Is it a good company at a reasonable price? The company, again, seems to be recovering. They have been increasing their dividends since 2020. However, I do not think that I would buy this utility company again. It does not have a great history with its dividends. Most long term investors have not done particularly well. It is possible that the stock price is rather cheap, but for a cheap Utility company, the dividend yield is low.
I do not own this stock of TransAlta Corp (TSX-TA, NSYE-TAC). I bought this stock in 1987. It was a utility stock and utility stocks were considered to be good investments. I sold some in 2000 as the stock price was below what I had paid for it. I bought some more in February 2009 because it was relatively cheap and it seemed to be recovering. I sold more in August 2012 as this company was doing poorly again. By September 2019, I had finally had enough and saw no hope in this stock doing better. I noticed that MPL Communications had given up hope in 2014.
When I was updating my spreadsheet, I noticed when updating my spreadsheet that I am still not enamored with this stock or company. You can see the from 5 and 10 year total returns below, that long term investors are still losing. Also, you would have to be invested in this stock for over 30 years to get a 5.5% total return. After that, total return is lousy.
If you had invested in this company in December 2013, for $1,011.00 you would have bought 75 shares at $13.48 per share. In December 2023, after 10 years you would have received $232.13 in dividends. The stock would be worth $826.50. Your total return would have been $1,058.63. This would be a total return of 0.53% per year with 1.99% from capital loss and 2.53% from dividends.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $13.48 | $1,011.00 | 75 | 10 | $232.13 | $826.50 | $1,058.63 |
If you had invested in this company in December 2018, for $1,000.61 you would have bought 179 shares at $5.59 per share. In December 2023, after 5 years you would have received $165.58 in dividends. The stock would be worth $1,972.58. Your total return would have been $2,138.16. This would be a total return of 17.06% per year with 14.54% from capital gain 2.52% from dividends.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $5.59 | $1,000.61 | 179 | 5 | $165.58 | $1,972.58 | $2,138.16 |
The current dividend yield is moderate with dividend growth currently increasing at a low rate. The current dividend yield is moderate (2% to 4% ranges) at 2.71%. The 5 yea median dividend yield is low (below 2%) at 1.82%. The 10 year median dividend yield is moderate at 2.07%. The historical median dividend yield is good (5% to 6% ranges) at 5.35%. The dividends have increased at a low rate (less than 8% per year) by 6.6% per year over the past 5 years. Dividend were decreasing from 2014 to 2014. In 2020, they were increasing again. They are still 80% below the dividends of 2013.
The Dividend Payout Ratios (DPR) are good. The DPR for 2023 for Earnings per Share (EPS) is good at 9% with 5 year coverage not calculable because of earning losses. The DPR for 2023 for Adjusted Earnings per Share (AEPS) is good at 7% with 5 year coverage at 8%. The DPR for 2023 for Cash Flow per Share (CFPS) is good at 5% with 5 year coverage at 6%. The DPR for 2023 for Free Cash Flow 1 (FCF) is non calculable because of negative FCF with 5 year coverage at 15%. The DPR for 2023 for Free Cash Flow 1 (FCF) 7% with 5 year coverage at 8%.
| Item | Cur | 5 Years |
|---|---|---|
| EPS | 9.44% | N/C |
| AFFO | 6.69% | 7.87% |
| FFO | 4.02% | 4.95% |
| CFPS | 5.07% | 5.52% |
| FCF 1 | N/C | 14.68% |
| FCF 2 | 6.52% | 7.86% |
Debt Ratios shows that this company has a lot of debt. The Long Term Debt/Market Cap Ratio for 2023 is fine at 0.86 and currently too high at 1.09. The Liquidity Ratio for 2023 is too low at 0.91. If you added in Cash Flow after dividends, the ratios are good at 1.71 and currently a bit low at 1.40. The Debt Ratio for 2023 is low at 1.24. I prefer this to be at 1.50 or higher. The Leverage and Debt/Equity Ratios for 2023 are far too high at 5.20 and 4.20.
| Type | Year End | Ratio Curr |
|---|---|---|
| Lg Term R | 0.86 | 1.09 |
| Intang/GW | 0.20 | 0.26 |
| Liquidity | 0.91 | 0.91 |
| Liq. + CF | 1.71 | 1.40 |
| Debt Ratio | 1.24 | 1.24 |
| Leverage | 5.20 | 5.20 |
| D/E Ratio | 4.20 | 4.20 |
The Total Return per year is shown below for years of 5 to 36 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 | 6.58% | 17.06% | 14.54% | 2.52% |
| 2013 | 10 | -15.43% | 0.53% | -1.99% | 2.53% |
| 2008 | 15 | -10.06% | -1.81% | -5.14% | 3.33% |
| 2003 | 20 | -7.29% | 2.45% | -2.56% | 5.02% |
| 1998 | 25 | -5.84% | 1.94% | -2.83% | 4.77% |
| 1993 | 30 | -4.86% | 5.53% | -1.08% | 6.61% |
| 1988 | 35 | -4.12% | 6.58% | -0.66% | 7.23% |
| 1987 | 36 | -3.90% | 6.32% | -0.74% | 7.05% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 4.36, 5.18 and 6.00. The corresponding 10 year ratios are all negative and so useless. The corresponding historical ratios are 14.85, 14.23 and 18.39. The current P/E Ratio is 24.36. This is a rather high ratio according to the above other ratios. It is a high ratio for a P/E Ratio for a utility stock also. This ratio is based on a stock price of $8.85 and EPS estimate for 2024 of $0.36. This stock price testing suggests that the stock price is relatively expensive.
I have Funds from Operations (FFO) data. The 5-year low, median, and high median Price/Earnings per Share Ratios are 2.16, 2.92 and 3.74. The corresponding 10 year ratios are 2.13, 2.83 and 3.39. The current P/FFO Ratio is 3.28 based on FFO estimate for 2024 of $2.70 and a stock price of $8.85. The current 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 Adjusted Funds from Operations (AFFO) data. The 5-year low, median, and high median Price/Earnings per Share Ratios are 3.63, 5.06 and 6.49. The corresponding 10 year ratios are 3.94, 5.63 and 7.10. The current P/FFO Ratio is 4.86 based on FFO estimate for 2024 of $1.82 and a stock price of $8.85. 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 get a Graham Price of $10.82. The 10-year low, median, and high median Price/Graham Price Ratios are 0.31, 0.43 and 0.60. The current P/GP Ratio is 0.82 based on a stock price of $8.85. This ratio is above the high ratio for the 10 year median ratios. This stock price testing suggests that the stock price is relatively expensive.
I get a 10-year median Price/Book Value per Share Ratio of 1.30. The current P/B Ratio is 4.59 based on a Book Value of $595M, Book Value per Share of $1.93 and a stock price of $8.85. The current P/B Ratio is 253% 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 3.25. The current P/CF Ratio is 2.94 based on Cash Flow per Share estimate for 2024 of $3.01, Cash Flow of $928.9M, and a stock price of $8.85. The current ratio is 9.5% 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 5.35%. The current dividend yield is 2.71% based on dividends of $0.24 and a stock price of $8.85. The current dividend is 49% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively expensive.
I get a 10 year median dividend yield of 2.08%. The current dividend yield is 2.71% based on dividends of $0.24 and a stock price of $8.85. The current dividend is 31% 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 1.05. The current P/S ratio is 0.99 based on Revenue estimate for 2024 of $7,760M, Revenue per Share of $8.94 and a stock price of $8.85. The current ratio is 6% 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 probably reasonable, but maybe relatively cheap. The 10 dividend yield tests say that the stock price is relatively cheap. The P/S Ratio testing is saying the stock price is reasonable. The historical dividend yield test says the stock price is expensive and it is not the only tests that say the stock price is expensive as the P/GP Ratio and P/B Ratio tests say the same thing. On the other hand, there are tests that say the stock price is reasonable such as the P/AFFO Ratio and the P/CF Ratio tests. It is a mixed bag.
When I look at analysts’ recommendations, I find Strong Buy (3), Buy (4), Hold (1) and Sell (1). The consensus recommendation would be a Buy. The 12 month stock price consensus is $13.78, with a high of $18.50 and low of $9.00. The consensus stock price of $13.78 implies a total return of 58.42% with 55.71% from capital gains and 2.71% from dividends.
There is only one entry on Stock Chase for 2024 and it is a Do Not Buy. However, entries for 2023 had a mix of Buy and Sell and Hold recommendations. Stock Chase gives this stock 3 stars out of 5. This stock is only the Globe All Stars dividend list. Amy Legate-Wolfe on Motley Fool thinks this is a screaming buy. Christopher Liew on Motley Fool thinks the stock price is depressed and is due for a rebound. The company put out a Press Release on their four quarter of 2023.
Simply Wall Street via Yahoo Finance reviews this stock. Simply Wall Street gives this stock 2 and one half stars out of 5. Simply Wall Street puts out 4 warnings on this stock of earnings are forecast to decline by an average of 125.7% per year for the next 3 years; unstable dividend track record; shareholders have been diluted in the past year; and has a high level of debt.
TransAlta Corp is an independent power producer based in Alberta, Canada. The company operates a diverse and growing fleet of electrical power generation assets in Canada, the United States, and Australia. The company has six reportable segments namely, hydro, wind & solar, Energy Marketing, gas, and energy transition segment. The company generates the majority of its revenue from the gas segment. Its web site is here TransAlta Corp.
The last stock I wrote about was about was Enbridge Inc (TSX-ENB, NYSE-ENB) ... learn more. The next stock I will write about will be TC Energy Corp (TSX-TRP, NYSE-TRP) ... learn more on Monday, March 25, 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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