Is it a good company at a reasonable price? What I do not like about this stock is the debt level, but this is not the first time debt level has been very high for this company. Utilities tend to have a lot of debt, but the debt for the company is still unusually high. I wonder if this is a good idea for a utility stock at the current time. However, I do own this company and I do not intend to sell.
I own this stock of Emera Inc (TSX-EMA, OTC-EMRA). I first bought this stock in 2005, as I wanted to buy something for my Locked in RRSP. I think that this was an appropriate stock and has good value. I was using up excess cash in my account.
When I was updating my spreadsheet, I noticed I have done well with this stock. As of the end of February, I have earned 9.31% per year with 3.30% from capital gains and 6.01% from dividends. I have had this stock for almost 19 years, but my purchases have been spread out and my last purchase was in 2023. Generally, I have found buy stocks over time gives me a better return.
If you had invested in this company in December 2013, for $1,008.81 you would have bought 33 shares at $30.57 per share. In December 2023, after 10 years you would have received $740.44 in dividends. The stock would be worth $1,659.90. Your total return would have been $2,400.34. This would be a total return of 10.84% per year with 5.11% from capital gain and 5.73% from dividends.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $30.57 | $1,008.81 | 33 | 10 | $740.44 | $1,659.90 | $2,400.34 |
The current dividend yield is good with dividend growth low. The current dividend yield is good (5% to 6% ranges) at 5.89%. The 5, 10 and historical dividend yields are moderate (2% to 4% ranges) at 4.69%, 4.62% and 4.77%. The dividend increases are low (below 8% per year) at 4.1% per year over the past 5 years. The last dividend increase was in 2023.
The Dividend Payout Ratios (DPR) are fine, especially when considering dividends paid in Cash. The DPR for 2023 for Earnings per Share (EPS) is high at 78% with 5 year coverage at 82%. The DPR for 2023 for Adjusted Earnings per Share (AEPS) is high at 94% with 5 year coverage at 91%. The DPR for dividends paid in cash in 2023 is a lot lower at 47% with 5 year coverage at 53%. The DPR for 2023 for Cash Flow per Share (CFPS) is good at 34% with 5 year coverage at 43%.
The DPR for 2023 for Free Cash Flow 1 (FCF) is not calculable because of so many years of negative FCF with 5 year coverage at a negative 40%. The DPR for 2023 for Free Cash Flow 2 (FCF) is good at 32% with 5 year coverage at 57%. Problem is that there is disagreement on what the FCF is. This seems to be a typical problem for FCF.
Note that a lot of utility companies only pay a portion of their dividends in cash because shareholders can use their dividends to buy more shares rather than receive cash. This accounts for the Dividend Reinvestment Plan that shareholders use through registration of their shares with Emera. Note that also now, shareholders can reinvest their dividends via their brokers and the percentage above does not take this into consideration.
| Item | Cur | 5 Years |
|---|---|---|
| EPS | 78.08% | 82.42% |
| AEPS | 94.17% | 90.52% |
| Div Pd Cash | 46.70% | 53.45% |
| CFPS | 33.90% | 43.21% |
| FCF 1 | N/C | -39.75% |
| FCF 2 | 31.79% | 56.92% |
Debt Ratios are generally not good ones, with debt being too high. The Long Term Debt/Market Cap Ratio for 2023 is far too high at 1.25 and currently at 1.29. The Liquidity Ratio for 2023 is far too low at 0.82 and 0.82 currently. If you added in Cash Flow after dividends, the ratios are too low at 1.13 and currently at 1.16. I prefer these ratios to be 1.50 or higher. The Debt Ratio for 2023 is low at 1.44. I also prefer this ratio to be 1.50 or higher. The Leverage and Debt/Equity Ratios for 2023 are too high 3.71 and 2.57. I prefer these ratios to be below 3.00 and 2.00.
| Type | Year End | Ratio Curr |
|---|---|---|
| Lg Term R | 1.25 | 1.29 |
| Intang/GW | 0.41 | 0.42 |
| Liquidity | 0.82 | 0.82 |
| Liq. + CF | 1.13 | 1.16 |
| Debt Ratio | 1.44 | 1.44 |
| Leverage | 3.71 | 3.71 |
| D/E Ratio | 2.57 | 2.57 |
The Total Return per year is shown below for years of 5 to 31 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 | 4.08% | 8.41% | 2.85% | 5.56% |
| 2013 | 10 | 7.03% | 10.84% | 5.11% | 5.73% |
| 2008 | 15 | 7.33% | 11.14% | 5.60% | 5.53% |
| 2003 | 20 | 6.06% | 10.45% | 5.32% | 5.13% |
| 1998 | 25 | 5.02% | 8.66% | 4.17% | 4.49% |
| 1993 | 30 | 4.47% | 9.61% | 4.61% | 4.99% |
| 1992 | 31 | 10.67% | 5.10% | 5.57% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 15.56, 17.25 and 18.23. The corresponding 10 year ratios are 14.95, 16.56 and 17.83. The corresponding historical ratios are 13.41, 15.36 and 17.08. The current P/E Ratio is 15.10 based on a stock price of $48.73 and EPS estimate for 2024 of $3.23. 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 also have Adjusted Earnings per Share (AEPS) data. The 5-year low, median, and high median Price/Earnings per Share Ratios are 16.58, 19.25 and 22.54. The corresponding 10 year ratios are 16.23, 18.08 and 19.57. The current ratio is 15.18 based on a stock price of $48.73 and AEPS estimate for 2024 of $3.21. 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 get a Graham Price of $52.04. The 10-year low, median, and high median Price/Graham Price Ratios are 1.00, 1.15 and 1.27. The current P/GP Ratio is 0.94 based on a stock price of $48.73. 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 1.62. The current P/B Ratio is 1.30 based on a stock price of $48.73, Book Value of $1,422 and Book Value per Share of $37.49. The current ratio is 19.6% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I have a Book Value per Share estimate for 2024 of $38.20, but this Book Value is calculated differently from how I do the calculation and with this calculation, the 10 year median ratio would be 1.44. With a Book Value per Share of $38.20, this implies a ratio of 1.28 with a stock price of $48.73 and Book Value of $10,853M. This ratio is 11% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 10-year median Price/Cash Flow per Share Ratio of 8.24. The current P/CF Ratio is 5.95 based on Cash Flow per Share estimate for 2024 of $8.19, Cash Flow of $2,327M and a stock price of $48.73. The current ratio is 28% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I get an historical median dividend yield of 4.77%. The current dividend yield is 5.89% based on dividends of $2.87 and a stock price of $48.73. The current ratio is 23% 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 4.62%. The current dividend yield is 5.89% based on dividends of $2.87 and a stock price of $48.73. The current ratio is 28% 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 2.09. The current ratio is 1.78 based on Revenue estimate for 2024 of $7,774M, Revenue per Share of $27.36 and a stock price of $48.73. The current ratio is 15% 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 reasonable and may even be cheap. The dividend yield tests are saying that the stock price is relatively cheap. The P/S Ratio test says that the stock price is reasonable and below the median. Other testing is saying the stock price is either reasonable or cheap.
When I look at analysts’ recommendations, I find Strong Buy (1), Buy (6), Hold (6), Underperform (1), and Sell (1). The consensus would be Hold. The 12 month stock price consensus is $52.64 with a High of $60.00 and Low of $44.00. The consensus price of $52.64 implies a total return of $13.91% with 8.02% from capital gains and 5.89% from dividends.
Mixed reviews on Stock Chase for 2024. There are two Buys, one Watch and one Do Not buy. Stock Chase gives this stock 4 stars out of 5. This stock is no longer on the Money Sense dividend list, but it is on others I follow. Amy Legate-Wolfe on Motley Fool thinks it is smart to buy utilities currently, especially Emera. Daniel Da Costa on Motley Fool thinks you should buy Emera for passive dividend income. Emera put out a Press Release on their fourth quarter of 2023.
Simply Wall Street via Yahoo Finance put out a report on this company. Simply Wall Street has 3 warnings of interest payments are not well covered by earnings; dividend of 5.94% is not well covered by cash flows; and shareholders have been diluted in the past year. Simply Wall Street gives this stock 3 and one half stars out of 5.
Emera is a geographically diverse energy and services company investing in electricity generation, transmission, and distribution as well as gas transmission and utility energy services. Emera has operations throughout North America and the Caribbean countries. Its web site is here Emera Inc.
The last stock I wrote about was about was IGM Financial Inc (TSX-IGM, OTC-IGIFF) ... learn more. The next stock I will write about will be Bombardier Inc (TSX-BBD.B, OTC-BDRBF) ... learn more on Monday, March 11, 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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