Is it a good company at a reasonable price? No, I am not doing well with this stock at the moment, but to me, I am being given 5.7% return on my money as I wait for things to improve. It is a utility with a lot of debt and rising interest rates are causing problem. But I do not think that it will go bankrupt, so I will take my return and wait. The stock price is probably reasonable, but could be relatively cheap.
I own this stock of Canadian Utilities Ltd (TSX-CU, OTC-CDUAF). I started to follow this stock in January of 2009 because it was on the Dividend Achievers list, the Dividend Aristocrats list and was also on Mike Higgs’ dividend growth list at that time. The Dividend Aristocrats list is now an index on the TSX. ATCO (TSX-ACO-X) owns 88% of this stock, so you would not buy both these stocks.
When I was updating my spreadsheet, I noticed I seemed to have done very badly to date with this stock. I have had it for 7 years and I have a total return of 1.13% with a capital loss of 3.71% and dividends at 4.84%. This utility is not well followed, and Stock Chase analyst just say it is interest sensitive, but seem uncertain why the stock price is falling.
If you had invested in this company in December 2013, for $1,034.43 you would have bought 29 shares at $35.67 per share. In December 2023, after 10 years you would have received $444.16 in dividends. The stock would be worth $924.81. Your total return would have been $1,368.97. This would be a total return of 3.32% per year with 1.11% from capital loss and 4.43% from dividends.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $35.67 | $1,034.43 | 29 | 10 | $444.16 | $924.81 | $1,368.97 |
The current dividend yield is good with dividend growth low. The current dividend yield is good (5% to 6% ranges) at 5.65%. The 5 year median dividend yield is also good at 5.10%. The 10 year and historical median dividend yields are moderate (2% to 4% ranges) at 4.73% and 3.84%. The dividend increases a low (below 8% per year) at 2.67% per year over the past 5 years. The last dividend increase was in 2024 and it was for 1%. The dividend increases hit a high of 10.31% in 2014 and have been decreasing since. The current This stock is on a couple of the dividend lists that I follow, but not on the Money Sense list since 2020.
The Dividend Payout Ratios (DPR) are fine. The DPR for 2023 for Earnings per Share (EPS) is fine at 77% with 5 year coverage at 86%. The DPR for 2023 for Adjusted Earnings per Share (AEPS) is fine at 81% with 5 year coverage at 80%. The DPR for 2023 for Cash Flow per Share (CFPS) is good at 28% with 5 year coverage at 27%. The DPR for 2023 for Free Cash Flow (FCF) is too high at 104% with 5 year coverage at fine at 87%. Utility stocks tend to have higher DPRs than other sector stocks.
| Item | Cur | 5 Years |
|---|---|---|
| EPS | 77.01% | 86.25% |
| AEPS | 81.19% | 80.01% |
| CFPS | 27.76% | 27.22% |
| FCF | 103.85% | 86.54% |
Debt Ratios show that the company has too much debt, but the Liquidity Ratio is fine. The Long Term Debt/Market Cap Ratio for 2023 is too high at 1.16 and currently at 1.16. The Liquidity Ratio for 2023 is too low at 1.01 and 1.03 currently. If you added in Cash Flow after dividends, the ratios are fine at 1.92 and currently at 2.00. The Debt Ratio for 2023 is fine at 1.45 and 1.46 currently. The Leverage and Debt/Equity Ratios for 2023 are too high at 3.24 and 2.24 and currently at 3.19 and 2.19.
| Type | Year End | Ratio Curr |
|---|---|---|
| Lg Term | 1.16 | 1.16 |
| Intan/GW | 0.07 | 0.13 |
| Liquidity | 1.01 | 1.03 |
| Liq. + CF | 1.92 | 2.00 |
| Debt Ratio | 1.45 | 1.46 |
| Leverage | 3.24 | 3.19 |
| D/E Ratio | 2.24 | 2.19 |
The Total Return per year is shown below for years of 5 to 35 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 | 2.67% | 5.91% | 0.36% | 5.55% |
| 2013 | 10 | 6.34% | 3.32% | -1.11% | 4.43% |
| 2008 | 15 | 6.84% | 7.91% | 3.07% | 4.83% |
| 2003 | 20 | 6.49% | 8.80% | 4.03% | 4.77% |
| 1998 | 25 | 6.08% | 8.41% | 3.99% | 4.43% |
| 1993 | 30 | 5.55% | 10.87% | 5.50% | 5.37% |
| 1988 | 35 | 4.96% | 11.13% | 5.49% | 5.63% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 16.31, 18.21 and 20.12. The corresponding 10 year ratios are 15.61, 17.72 and 19.84. The corresponding historical ratios are 11.52, 13.30 and 15.55. The current P/E Ratio is 13.71 based on a stock price of $32.09 and EPS estimate for 2024 of 2.34. 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 also have Adjusted Earnings per Share (AEPS) data. The 5-year low, median, and high median Price/Adjusted Earnings per Share Ratios are 13.82, 15.45 and 17.90. The corresponding 10 year ratios are 13.87, $16.00 and 18.09. The current ratio is 13.83 based on a stock price of $32.09 and AEPS estimate for 2024 of $2.32. 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 Graham Price of $32.40. The 10-year low, median, and high median Price/Graham Price Ratios are 1.01, 1.16 and 1.32. The current P/GP Ratio is 0.99 based on a stock price of $32.09. 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 1.88. The current P/B Ratio is 1.60 based on a Book Value of $5,449M, Book Value per Share of $20.11 and a stock price of $32.09. 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.
I also have a Book Value per Share for 2024 of $20.10. This analyst calculates the Book Value differently than I do and this way has a 10-year median Price/Book Value per Share Ratio of 1.46. The BVPS of $20.10 implies a Book Value of $5,446M and a ratio of 1.60 based on a stock price of $32.09. This ratio is 9.58% above the 10 year median. his stock price testing suggests that the stock price is relatively reasonable and below the median. The analyst really expects the Book Value for this company to drop a lot this year.
I get a 10-year median Price/Cash Flow per Share Ratio of 5.99. The current P/CF Ratio is 5.16 based on a stock price of $32.09, Cash Flow per Share for 2024 of $6.22 and Cash Flow of $1,685M. The current ratio is 14% 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 3.84%. The current dividend yield is 5.65% based on dividends of $1.824 and a stock price of $32.09. The current dividend yield is 47% 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 4.73%. The current dividend yield is 5.65% based on dividends of $1.824 and a stock price of $32.09. The current dividend yield is 19% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable and below the median.
The 10-year median Price/Sales (Revenue) Ratio is 2.59. The current P/S Ratio is 2.01 based on Revenue estimate for 2024 of $4,322M, Revenue per Share of $15.95 and a stock price of $32.09. The current ratio is 22% 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 10 year median dividend yield test says the stock price is reasonable, but it is very close to cheap. The P/S Ratio test says the stock price is cheap. A number of other tests says the stock price is cheap, but some also say reasonable.
When I look at analysts’ recommendations, I find Strong Buy (1), Hold (5). The consensus would be a Hold. The 12 month stock price consensus is $34.58 with a high of $36.00 and a low of $33.00. The consensus price of $34.58 implies a total return of 13.41% with 7.76% from capital gains and $5.65% from dividends based on a current stock price of $32.09.
There are only comments from 2023 on Stock Chase and the recommendations are a Hold. Stock Chase gives this stock 3 stars out of 5. Amy Legate-Wolfe on Motley Fool says this company is better to buy than Enbridge. Daniel Da Costa on Motley Fool says this company is the most defensive stock to buy. The company put out a Press Release on their year-end results for 2023. The company put out a Press Release about their first quarter of 2024 results.
Simply Wall Street via Yahoo Finance reviews this stock and says it is undervalued. Simply Wall Street has two warnings signs of interest payments are not well covered by earnings; and dividend of 5.69% is not well covered by cash flows. Simply Wall Street gives this stock 3 and one half stars out of 5.
Canadian Utilities Ltd, a subsidiary of holding company Atco, offers gas and electricity services. The company is engaged in Atco Energy systems and its Energy Infrastructure operating segment to ATCO EnPower. Headquartered in Calgary, Alberta, the firm mainly operates in Canada, Australia, and others. The company generates maximum revenue from Canada. Canadian Utilities launched a large venture called Atco Energy, which provides low-cost and sustainable energy solutions for Alberta. Its web site is here Canadian Utilities Ltd .
The last stock I wrote about was about was Mullen Group Ltd (TSX-MTL, OTC-MLLGF) ... learn more. The next stock I will write about will be Pizza Pizza Royalty Corp (TSX-PZA, OTC-PZRIF) ... learn more on Friday, May 24, 2024 around 5 pm. Tomorrow on my other blog I will write about Top Canadian Food Stocks for May.... learn more learn more on Thursday, May 23, 2024 around 5 pm.
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