Is it a good company at a reasonable price? This stock is on the MoneySense list in from 2017 to 2023, but it is not on the list in 2024. I have dividend information for the pat 35 year and in 31 of those years, dividends have increased. It does produce a nice dividend and it has grown its dividends. It has not produced any capital gains lately. You expect a utility to produce capitals gains from 3% to 5%. You would buy this for a passive dividend. The stock price is down 11% since its last high in 2019. The current stock price is reasonable.
I do not own this stock of ATCO Ltd (TSX-ACO.X, OTC-ACLLF). I started to look at this stock in 2009 because it was a dividend paying stock that was on everyone’s list. At that time this stock was on the Dividend Achievers list, the Dividend Aristocrats list and also was on Mike Higgs’ list. ATCO (TSX-ACO-X) owns 52.3% (2021) Canadian Utilities (TSX-CU), so you would not buy both these stocks.
When I was updating my spreadsheet, I noticed analysts had expected an increase in Revenue by 1.6% (small increase), but Revenue went down by 4.8%. However, both AEPS and EPS went up more than expected and this year they are the same. It is interesting that there is insider buying over the past year.
The current dividend yield is moderate with dividend growth low. The current dividend yield is moderate (2% to 4% ranges) at 4.33%. The 5, 10 and historical dividend yield are also moderate at 4.20%, 3.69% and 2.19%. Dividend growth is low (below 8% per year) at 4.8% per year over the past 5 years. The last dividend increase was in 2024 and it was for 3%. Dividend increases hit a high of 15.2% in 2016 and have been dropping ever since.
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 56%. The DPR for 2023 for Adjusted Earnings per Share (AEPS) is fine at 50% with 5 year coverage at 52%. It is better if the DPR on AEPS is no higher than the 40% range. The DPR for 2023 for Cash Flow per Share (CFPS) is good at 10% with 5 year coverage at 11%. The DPR for 2023 for Free Cash Flow (FCF) is high at 195% with 5 year coverage at 40%. However, no place I look has agreed on what the FCF is, so I am dismissing FCF.
| Item | Cur | 5 Years |
|---|---|---|
| EPS | 49.80% | 56.06% |
| AEPS | 49.93% | 52.24% |
| CFPS | 10.69% | 10.54% |
| FCF | 195.45% | 39.18% |
Debt Ratios are fine. The Long Term Debt/Covering Assets Ratio for 2023 is good at 0.50 and currently at 0.52. The Long Term Debt/Market Cap Ratio for 2023 is high at 2.42 and currently at 2.12. The Liquidity Ratio for 2023 is low at 1.14 and 1.59 currently. If you added in Cash Flow after dividends, the ratios are fine at 2.22 and currently at 3.28. The Debt Ratio for 2023 is good at 1.50 and 1.52 currently. The Leverage and Debt/Equity Ratios for 2023 are fine at 2.98 and 1.50 and currently at 2.92 and 1.52.
| Type | Year End | Ratio Curr |
|---|---|---|
| Lg Term A | 0.50 | 0.52 |
| Lg Term R | 2.42 | 2.12 |
| Intang/GW | 0.29 | 0.24 |
| Liquidity | 1.14 | 1.59 |
| Liq. + CF | 2.22 | 3.28 |
| Debt Ratio | 1.50 | 1.52 |
| Leverage | 2.98 | 2.92 |
| D/E Ratio | 1.50 | 1.52 |
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 | 4.78% | 4.62% | 0.03% | 4.59% |
| 2013 | 10 | 9.75% | 1.52% | -1.86% | 3.38% |
| 2008 | 15 | 9.77% | 8.85% | 4.85% | 4.00% |
| 2003 | 20 | 9.32% | 10.07% | 6.11% | 3.96% |
| 1998 | 25 | 10.14% | 9.21% | 5.75% | 3.46% |
| 1993 | 30 | 12.21% | 11.69% | 7.78% | 3.92% |
| 1988 | 35 | 10.96% | 13.16% | 8.97% | 4.18% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 12.40, 13.67 and 14.94. The corresponding 10 year ratios are 12.35, 14.07 and 16.21. The corresponding historical ratios are 8.99, 10.54 and 12.18. The current P/E Ratio is 10.98 based on a stock price of $45.25 and EPS estimate for 2024 of $4.12. The current P/E Ratio is below the low ratio of the 10 year median ratio. 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 10.85, 12.28 and 13.72. The corresponding 10 year ratios are 11.14, 13.41 and 15.89. The current P/AEPS Ratio is 10.98 based on a stock price of $45.25 and EPS estimate for 2024 of $4.12. The current P/E Ratio is below the low ratio of the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I get a Graham Price of $60.57. The 10-year low, median, and high median Price/Graham Price Ratios are 0.73, 0.87 and 1.04. The current P/CF Ratio is 0.75 based on a stock price of $45.25. 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 10-year median Price/Book Value per Share Ratio of 1.25. The current ratio is 1.14 based on a Book Value of $4,439M, Book Value per Share of $39.58 and a stock price of $45.25. The current ratio is8% 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 Book Value per Share estimate of $40.94 for 2024. This implies a ratio of 1.11 and Book Value of $4,592M based on a stock value of $45.25. This ratio is 11.7% 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 2.76. The current P/CF Ratio is 2.45 based on Cash Flow per Share estimate for 2024 of $18.50, Cash Flow of $2075M and a stock price of $45.25. The current ratio is 11.4% 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 2.19%. The current dividend yield is 4.33% based on a stock price of $45.25 and dividends of $1.952. The current dividend yield is 98% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median dividend yield of 3.69%. The current dividend yield is 4.33% based on a stock price of $45.25 and dividends of $1.952. The current dividend yield is 17% above the 10 year median ratio. 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 1.12. The current P/S Ratio is 0.99 based on Revenue estimate for 2024 of $5,131M, Revenue per Share of $45.75 and a stock price of $45.25. The current ratio is 12% 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. The 10 year median dividend yield test says that the stock price is relatively reasonable. This is confirmed by the P/S Ratio test. Most of the testing says that the stock price is relatively reasonable, but some like the historical median dividend yield test and the P/S Ratio tests, says that the stock price is relatively cheap.
When I look at analysts’ recommendations, I find Strong Buy (2), Buy (1) and Hold (3). The consensus would be a Buy. The 12 month stock price consensus is $47.75, with a high of $51.00 and low of $45.00. The consensus price of $47.75 implies a total return of 9.85% with 5.52% from capital gains and 4.33% from dividends based on a stock price of $45.25.
There are mixed views by analyst on Stock Chase about this stock. A negative for one analyst is that it is a good dividend stock, but there is not much in capital gains. Stock Chase gives this stock 3 stars out of 5. Christopher Liew on Motley Fool likes this stock because it is a dividend aristocrat. That is true, but it is not on the Money Sense list which I like better. Jitendra Parashar on Motley Fool says buy this for passive income. The company put out a Press Release about their Second Quarter of 2024 results. 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 two warnings out on this stock of interest payments are not well covered by earnings, and earnings have declined by 2.5% per year over past 5 years.
Atco Ltd is a Canadian holding company that offers gas, electric, and infrastructure solutions. The largest subsidiary of the company is Canadian utilities, which operates natural gas, electricity, and logistical services. Atco's primary segments include Structures and Logistics, ATCO Energy Systems, ATCO EnPower, and Corporate and Other. It generates maximum revenue from the ATCO Energy Systems segment. Geographically, it derives most of its revenue from Canada. Its web site is here ATCO Ltd.
The last stock I wrote about was about was Exchange Income Corp (TSX-EIF, OTC-EIFZF) ... learn more. The next stock I will write about will be Capital Power Corp (TSX-CPX, OTC-CPRHF) ... learn more on Wednesday, August 28, 2024 around 5 pm. Tomorrow on my other blog I will write about TFI Internation Inc.... learn more on Tuesday, August 27, 2024 around 5 pm.
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