Is it a good company at a reasonable price? I worry about the amount of debt. They have sold a lot of stock over time and so have diluted shareholder value. You can see this with the difference in Revenue and Revenue per share mentioned below. Earnings have been volatile and this is mentioned below also. They just cut the dividends, and this is never a good sign. Some analysts like the stock better than others, but lots of debt has been pointed out as a problem. The stock price is testing as cheap, but cheap does not necessarily mean a good deal.
I do not own this stock of Algonquin Power & Utilities Corp (TSX-AQN, NTSE-AQN). This is a dividend paying utility stocks. I got it off a list of dividends paying utility stocks. Also, I own Emera Inc. and this company owns shares in Algonquin Power.
When I was updating my spreadsheet, I noticed is that there is a big difference in growth in Revenue and Revenue per share. The 5 and 10 year growth in Revenue is 10.4% and 15.6%. The 5 and 10 year growth in Revenue per Share is 3% and 2.4%. This is a big difference. It points to the company issuing lots of new shares and to a big dilution of shareholder value.
Earnings per Share have been volatile. You can see this in the 5 and 10 year Earnings which went down by 5.5% over the past 5 years and down by 40% over the past 10 years, but the 5 year running average is up by 8% for the past 5 years and up by 13% over the past 10 years. AEPS figures show this too, but not so strongly. You notice this also in the P/E Ratios which are high.
If you had invested in this company in December 2013, for $1,005.58 you would have bought 137 shares at $7.34 per share in CND$. In December 2023, after 10 years you would have received $898.91 in dividends. The stock would be worth $1,145.32. Your total return would have been $2,044.23. This would be a total return of 9.35% per year with 1.31% from capital gain and 8.04% from dividends. These values are in CDN$.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $7.34 | $1,005.58 | 137 | 10 | $898.91 | $1,145.32 | $2,044.23 |
If you had invested in this company in December 2013, for $1,004.01 you would have bought 147 shares at $6.83 per share in US$. In December 2023, after 10 years you would have received $738.79 in dividends. The stock would be worth $929.04. Your total return would have been $1,667.83.23. This would be a total return of 6.35% per year with 0.77% from capital loss and 7.30% from dividends. (I checked my US$ stock prices against the CDN$ prices and the exchange rate at the time of the stock prices and they are accurate.) These values are in US$.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $6.83 | $1,004.01 | 147 | 10 | $738.79 | $929.04 | $1,667.83 |
The current dividend yield is high with dividend growth currently being cut. The current dividend yield is high (7% or higher) at 7.33%. The 5 and 10 year median dividend yield is moderate (2% to 4% ranges) at 4.31% and 4.67%. The historical median dividend yield is good (5% to 6% ranges) at 6.79%. It is high because this stock started out as an income trust and these company tend to have quite high dividend yields. The dividends have recently been cut by 40%. Currently dividends are being paid in US$.
The Dividend Payout Ratios (DPR) are too high currently, but are expected to improve over the next 3 years. The DPR for 2023 for Earnings per Share (EPS) is far too high at 1687% with 5 year coverage at 123%. The DPR for 2023 for Adjusted Earnings per Share (AEPS) is still too high, but better than for EPS at 96% with 5 year coverage at 93%. The DPR for 2023 for Cash Flow per Share (CFPS) is good at 34% with 5 year coverage too high at 51%. The DPR for 2023 for Adjusted Funds from Operations (AFFO) is good at 48% with 5 year coverage at 52%. The DPR for 2023 for Free Cash Flow (FCF) is negative.
| Item | Cur | 5 Years |
|---|---|---|
| EPS | 1687.67% | 123.33% |
| AEPS | 95.53% | 93.42% |
| CFPS | 34.38% | 50.92% |
| AFFO | 48.27% | 52.23% |
| FCF | -81.02% | -63.22% |
Debt Ratios need improving, especially the Liquidity Ratio and the level of debt. The Long Term Debt/Market Cap Ratio for 2023 is far too high at 1.81 and currently at 2.16. The Liquidity Ratio for 2023 is far too low at 0.63 and 0.98 currently. If you added in Cash Flow after dividends, the ratio is too low for 2023 at 0.98 and is fine currently at 1.33. I prefer the Liquidity ratio to be 1.50 or higher. The Debt Ratio for 2023 is good at 1.56 and 1.54 currently. The Leverage and Debt/Equity Ratios for 2023 are too high at 3.78 and 2.42 and currently at 3.91 and 2.53. I prefer these ratios to be under 3.00 and under 2.00
| Type | Year End | Ratio Curr |
|---|---|---|
| Lg Term | 1.81 | 2.16 |
| Intang/GW | 0.33 | 0.34 |
| Liquidity | 0.63 | 0.98 |
| Liq. + CF | 0.98 | 1.33 |
| Liq, CF DB | 1.30 | 2.76 |
| Debt Ratio | 1.56 | 1.54 |
| Leverage | 3.78 | 3.91 |
| D/E Ratio | 2.42 | 2.53 |
The Total Return per year is shown below for years of 5 to 26 to the end of 2023 in CDN$. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See chart below.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2018 | 5 | 0.06% | -2.54% | -9.45% | 6.90% |
| 2013 | 10 | 7.50% | 9.35% | 1.31% | 8.04% |
| 2008 | 15 | -1.82% | 19.84% | 8.95% | 10.89% |
| 2003 | 20 | -1.57% | 5.42% | -1.13% | 6.56% |
| 1998 | 25 | -0.88% | 5.61% | -1.32% | 6.93% |
| 1997 | 26 | -0.88% | 6.73% | -0.85% | 7.58% |
The Total Return per year is shown below for years of 5 to 20 to the end of 2023 in US$. 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 | 0.68% | -1.73% | -8.86% | 7.13% |
| 2013 | 10 | 5.18% | 6.53% | -0.77% | 7.30% |
| 2008 | 15 | -2.33% | 17.31% | 6.94% | 10.37% |
| 2003 | 20 | -1.69% | 6.00% | -1.25% | 7.25% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 10.02, 12.02 and 14.03. The corresponding 10 year ratios are 23.16, 25.87 and 28.12. The corresponding historical ratios are 23.68, 27.16 and 30.43. The current P/E Ratio is 18.21 based on a stock price of $8.10 and EPS estimate for 2024 of $0.44 ($0.33 US$). 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. This testing is in CDN$. The ratios are rather high. Probably because EPS has been going down and up quite a bit over the past 5 and 10 years.
I also have Adjusted Earnings per Share (AEPS) data. The 5-year low, median, and high median Price/Adjusted Earnings per Share Ratios are 16.54, 19.85 and 23.16. The corresponding 10 year ratios are 16.82, 19.93 and 22.65. The current ratio is 12.33 based on a stock price of $8.10 and AEPS estimate for 2024 of $0.66 ($0.48 US$). 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. This testing is in CDN$.
I also have Adjusted Funds from Operations (AFFO) data. The 5-year low, median, and high median Price/ Adjusted Funds from Operations Ratios are 9.29, 11.15 and 13.01. The corresponding 10 year ratios are 7.60, 8.70 and 10.40. The current ratio is 5.71 based on AFFO for the past 12 months of $961.99M, AFFO per Share of $1.42 and a stock price of $8.10. The current ratio is below the low ratio of the 10 year median ratios. This stock price testing suggests that the stock price is relatively cheap. This testing is in CDN$.
I get a Graham Price of $11.73. The 10-year low, median, and high median Price/Graham Price Ratios are 1.01, 1.22 and 1.41. The current ratio is 0.69 based on a stock price of $8.10. This ratio is below the low ratio of the 10 year median ratios. This stock price testing suggests that the stock price is relatively cheap. This testing is in CDN$.
I get a 10-year median Price/Book Value per Share Ratio of 1.62. The current ratio is 0.87 based on Book Value of $4,686M, Book Value per Share of $6.80 and a stock price of $5.90. The current ratio is 46% below the 10 year median ratios. This stock price testing suggests that the stock price is relatively cheap. This testing is in US$ and you will get a similar result in CDN$.
I also have a Book Value per Share (BVPS) estimate for 2024 of $7.88. This analyst calculates the Book Value differently than I do and the 10 year median ratios here is 1.54. The current BVPS implies a ratio of 0.75, with a Book Value of $5,431M and a stock price of $5.90. The current ratio is 51% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap. This testing is in US$ and you will get a similar result in CDN$.
I get a 10-year median Price/Cash Flow per Share Ratio of 10.11. The current P/CF Ratio is 5.67 based on Cash Flow per Share estimate for 2024 of $1.04, Cash Flow of $716M and a stock price of $5.90. The current ratio is 44% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap. This testing is in US$ and you will get a similar result in CDN$.
I get an historical median dividend yield of 6.79%. The current dividend yield is 7.33% based on dividends of $0.594 and a stock price of $8.10. The current dividend yield is 8% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable and below the median. This testing is in CDN$ as I have move data on dividends in CDN$ than US$. The historical dividend yield is rather high because this stock used to be an income trust and these companies can afford high dividend yields.
I get a 10 year median dividend yield of 4.76%. The current dividend yield is 7.36% based on dividends of $0.434 and a stock price of $5.90. The current dividend yield is 54% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively cheap. This testing is in US$ and you will get a similar result in CDN$. Dividends are now paid in US$.
The 10-year median Price/Sales (Revenue) Ratio is 2.80. The current P/S Ratio is 1.40 based on Revenue estimate for 2024 of $2,908M, Revenue per Share of $4.22 and a stock price of $5.90. The current ratio is 50% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap. This testing is in US$ and you will get a similar result in CDN$. Dividends are now paid in US$.
Results of stock price testing is that the stock price is that the stock price is relatively cheap. The 10 year dividend yield test says this. It is confirmed by the P/S Ratio test. The rest of the testing says the same thing. The only exception is the historical median dividend test, but original dividends were quite high because the stock started off as an income trust and those type of companies generally paid quite high dividends.
When I look at analysts’ recommendations, I find Strong Buy (2), Buy (2) and Hold (7). The consensus would be a Buy. The 12 month stock price is $9.22 ($6.74 US$), with a high of $9.99 ($7.30 US$) and low of $8.46 ($6.18 US$). The stock price of $9.22 implies a total return of 21.21% with 13.88% from capital gains and 7.33% from dividends.
Stock Chase. Stock Chase gave this company 4 stars out of 5. There are quite a few entries on Stock Chase for this stock and half is positive and half negative. High Debt seems to be mentioned a lot. Andrew Button on Motley Fool reviews this stock and does not like it, but says that does not say it will do poorly for investors. Adam Othman on Motley Fool thinks this is a good buy because of the very low price. The company put out a press release via Newswire about its 2023 results. The company put out a press release on Newswire about their 2024 results.
Simply Wall Street via Yahoo Finance reviews this stock. Simply Wall Street has two warnings on this stock of interest payments are not well covered by earnings; and dividend of 7.33% is not well covered by earnings or cash flows. Simply Wall Street gives this stock 2 and one half stars out of 5.
Algonquin Power & Utilities Corp, a parent company of Liberty, is a diversified international generation, transmission, and distribution utility. It has two business groups, the Regulated Services Group, and the Renewable Energy Group. AQN has over one million customers, largely in the United States and Canada. Its web site is here Algonquin Power & Utilities Corp.
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