Is it a good company at a reasonable price? It is never a good sign when a company keeps their dividends flat. However, this used to be an income trust company and these companies that had to change to corporations have had a difficult time getting the dividends right. As you can see from the chart below, this company has done well in delivering a return to its shareholders. On the other hand, the stock price has fallen year to date by 40%. The Utility index for the TSX is down 8.2% year to date.
I do not own this stock of Northland Power Inc (TSX-NPI, OTC-NPIFF). This company is into generating electric power. I have a lot invested in pipelines and I would like to have more invested in electric power as part of my utility’s investments. I read a report on this stock that said it was a good defensive stock to buy. That is, it is a good stock to hold in a stock market correction. I can certainly see the logic of using utility stocks as defensive stocks.
When I was updating my spreadsheet, I noticed that earnings are up basically because their expenses went up 6.5% and Revenue went up 17%. The ratio of expenses to revenue went from 0.63 to 0.58. There are other factors such as foreign exchange and Fair Value loss or gains because of the way EPS is determined under IFRS rules. EPS for 2024 was $3.46. However, analysts expect the EPS for 2023 to be lower at $0.96 and go to $1.30 in 2024.
If you had invested in this company in December 2012, for $1,008.18 you would have bought 54 shares at $18.67 per share. In December 2022, after 10 years you would have received $615.60 in dividends. The stock would be worth $2,005.02. Your total return would have been $2,620.62. This is a total return would be a total return of 11.73% per year with 7.12% from capital gain and 4.61% from dividends.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $18.67 | $1,008.18 | 54 | 10 | $615.60 | $2,005.02 | $2,620.62 |
The current dividend yield is good with no dividend growth. The current dividend yield is good (5% to 6% ranges) at 5.35%. The 5 and 10 year median dividend yields are moderate (2% to 4% ranges) at 3.98%, 4.97%. The historical median dividend yield is high (7% and above) at 7.03%. This company used to be a Income Trust and Income Trust companies can have quite high dividend yields and much higher than corporations. The dividends have been flat since 2018 when the rate was raised 11%. The 5 year dividend growth rate is 2.1% per year. The Dividend Payout Ratios (DPR) are probably fine. The DPR for 2022 for Earnings per Share (EPS) is 35% with 5 year coverage at 54%. The DPR for 2022 for Free Cash Flow (FCF) as determined by the company is 75% with 5 year coverage at 72%. The DPR for 2022 for Adjusted Free Cash Flow (AFCF) as determined by the company is 65% with 5 year coverage at 16%. The DPR for 2022 for Cash Flow per Share (CFPS) is 19% with 5 year coverage at 19%. The DPR for 2022 for Free Cash Flow (FCF) is 15% with 5 year coverage at 22%.
| Item | Cur | 5 Years |
|---|---|---|
| EPS | 34.68% | 65.43% |
| FCF Co. | 74.53% | 72.11% |
| AFCF | 65.43% | 16.37% |
| CFPS | 19.44% | 19.01% |
| FCF | 15.03% | 22.46% |
Debt Ratios would better if they were improved. The Long Term Debt/Market Cap Ratio for 2022 is high at 0.67 and too high currently at 1.16. The Liquidity Ratio for 2022 is a low at 1.23 and fine currently at 1.54 currently. The Debt Ratio for 2022 is fine at 1.51 and a bit low at 1.45currently. The Leverage and Debt/Equity Ratios for 2022 are too high at 3.01 and 2.01. However, the current ratios are too high at 3.22 and 2.22. I prefer them to be below 3.00 and 2.00.
| Type | Year End | Ratio Curr |
|---|---|---|
| Lg Term R | 0.67 | 1.16 |
| Intang/GW | 0.13 | 0.21 |
| Liquidity | 1.23 | 1.54 |
| Liq. + CF | 2.03 | 2.02 |
| Debt Ratio | 1.50 | 1.45 |
| Leverage | 3.01 | 3.22 |
| D/E Ratio | 2.01 | 2.22 |
The Total Return per year is shown below for years of 5 to 25 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 | 2.13% | 14.06% | 9.72% | 4.34% |
| 2012 | 10 | 1.06% | 11.73% | 7.12% | 4.61% |
| 2007 | 15 | 0.60% | 13.72% | 7.68% | 6.04% |
| 2002 | 20 | 1.02% | 12.93% | 6.27% | 6.66% |
| 1997 | 25 | 2.81% | 12.21% | 5.39% | 6.82% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 13.08, 15.65 and 17.62. The corresponding 10 year ratios are 13.38, 16.03 and 18.38. The corresponding historical ratios are 13.13, 15.65 and 17.89. The current P/E Ratio is 24.37 based on a stock price of $22.42 and EPS estimate for 2023 of $0.92. This ratio is above the high ratio of the 10 year median ratios. This stock price testing suggests that the stock price is relatively expensive.
Under this stock, EPS is volatile. Over the past 27 years, EPS have increased in 11 years and declined in 14 years. The EPS for 2024 is expected to be higher at $1.30 and this gives a P/E Ratio of 17.25. This ratio is between the median and high ratio 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 $17.77. The 10-year low, median, and high median Price/Graham Price Ratios are 1.79, 2.05 and 1.79. The current P/GP Ratio is 1.26 based on a stock price of $22.42. 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 4.40. The currently P/B Ratio is 1.34 based on a Book Value of $4,191M, Book Value per Share of $16.76 and a stock price of $22.42. The current ratio is 69% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I also have Book Value per Share estimate for 2023 of $10.50. This implies a ratio of 2.14 with a stock price of $22.42 and Book Value of $2,625M. This ratio is 51% 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 5.32. The current P/CF Ratio is 5.54 based on Cash Flow per Share estimate for 2023 of $4.05 and a stock price of $22.42. The current ratio is 4% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get an historical median dividend yield of 7.03%. The current dividend yield is 5.35% based on a stock price of $22.42 and dividends of $1.20. The current dividend yield is 24% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable expensive. However, this company used to be a income trust and these companies could have much higher dividends that corporations.
I get a10 year median dividend yield of 4.97%. The current dividend yield is 5.35% based on a stock price of $22.42 and dividends of $1.20. The current dividend yield is 7.8% above the 10 year median dividend yield. This stock price testing suggests that the stock price is relatively reasonable and below the median. A potential problem is that the dividends have been flat since 2018.
The 10-year median Price/Sales (Revenue) Ratio is 3.30. The current P/S Ratio is 2.53 based on Revenue estimate for 2023 of $2,214M, Revenue per Share of $8.86 and a stock price of $22.42. The current ratio is 23% 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 reasonable, but could be cheap. The problem with the dividend yield tests is that the stock used to be an income trust which could have high yields, and much higher than corporations. The 10 year dividend test says the stock price is reasonable. The P/S Ratio test says that the stock price is cheap. Other tests go from expensive to cheap.
When I look at analysts’ recommendations, I find Strong Buy (6) and Buy (7). The consensus would be a Strong Buy. The 12 month stock price consensus is $31.77 with a high of $43.00 and low of $27.00. The consensus of $31.77 implies a total return of 47.06% with 41.70% from capital gains and 5.35% from dividends.
On the Stock Chase site there are lots of Do No Buys. Stock Chase gives this stock 5 stars out of 5. It is on the Money Sense dividend list that I follow. Jitendra Parashar on Motley Fool thinks this is a good stock to buy for passive income. Rajiv Nanjapla on Motley Fool thinks you should buy because the stock is deeply discounted. The company put out a Press Release on their 2022 year end results. The company put out a Press Release on their third quarter of 2023.
Simply Wall Street on Yahoo Finance. They found it slightly overvalued. They put out 4 warnings signs for this stock of interest payments are not well covered by earnings; unstable dividend track record; profit margins (17%) are lower than last year (26.2%); and shareholders have been diluted in the past year. Simply Wall Street gives this stock 3 and one half stars out of 5.
Northland Power develops, constructs, and operates maintainable infrastructure assets across a range of clean and green technologies, such as wind (offshore and onshore), solar, and supplying energy through a regulated utility. Offshore wind is expected to remain the company's largest segment over the long term. Northland's growth opportunities are global and span North America, Europe, Latin America, and Asia. Its web site is here Northland Power Inc.
The last stock I wrote about was about was Chesswood Group Ltd (TSX-CHW, OTC-CHWWF) ... learn more. The next stock I will write about will be FirstService Corp (TSX-FSV, NASDAQ-FSV) ... learn more on Monday, November 20, 2023 around 5 pm.
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