Is it a good company at a reasonable price? I do not like the debt level, but utilities tend to have high debt levels. It is never a good sign when a company cuts dividends, but the dividends were high because the company used to be an income trust and income trusts can pay higher dividends than corporations. Eventually, all old income trusts had to lower dividends one way or another. I have not intentions of selling my shares in this company. The stock price is probably reasonable, but it may even be cheap as the P/S Ratio tests says.
I own this stock of AltaGas Ltd (TSX-ALA, OTC-ATGFF). When I bought this stock in 2009 it was on many dividend growth stock lists. In 2009, I saw that this stock also had good growth in Revenues, Earnings, Dividends, and Stock Prices over the last 5 and 10 years. The stock had a fairly strong balance sheet. I took a small position in this stock, and planned to wait and see how things go with this stock before buying more. I bought more in 2010 and 2012.
When I was updating my spreadsheet, I noticed that the people who bought this stock 10 years ago have faired badly. See charts on below. When you buy stocks for the long term, companies can go through some tough times. I kept this stock as I did not lose faith in it.
If you had invested in this company in December 2013, for $1,019.25 you would have bought 25 shares at $40.77 per share. In December 2023, after 10 years you would have received $375.95 in dividends. The stock would be worth $695.50. Your total return would have been $4,071.45. This would be a total return of 0.61% per year with 3.75% from capital loss and 4.36% from dividends.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $40.77 | $1,019.25 | 25 | 10 | $375.95 | $695.50 | $1,071.45 |
The current dividend yield is moderate with dividend growth restarting after dividend cuts. The current dividend yield is moderate (2% to 4% ranges) at 4.04%. The 5 year median dividend yield is moderate at 4.81%. The 10 year and historical median dividend yields are good (5% to 6% ranges) at 5.25% and 5.62%. Dividends were cut 56% in 2019. Dividends were raised again in 2021, but dividends are still 46% below the dividends of 2018. Dividends over the past 5 years have been decreased by 13% per year, and they are up 24% over the past 3 years.
The Dividend Payout Ratios (DPR) are fine. The DPR for 2023 for Earnings per Share (EPS) is fine at 50% with 5 year coverage at 58%. The DPR for 2023 for Adjusted Earnings per Share (AEPS) is fine at 59% with 5 year coverage at 64%. The DPR for 2023 for Cash Flow per Share (CFPS) is good at 38% with 5 year coverage at 28%. The DPR for 2023 for Free Cash Flow (FCF) is too high at 178% with 5 year coverage negative.
| Item | Cur | 5 Years |
|---|---|---|
| EPS | 49.56% | 57.59% |
| AEPS | 59.26% | 63.92% |
| CFPS | 32.35% | 28.31% |
| FCF | 177.53% | -131.29% |
Debt Ratios are fine, but the company does have a high debt level. The Long Term Debt/Market Cap Ratio for 2023 is fine, but high at 0.92 and currently at 0.87. The Long Term Debt/Covering Assets for 2023 is fine, but high at 0.89 and currently at 0.56. The Liquidity Ratio for 2023 is low at 0.89. If you added in Cash Flow after dividends, the ratios are still low fine at 1.12 and currently at 1.13. If you also add back the current portion of the long term debt, the ratios are fine at 1.59 and currently at 1.60. The Debt Ratio for 2023 is good at 1.50. The Leverage and Debt/Equity Ratios for 2023 are fine at 2.98 and 1.98.
| Type | Year End | Ratio Curr |
|---|---|---|
| Lg Term R | 0.92 | 0.87 |
| Lg Term R+A | 0.89 | 0.56 |
| Intang/GW | 0.66 | 0.62 |
| Liquidity | 0.89 | 0.89 |
| Liq. + CF | 1.12 | 1.13 |
| Liq. + CF + D | 1.59 | 1.60 |
| Debt Ratio | 1.50 | 1.50 |
| Leverage | 2.98 | 2.98 |
| D/E Ratio | 1.98 | 1.98 |
The Total Return per year is shown below for years of 5 to 24 to the end of 2023. 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. |
|---|---|---|---|---|---|
| 2018 | 5 | -12.55% | 20.64% | 14.89% | 5.75% |
| 2013 | 10 | -2.81% | 0.61% | -3.75% | 4.36% |
| 2008 | 15 | -4.16% | 11.21% | 3.26% | 7.95% |
| 2003 | 20 | 5.66% | 12.57% | 3.03% | 9.54% |
| 1999 | 24 | 9.57% | 17.85% | 6.60% | 11.25% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 9.49, 10.31 and 12.97. The corresponding 10 year ratios are 19.49, 23.55 and 27.61. The corresponding historical ratios are 12.74, 15.60 and 18.61. The current P/E Ratio is 13.76 based on a stock price of $29.48 and EPS estimate for 2024 of $2.14. The current ratios are below the low ratios of the 10 year median ratios. This stock price testing suggests that the stock price is relatively cheap.
I have Adjusted Earnings per Share (AEPS) data. The 5-year low, median, and high median Price/Earnings per Share Ratios are 11.34, 13.11 and 15.94. The corresponding 10 year ratios are 12.84, 19.10 and 23.51. The current ratio is 13.71 based on a stock price of $29.48 and AEPS estimate for 2024 of $2.15. 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 have Funds from Operations (FFO) data. The 5-year low, median, and high median Price/ Funds from Operations Ratios are 4.44, 5.40 and 6.37. The corresponding 10 year ratios are 5.28, 6.61 and 8.46. The current P/FFO Ratio is 7.37 based on a stock price of $29.48 and FFO for last 12 months of $4.00. 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 have Funds from Operations (FFO) data. The 5-year low, median, and high median Price/Adjusted Funds from Operations Ratios are 5.06, 6.17 and 7.19. The corresponding 10 year ratios are 5.99, 7.34 and 5.99. The current P/AFFO Ratio is 7.43 based on a stock price of $29.48 and AFFO estimate for 2024 of $3.97. 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 $34.66. The 10-year low, median, and high median Price/Graham Price Ratios are 0.68, 0.93 and 1.21. The current P/GP Ratio is 0.85 based on a stock price of $29.48. The current ratio is between the low and median ratio 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 1.10. The current P/B Ratio is 1.19 based on a Book Value of $7,322, Book Value per Share of $24.83 and a stock price of $29.48. The current ratio is 8% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I also have a Book Value per Share estimate for 2024 of $25.08. This Book Value per Share estimate is calculated differently than I calculate it and the corresponding 10 year ratio is 0.97. The Book Value per Share estimate of $25.08 implies a ratio of 1.18 and Book Value of $7,396 with a stock price of $29.48. This ratio is 21% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive. This estimate assumes that the book value will decrease in 2024 by 6%, but it has been going up lately. The estimates then assumes that the book value will climb by 8% in 2025. I do wonder about these estimates
I get a 10-year median Price/Cash Flow per Share Ratio of 9.39. The current P/CF Ratio is 7.37 based on a stock price of $29.48, Cash Flow per Share estimate for 2024 of $4.00 and Cash Flow of $1,180M. The current ratio is 22% below the 10 year median ratio. his stock price testing suggests that the stock price is relatively cheap.
I get an historical median dividend yield of 5.62%. The current dividend yield is 4.04% based on dividends of $1.19 and a stock price of $29.48. The current ratio is 28% below the historical median dividend yield. his stock price testing suggests that the stock price is relatively expensive.
I get a 10 year median dividend yield of 5.25%. The current dividend yield is 4.04% based on dividends of $1.19 and a stock price of $29.48. The current ratio is 23% below the historical median dividend yield. his stock price testing suggests that the stock price is relatively expensive.
The 10-year median Price/Sales (Revenue) Ratio is 1.10. The current P/S Ratio is 0.84 based on Revenue estimate for 2024 of $13,659M, Revenue per Share of $46.32 and a stock price of $29.48. The current P/S Ratio is 42% 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, striking a value between the dividend yield and P/S Ratio tests and looking at other tests. The problem with the dividend yield tests is that the dividends have decreased and this test is good for increasing dividends. However, when a company decreases the dividends or keeps them flat, that is not a good sign. The P/S Ratio test says that the stock price is cheap and the dividend tests say it is expensive. Most of the other testings suggests that the stock price is reasonable and above or below the median.
When I look at analysts’ recommendations, I find Strong Buy (5), Buy (7) and Hold (1). The consensus would be a Strong Buy. The 12 month stock price consensus is $33.38 with a high of $36.00 and low of $30.00. The consensus price of $33.38 implies a total return of 17.27% with 13.23% from capital gains and 4.04% from dividends.
There are 7 buy recommendations on Stock Chase for 2024. Stock Chase gives this stock 5 stars out of 5. Brian Paradza on Motley Fool thinks this stock is a buy on attractive terms. Rajiv Nanjapla on Motley Fool thinks this is a good dividend stock to have in your portfolio. The company put out a Press Release about their fourth quarter of 2023.
Simply Wall Street via Yahoo Finance reviews this stock. Simply Wall Street has 4 warnings for this stock of interest payments are not well covered by earnings; dividend of 4.04% is not well covered by cash flows; shareholders have been diluted in the past year; and large one-off items impacting financial results. Simply Wall Street gives this stock 3 and one half stars out of 5.
AltaGas Ltd owns and operates a diversified basket of energy infrastructure businesses. Business is conducted through given segments: Midstream, Utilities and Corporate/other. Revenue is derived from customers in both Canada and the United States, with Canadian customers contributing the most. Its web site is here AltaGas Ltd .
The last stock I wrote about was about was TC Energy Corp (TSX-TRP, NYSE-TRP) ... learn more. The next stock I will write about will be Hydro One Ltd (TSX-H, OTC-HRNNF) ... learn more on Friday, March 29, 2024 around 5 pm. Tomorrow on my other blog I will write about Bitcoin and other Digital Currency.... learn more on Thursday, March 28, 2024 around 5 pm.
This blog is meant for educational purposes only and is not to provide investment advice. I am not a licensed professional investment advisor. 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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