Stock Price Growth | 89.18% | 13.60% |
| 10 | Revenue Growth | 110.07% | 7.71% |
| 10 | AEPS Growth | 182.17% | 10.93% |
| 10 | Net Income Growth | 122.58% | 8.33% |
| 10 | Cash Flow Growth | 286.36% | 14.47% |
| 10 | Dividend Growth | 76.39% | 5.84% |
| 10 | Stock Price Growth | 103.83% | 7.38% |
If you had invested in this company in December 2012, for $1,000.12 you would have bought 44 shares at $22.73 per share. In December 2022, after 10 years you would have received $745.80 in dividends. The stock would be worth $2,038.52. Your total return would have been $2,784.32. This is a total return would be 12.72% per year with 7.38% from capital gains and 5.34% from dividends.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $22.73 | $1,000.12 | 44 | 10 | $745.80 | $2,038.52 | $2,784.32 |
The current dividend yield is good with dividend growth low. The current dividend yield is good (5% to 6% ranges) at 5.95%. The 5, 10 and historical dividend yields are also good at 6.03%, 6.27% and 5.73%. The dividend growth is low (less than 8% per year) at 6.59% per year over the past 5 years. The last dividend increase occurred in 2023 and it was for 6%.
The Dividend Payout Ratios (DPR) are probably fine based on AFFO and CFPS. The DPR for 2022 for Earnings per Share (EPS) is 265% with 5 year coverage at 198%. The DPR for 2022 for Adjusted Earnings per Share (AEPS) is 61.06% with 5 year coverage at 124%. This DPR is coming down and is expect to be around 44% in 2023, but then analysts expect it to rise again in 2024 to 74%. The DPR for 2022 for Adjusted Funds from Operations (AFFO) is 31% with 5 year coverage at 38%. The DPR for 2022 for Cash Flow per Share (CFPS) is 30% with 5 year coverage at 29%. The DPR for 2022 for Free Cash Flow (FCF) is 87% with 5 year coverage at 115%.
Obviously, the DPR for EPS is too high, but the one for AEPS is more important. It is better but it is not good if it will be going up again. The DPR for AFFO and CFPS are important, and they are considered good is they are 40% or lower, which they both are. The problem with FCF is that every site has a different value.
| Item | Cur | 5 Years |
|---|---|---|
| EPS | 264.58% | 198.09% |
| AEPS | 61.06% | 123.97% |
| AFFO | 30.53% | 37.66% |
| CFPS | 30.00% | 28.59% |
| FCF | 86.56% | 115.46% |
Debt Ratios are not what I like to see, but utilities do have lots of debt. The Long Term Debt/Market Cap Ratio for 2022 is 0.78. It is high and some analysts think that it should be at 0.50 or lower. The Liquidity Ratio for 2022 is low at 0.76 and even with Cash Flow after dividends it is still low at 1.06. I prefer it to be 1.50 or higher for safety. The Debt Ratio for 2022 is 1.32 and this is also low and I prefer it to be 1.50 or higher. The Leverage and Debt/Equity Ratios for 2022 are high at 5.96 and 4.51. They improve currently to 4.69 and 3.32, but these are still too high. I prefer them to be below 3.00 and 2.00.
| Type | Year End | Ratio Curr |
|---|---|---|
| Lg Term R | 0.78 | 0.83 |
| Intang/GW | 0.15 | 0.16 |
| Liquidity | 0.76 | 0.79 |
| Liq. + CF | 1.06 | 1.22 |
| Debt Ratio | 1.32 | 1.41 |
| Leverage | 5.96 | 4.69 |
| D/E Ratio | 4.51 | 3.32 |
The Total Return per year is shown below for years of 5 to 13 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 | 6.59% | 19.88% | 13.60% | 6.28% |
| 2012 | 10 | 5.84% | 12.72% | 7.38% | 5.34% |
| 2009 | 13 | 4.46% | 11.28% | 6.13% | 5.15% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 36.69, 42.71 and 50.35. The corresponding 10 year ratios are 24.28, 34.32 and 43.55. The corresponding historical ratios are 23.42, 28.95 and 34.47. The current P/E Ratio is 7.58 based on a stock price of $41.32 and EPS estimate for 2023 of $5.45. 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. Analysts do expect EPS is drop and P/E Ratio to rise to 13.68 in 2024 and 19.04 in 2025. But these are still below the 10 year P/E Ratios.
I also have Adjusted Earnings per Share (AEPS) data. The 5-year low, median, and high median Price/Adjusted Earnings per Share Ratios are 17.13, 22.95 and 26.18. The corresponding 10 year ratios are 16.92, 21.40 and 24.08. The current P/AEPS Ratio is 7.72 based on a stock price of $41.32 and AEPS estimate for 2023 of $5.35. Analysts also expect the AEPS to drop and P/AEPS ratios to go up to 12.48 in 2024 and 15.95 in 2025. But these are still below the 10 year P/AEPS Ratios.
I also have Adjusted Funds from Operations (AFFO) data. The 5-year low, median, and high median Price/Adjusted Funds from Operations Ratios are 5.16, 6.13 and 7.70. The corresponding 10 year ratios are 5.06, 6.05 and 7.23. The current P/AFFO Ratio is 5.72 based on a stock price of $41.32 and AFFO estimate for 2023 of $7.23. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a Graham Price of $45.66 . The 10-year low, median, and high median Price/Graham Price Ratios are 1.00, 1.19 and 1.34. The current P/GP Ratio is 0.91 based on a stock price of $41.32. 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 1.17. The current P/B Ratio is 2.39 based on a stock price of $41.32, Book Value of $2,024M and Book Value per Share of $17.32. The current ratio is 104% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
I also have a Book Value per Share estimate for 2023 of $22.50. Because this analysis calculated the Book Value differently, I am using a 10-year median Price/Book Value per Share Ratio of 0.86. A Book Value per Share of $22.50 implies a Book Value of $2,630M, and a P/B Ratio of 1.84 based on a stock price of $41.32. The current ratio of 1.84 is 113% above 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 5.24. The current P/CF Ratio is 4.79 based on Cash Flow per Share estimate for 2023 of $8.63, Cash Flow of $1,009M and a stock price of $41.32. The current ratio is 8.6% 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 5.73%. The current dividend yield is 5.95% based on a dividend of $2.355 and a stock price of $41.32. The current dividend yield is 3.9% 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 6.27%. The current dividend yield is 5.95% based on a dividend of $2.355 and a stock price of $41.32. The current dividend yield is 5% 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 1.66. The current P/S Ratio is 1.46 based on Revenue estimate for 2023 of $3,299M, Revenue per Share of $28.22 and a stock price of $41.32.
Results of stock price testing is that the stock price is probably reasonable. The dividend yield tests are saying this as it the P/S Ratio testing. Other tests vary from cheap to reasonable to expensive.
When I look at analysts’ recommendations, I find Strong Buy (1), Buy (5), Hold (7). The consensus would be a Buy. The 12 month stock price is $57.00. This implies a total return of 43.90% with 37.95% from capital gains and 5.95% from dividends.
Analysts on Stock Chase mostly like this stock. One talks about recent cost overruns. Another mentions that he thinks the dividend is safe. Stock Chase gives this stock 4 stars out of 5. It has been on the money sense list, but not the recent one. It is on the Aristocrats list. Sneha Nahata on Motley Fool likes this stock because it produces clean energy. Ambrose O'Callaghan on Motley Fool likes this stock because he thinks it is a buy. The company put out a press release on Global Newswire about their results for 2022. The company put out a Press Release on their results for the second quarter of 2023.
Simply Wall Street on Yahoo Finance reviews this stock. They put out 3 warnings of dividend of 6.17% is not well covered by earnings or cash flows; interest payments are not well covered by earnings; and earnings are forecast to decline by an average of 13.3% per year for the next 3 years. Simply Wall Street gives this stock 3 stars out of 5.
Capital Power Corp is a North American power producer whose principal activities are developing, acquiring, and operating power plants. Through its subsidiary, Capital Power owns and operates a portfolio of natural gas, coal, wind, solar, and solid fuel energy generating facilities. These are located throughout Western and Central Canada and the U.S. Its web site is here Capital Power Corp.
The last stock I wrote about was about was ATCO Ltd (TSX-ACO.X, OTC-ACLLF) ... learn more. The next stock I will write about will be Boralex Inc (TSX-BLX, OTC- BRLXF) ... learn more on Wednesday, August 30, 2023 around 5 pm. Tomorrow on my other blog I will write about Growth Investing.... learn more on Tuesday, August 29, 2023 around 5 pm.
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