Is it a good company at a reasonable price? I prefer stocks with lower yield but with dividend growth. However, this stock has given shareholders a decent return and does provide good passive income. It does have a lot of debt, but most utility stocks have lots of debt. This stock seems to be currently at a bargain price.
I do not own this stock of Northland Power Inc (TSX-NPI, OTC-NPIFF). This company is into generating electric power. I have a lot invested in pipelines and I would like to have more invested in electric power as part of my utility’s investments. I read a report on this stock that said it was a good defensive stock to buy. That is, it is a good stock to hold in a stock market correction. I can certainly see the logic of using utility stocks as defensive stocks.
When I was updating my spreadsheet, I noticed that the company lost money because they took an impairment of non-financial assets (goodwill) in 2023. Northland Power has also put out a warning of people offering a guaranteed return investment in the company. See the alert.
If you had invested in this company in December 2013, for $1,006.20 you would have bought 65 shares at $15.48 per share. In December 2023, after 10 years you would have received $748.80 in dividends. The stock would be worth $1,564.55. Your total return would have been $2,313.35. This would be a total return of 10.71% per year with 4.51% from capital gain and 6.20% from dividends.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $15.48 | $1,006.20 | 65 | 10 | $748.80 | $1,564.55 | $2,313.35 |
The current dividend yield is good with dividend growth non-existing. The dividend yield is good (5% to 6% ranges) at 5.89%. The 5 and 10 year median dividend yields are moderate (2% to 4% ranges) at 3.585 and 4.67%. The historical median dividend yield is good at 6.54%. Dividend have been flat since 2019, so 0% increases over the past 5 years. This company used to be an income trust with a high yield. Dividend were cut by under 2% when the company became a corporation, and since then there was one increase of 11% in 2018. Analysts do not see any increases any time soon.
The Dividend Payout Ratios (DPR) are not good, but are improving. The DPR for 2023 for Earnings per Share (EPS) is non-calculable because of earnings losses with 5 year coverage too high at 86%. The DPR for 2023 for Free Cash Flow (FCF) as determined by the company is high at 71% with 5 year coverage at 73%. The DPR for 2023 for Adjusted Free Cash Flow (AFCF) is high at 86% with 5 year coverage good at 39%. The DPR for 2023 for Cash Flow per Share (CFPS) is good at 24% with 5 year coverage at 20%. The DPR for 2023 for Free Cash Flow (FCF) is fine at 42% with 5 year coverage good at 38%. However, there is no agreement on what the FCF is.
| Item | Cur | 5 Years |
|---|---|---|
| EPS | 0.00% | 85.84% |
| FCF Co. | 71.43% | 73.77% |
| AFCF | 85.84% | 38.96% |
| CFPS | 24.44% | 19.82% |
| FCF | 42.41% | 37.53% |
Debt Ratios show that the debt level is too high. The Long Term Debt/Market Cap Ratio for 2023 is far too high at 1.05 and currently at 1.28. The Liquidity Ratio for 2023 is too low at 1.13 and too low at 1.17 currently. If you added in Cash Flow after dividends, the ratios are fine at 1.51 and currently 1.75. The Debt Ratio for 2023 is fine at 1.49 and 1.48 currently. The Leverage and Debt/Equity Ratios for 2023 are too high at 3.04 and 2.04 and currently at 3.06 and 2.06. I prefer these ratios to be below 3.00 and 2.00.
| Type | Year End | Ratio Curr |
|---|---|---|
| Lg Term R | 1.05 | 1.28 |
| Intang/GW | 0.18 | 0.20 |
| Liquidity | 1.13 | 1.17 |
| Liq. + CF | 1.51 | 1.75 |
| Debt Ratio | 1.49 | 1.48 |
| Leverage | 3.04 | 3.08 |
| D/E Ratio | 2.04 | 2.08 |
The Total Return per year is shown below for years of 5 to 26 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 | 0.00% | 7.41% | 2.09% | 5.32% |
| 2013 | 10 | 1.06% | 10.71% | 4.51% | 6.20% |
| 2008 | 15 | 0.70% | 12.34% | 4.99% | 7.35% |
| 2003 | 20 | 1.02% | 11.02% | 3.61% | 7.41% |
| 1998 | 25 | 1.25% | 10.21% | 3.00% | 7.22% |
| 1997 | 26 | 1.25% | 11.33% | 3.44% | 7.90% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 11.81, 14.88 and 16.67. The corresponding 10 year ratios are 12.45, 15.26 and 17.14. The corresponding historical ratios are 13.11, 15.49 and 17.86. The current P/E Ratio is 12.34 based on a stock price of $20.38 and EPS estimate for 2024 of $1.65. 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 Free Cash Flow per Share data (FCF) from the company. The 5-year low, median, and high median Price/ Free Cash Flow Ratios are 12.42, 19.36 and 26.77. The corresponding 10 year ratios are 12.72, 15.93 and 17.73. The current ratio is 15.68 based on a stock price of $20.38 and FCF estimate for 2024 of $1.30. This ratio is between the low and median ratio 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 Free Cash Flow per Share data (AFCF) from the company. The 5-year low, median, and high median Price/ Adjusted Free Cash Flow Ratios are 10.94, 16.02, and 22.16. The corresponding 10 year ratios are 12.60, 15.30 and 17.73. The current ratio is 13.32 based on a stock price of $20.38 and AFCF estimate for 2024 of $1.53. This ratio is between the low and median ratio 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 $24.71. The 10-year low, median, and high median Price/Graham Price Ratios are 1.79, 2.05 and 2.47. The current P/GP Ratio is 0.82 based on a stock price of $20.38. This ratio is below the low ratio for 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 4.40. The current P/B Ratio is 1.24 based on a stock price of $20.38, Book Value of $4,779M, and Book Value per Share of $16.44. The current ratio is 72% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I have a Book Value per Share estimate for 2024 and it is $16.44. This is the same as the current one. So, testing results will be the same as above.
I get a 10-year median Price/Cash Flow per Share Ratio of 5.32. The current P/CF Ratio is 5.12 based on a stock price of $20.38, Cash Flow per Share estimate for 2024 of $3.98 and Cash Flow of $1,015M. The current ratio is 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 6.54%. The current dividend yield is 5.89% based on dividends of $1.20 and a stock price of $20.38. The current dividend yield is 10% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable but above the median. The company used to be an income trust, so this test probably is not valid.
I get a 10 year median dividend yield of 4.67%. The current dividend yield is 5.89% based on dividends of $1.20 and a stock price of $20.38. The current dividend yield is 26% 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 3.30. The current P/S Ratio is 2.18 based on a stock price of $20.38, Revenue estimate for 2024 of $2,379M and Revenue per Share of $9.33. The current ratio is 34% 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 cheap. the 10 year median dividend yield test says that the stock price is relatively cheap. This is confirmed by the P/S Ratio test. The rest of the testing is saying that the stock price is relatively cheap or reasonable.
When I look at analysts’ recommendations, I find Strong Buy (5), Buy (7), and Hold (2). The consensus would be a Strong Buy. The 12 month stock price consensus is $29.77 with a high of $35.00 and low of $23.00. The 12 month stock price consensus of $29.77 implies a total return of 51.96% with 46.07% from capital gains and 5.89% from dividends.
A lot of analysts on Stock Chase like this company. Although one says there are better choices elsewhere and a couple complain that power companies have been hammered lately, especially because of changes in interest rates. Stock Chase gives this stock 4 stars out of 5. Adam Othman on Motley Fool thinks this company is undervalued and has long term prospects. Karen Thomas on Motley Fool thinks this stock is cheap and has a high yield and is well positioned for the years ahead. The company put out a Press Release about their fourth quarter of 2023. The company put out a Press Release about their second quarter of 2024.
Simply Wall Street via Yahoo Finance reviews this stock. They think its value us $42.91 CDN$ and is therefore undervalued. They have 4 warnings out on this stock of interest payments are not well covered by earnings; dividend of 5.93% is not well covered by earnings or free cash flows; large one-off items impacting financial results; and profit margins (2.7%) are lower than last year (18.6%). Simply Wall Street gives this stock 2 and one half stars out of 5.
Northland Power develops, constructs, and operates maintainable infrastructure assets across a range of clean and green technologies, such as wind (offshore and onshore), solar, and supplying energy through a regulated utility. Offshore wind is expected to remain the company's largest segment over the long term. Northland's growth opportunities are global and span North America, Europe, Latin America, and Asia. Its web site is here Northland Power Inc .
The last stock I wrote about was about was Chesswood Group Ltd (TSX-CHW, OTC-CHWWF) ... learn more. The next stock I will write about will be FirstService Corp (TSX-FSV, NASDAQ-FSV) ... learn more on Monday, November 18, 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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