Most important question to ask on dividend paying stock: “Can the level of dividends be sustained?” Also, once you have a company, you need to focus also on its ability to pay their dividend rather than on the stock price. I have found that the value of my portfolio has fluctuated a lot, but my dividend income has not. In fact, my dividend income has only increased since I held a basket of dividend paying stock.
If you just concentrate on your portfolio value, it might drive you crazy and you might just sell when you should not. I have found that in recession, some companies cut or eliminate dividends, some keep them level and other increase them. Overall, my dividend income has still increased. So, what you should be looking at is cash flow. When you look at dividend cash flow, you have to look at it over a 3 month period to get Cycle 1 to 3 of dividend payments. Or, you can look at dividend cash flow over a 12 month period.
Of course, when a company I own cuts or eliminates dividends, I check on the long term viability of the company. You have to ask yourself if you should buy more, sell some or all or just hold on a stock on such a company.
I look at Dividend Payout Ratios based on earnings and on cash flow. If I see some problems I might investigate the company further. I know that some analysts look at DPR based on Funds from Operations (FFO) and Adjusted Funds from Operations (AFFO) and Free Cash Flow.
I look at such things sometimes on a short term basis and for REITS, but I do not like to do this on a long term basis for a company. When a company cannot provide a positive EPS higher than the dividend over the long term, it suggests to me that the company is mortgaged to the hilt and not a good long term buy. You should be aware that there are many analysts that seem to disagree with this.
Getting back to my main theme, it is all about whether or not a company can afford to pay their dividends. A company’s ability to pay dividends will ultimately lead to higher stock prices over time.
Like the Investopedia site, most sites give a definition of Dividend Payout Ratio using Earnings. See Investopedia. I do not think that this is a bad thing to do, but I also feel that you should go beyond this. As I had already said, I look at DPR for both Earnings per Share (EPS) and Cash Flow. If I see problems, I look beyond this on an individual stock basis. Also, for REITs, I look at a DPR on Funds from Operations (FFO). (I used to also look at FFO for the old income trust companies.)
Dividend payout ratios vary widely among companies. Stable, large, mature companies (like TSX-BCE or TSX-TRP) tend to have larger dividend payouts. However, with a more growth-oriented company it will tend to keep their cash for expansion purposes, have modest payout ratios. This would be companies like Saputo (TSX-SAP). In fact a lot of consumer stocks have low payout ratios.
Also, dividends are paid with cash and not with earnings. This is why a lot of analysts check the dividend payments against things like Free Cash Flow. See Investopedia for a definition of Free Cash Flow. Others check the dividends against Funds from Operations (FFO) or Adjusted Funds from Operations (AFFO). For a definition on FFO see Investopedia and also Investopedia for a definition of AFFO.
For an example of calculating FFO, see Investing Answers. This site also discusses the difference between FFO and AFFO. Some REITS pay as high as 90% of the FFO in distributions, but others keep the ratio lower (say 60%). If a REIT is paying 90% of the FFO, it is basically paying all its profits in distributions.
Analysts talk about DPR for Earnings at 60% and below and DPR for Free Cash Flow at 80% and below and 40% or lower for Cash Flow. The best companies have cash flows that are higher than earnings.
In the Investing Daily blog is an article on why you should use cash flow values in your DPR. See Investing Daily.
There are sorts of perspectives on this ratio and all sorts of blogs mentioning this ratio. See these articles by Dividend Guy, Million Dollar Journey, Dividend Money, The Market Capitalist and Dividend Ninja, Wiki Fool.
Next week, I will go back to talking about utility type stocks, including ATCO (TSX-ACO.A), Canadian Utilities (TSX-CU) and Innergex Renewables (TSX-INE).
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on twitter.
Friday, July 29, 2011
Thursday, July 28, 2011
Debt Ratios
I used 4 basic debt ratios. Two have to do with assets and liabilities and two have to with equity (Shareholders’ Equity or Book Value) and its relationship to liabilities and assets. These ratios are balance sheet ones. There are a lot of different ratios you can use. What I am trying with my spreadsheets is to use a number of approaches to get different views of a stock. With these debt ratios I use I am trying to see if there are any problems than need further investigation.
The first one is the Liquidity Ratio and it is Current Assets/Current Liabilities. This is also called the Current Ratio. The next is the Asset/Liabilities Ratio and it is Total Assets/Total Liabilites. Ideally, for both these ratios you are looking for one of 1.50. That is assets are 1.5 times the liabilities. These ratios are also sometimes called Balance Sheet ratios.
With the Liquidity Ratio you are looking to see if a company has the ability to pay off their short term debts. If the ratio is less than 1.50, you might also want to look at the ability of the company to pay dividends and fund their short term debts (unfundable from short term assets) from cash flow. Also, you may want to see a higher ratio (i.e. 2.00) if you feel that the company would have a hard time borrowing money on a short term notice.
Also, some people use what is called the Quick Ratio which is Current Assets-Inventories/Current Liabilities. This is useful on companies which may have inventories that cannot readily been turned into cash. Inventories could have old products in them, or items in the inventory could be not readily sold in the current business cycle. This is compared to an inventory of new products easily sold.
Investopedia has a tutorial on this subject on site.
Asset/Liabilities Ratios are one way of looking at debt levels. Other Ratios look at Debt/Asset Ratio (Liabilities/Assets). These ratios are used to measure the long term solvency of a company. The higher the ratio, the better off the company is. This ratio can measure the financial risk of a company.
If the Asset/Liability Ratio is less than 1.00, then you should carefully review a company. It could be pointing to a company in difficulties. This is because the assets of a company cannot cover the company’s liabilities.
The next ratio to discuss is the Leverage Ratio or Assets to Book Value (or Shareholders Equity). This ratio shows how much of a company’s assets are owned by the company (or its shareholders) and how much are leveraged or financed through debt. This ratio strongly depends on the type of industry a company is in.
Read definitions of this ratio at Dogs of the Dow investor glossary, Wall Street Survivor site and at Investopedia.
Debt/Equity Ratio is another ratio I use. It is Total Liabilities/Shareholders Equity. This is also used to measure the long term solvency of a company. In the debt portion of this ratio, you may want to use just debt (short term and long term debt), or just use long term debt. It is important to realize that if the ratio is greater than 1, the majority of assets are financed through debt. If it is smaller than 1, assets are primarily financed through equity.
Read definitions of this ratio at Investor Words and Investor Words.
For this ratio, one of around 0.50 or below probably points to a company with no debt or very minimal debt. I just reviewed Computer Modelling Group Ltd (TSX-CMG) and its recent debt/equity ratio is 0.64. It has minimal debt. I reviewed it on my blog in June 2011. Click here or here to access its blog entries. See my spreadsheet at cmg.htm.
If it is high, the company is probably using debt to finance its operations. Utility companies often have high ones. I reviewed Enbridge Inc. (TSX-ENB).in April 2011 and its recent debt/equity ratio is 2.94. It heavily uses debt to finance its operations. Click here or here to access its blog entries. See my spreadsheet at enb.htm.
You would want to compare the current debt ratios to the historical debt ratios of the same company. You also want to compare a company’s ratios to similar companies in the same industry. These ratios only give you an indication on how a company is doing; you need to look at a number of things to get a complete picture of how well a company is doing. Also, the account methods a company uses can significantly affect these ratios.
Also, sometimes companies have what is called loan covenants that specify certain debt ratios that a company must maintain. If they do not, certain things must happen. Often, if they do not keep the loan covenants, dividends will be cut or discontinued until such time as the debt ratios meet the terms of the loan covenants. A company is said to have a “Clean Balance Sheet” if it has little or no debt.
There is a blog on accounting statements at Accounting Coach. This blog has a good articles on the Balance Sheet; the Income Statement; and the Cash Flow Statement.
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on twitter.
The first one is the Liquidity Ratio and it is Current Assets/Current Liabilities. This is also called the Current Ratio. The next is the Asset/Liabilities Ratio and it is Total Assets/Total Liabilites. Ideally, for both these ratios you are looking for one of 1.50. That is assets are 1.5 times the liabilities. These ratios are also sometimes called Balance Sheet ratios.
With the Liquidity Ratio you are looking to see if a company has the ability to pay off their short term debts. If the ratio is less than 1.50, you might also want to look at the ability of the company to pay dividends and fund their short term debts (unfundable from short term assets) from cash flow. Also, you may want to see a higher ratio (i.e. 2.00) if you feel that the company would have a hard time borrowing money on a short term notice.
Also, some people use what is called the Quick Ratio which is Current Assets-Inventories/Current Liabilities. This is useful on companies which may have inventories that cannot readily been turned into cash. Inventories could have old products in them, or items in the inventory could be not readily sold in the current business cycle. This is compared to an inventory of new products easily sold.
Investopedia has a tutorial on this subject on site.
Asset/Liabilities Ratios are one way of looking at debt levels. Other Ratios look at Debt/Asset Ratio (Liabilities/Assets). These ratios are used to measure the long term solvency of a company. The higher the ratio, the better off the company is. This ratio can measure the financial risk of a company.
If the Asset/Liability Ratio is less than 1.00, then you should carefully review a company. It could be pointing to a company in difficulties. This is because the assets of a company cannot cover the company’s liabilities.
The next ratio to discuss is the Leverage Ratio or Assets to Book Value (or Shareholders Equity). This ratio shows how much of a company’s assets are owned by the company (or its shareholders) and how much are leveraged or financed through debt. This ratio strongly depends on the type of industry a company is in.
Read definitions of this ratio at Dogs of the Dow investor glossary, Wall Street Survivor site and at Investopedia.
Debt/Equity Ratio is another ratio I use. It is Total Liabilities/Shareholders Equity. This is also used to measure the long term solvency of a company. In the debt portion of this ratio, you may want to use just debt (short term and long term debt), or just use long term debt. It is important to realize that if the ratio is greater than 1, the majority of assets are financed through debt. If it is smaller than 1, assets are primarily financed through equity.
Read definitions of this ratio at Investor Words and Investor Words.
For this ratio, one of around 0.50 or below probably points to a company with no debt or very minimal debt. I just reviewed Computer Modelling Group Ltd (TSX-CMG) and its recent debt/equity ratio is 0.64. It has minimal debt. I reviewed it on my blog in June 2011. Click here or here to access its blog entries. See my spreadsheet at cmg.htm.
If it is high, the company is probably using debt to finance its operations. Utility companies often have high ones. I reviewed Enbridge Inc. (TSX-ENB).in April 2011 and its recent debt/equity ratio is 2.94. It heavily uses debt to finance its operations. Click here or here to access its blog entries. See my spreadsheet at enb.htm.
You would want to compare the current debt ratios to the historical debt ratios of the same company. You also want to compare a company’s ratios to similar companies in the same industry. These ratios only give you an indication on how a company is doing; you need to look at a number of things to get a complete picture of how well a company is doing. Also, the account methods a company uses can significantly affect these ratios.
Also, sometimes companies have what is called loan covenants that specify certain debt ratios that a company must maintain. If they do not, certain things must happen. Often, if they do not keep the loan covenants, dividends will be cut or discontinued until such time as the debt ratios meet the terms of the loan covenants. A company is said to have a “Clean Balance Sheet” if it has little or no debt.
There is a blog on accounting statements at Accounting Coach. This blog has a good articles on the Balance Sheet; the Income Statement; and the Cash Flow Statement.
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on twitter.
Wednesday, July 27, 2011
Dividend Growth Stocks 2
Or, why buy SNC-Lavalin (TSX-SNC) and all that Part 2. Going back to the Globe and Mail article, one of the things that Tom Connolly, who was interviewed for the above article, said was that he was not selling his shares of companies that had not raised their dividends for a while. While I disagree with his holding on the Loblaw (TSX-L), a company I sold some years ago because I did not see an end to their problems, I have certainly held onto Power Financial (TSX-PWF), Sun Life Financial (TSX-SLF) and all my bank stock.
What I have noticed in recessions is that some sections of the market get hit much worse than other sections. In this past recession, insurance companies and banks, in fact all financial institutions got hit quite badly. The reason I did not sell was that I believe they will all recover and then continue on a great dividend growth stocks. The reason I sold Loblaw (TSX-L) was that I did not see it recovering in any sort of reasonable time frame.
I have followed dividend growth stocks for a while. There are two dividend lists that I follow of Dividend Achievers and Dividend Aristocrats (see indices). The main problems with such lists are that they are changing all the time. I do follow most of these stocks, see my website for stocks followed.
I had also followed Mike Higgs, an early blogger. He had his own ideas on what stock should be considered to be dividend growth stocks. On my stock index list, some 9 columns in, is one called “M”. Stocks with a “Y” in this column were ones on Mike’s list. Mike seldom changed the stocks on his list.
Also, he felt that the only way to judge if such stocks were currently cheap, was if the dividend yield was higher than the stock’s historical dividend yield. On my spreadsheets, in the dividend section, I usually have a “yield on low” row. This is the dividend yield on the low stock price of that year. Over to the right, I give the 10 year median “yield on low”. This will give you an idea on what sort of dividend highs a stock has had in the past.
My best advice is to not worry how well other people are doing, but only worry about how well you are doing. If you are making progress towards your investment goals, you are probably doing ok. There are always going to be bull markets and bear markets, so your portfolio value will fluctuate. But if you are looking for income and you are making progress in the long term in in getting higher and higher income, you are probably doing ok.
Also, if you have a good company, do not sell it off because it price goes lower than what you paid for it. If it is a good company, it will come back. The beauty of dividend growth stocks is that you can focus instead on the income you are collecting rather than on the portfolio value. There have been bear markets in the past and there will be bear markets in the future. It is just the way it is.
When markets go down there are temptations to sell your stock to buy back at a cheaper prices. This is called “Timing the Market”, and not even pros can get this right. You may get it right once in a while, but no one can do this consistently and it is a great way of losing money. Also, when you sell to buy later there are fees to pay and maybe taxes to pay, so it may not be as simple or as easy as it sounds.
I have statistics on the TSX going back to 1956 and there is only one 10 years period, 1974, when the stock market was lower over a 10 years period. The statistics do not include dividends, which can be a large part of your return. The TSX index has been lower after 5 years over the same time period 3 times, in 1974, 1977 and 2002. So, the thing to do is, invest for the long term.
For more information on this subject, see Investing for the Long Term. I believe the US had another 10 year period with a negative return just recently, but Canada has not. I believe there was 10 year loss period ending in 2009 for the US. We do somewhat follow the US markets, but not exactly. Sometimes we are hit by weaker markets than they are and sometime we get off lighter. The latest recession has been easier on Canada than US.
Also, buy what you know. You should understand how the companies you invest in make their money. I have a bias to financial and tech companies. I used to work in IT in the financial sector. I think you should also approve of the way your companies make their money.
I may follow a lot of companies now, but I started off investing in just 3 companies, BCE (TSX-BCE), Labatt and Bank of Montreal (TSX-BMO). I still have BCE and BMO. Labatt was bought out. Start small and with few stocks and get to know them. You do not need to have a balanced portfolio when you have little invested. You can balance your portfolio later when it has grown.
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on twitter.
What I have noticed in recessions is that some sections of the market get hit much worse than other sections. In this past recession, insurance companies and banks, in fact all financial institutions got hit quite badly. The reason I did not sell was that I believe they will all recover and then continue on a great dividend growth stocks. The reason I sold Loblaw (TSX-L) was that I did not see it recovering in any sort of reasonable time frame.
I have followed dividend growth stocks for a while. There are two dividend lists that I follow of Dividend Achievers and Dividend Aristocrats (see indices). The main problems with such lists are that they are changing all the time. I do follow most of these stocks, see my website for stocks followed.
I had also followed Mike Higgs, an early blogger. He had his own ideas on what stock should be considered to be dividend growth stocks. On my stock index list, some 9 columns in, is one called “M”. Stocks with a “Y” in this column were ones on Mike’s list. Mike seldom changed the stocks on his list.
Also, he felt that the only way to judge if such stocks were currently cheap, was if the dividend yield was higher than the stock’s historical dividend yield. On my spreadsheets, in the dividend section, I usually have a “yield on low” row. This is the dividend yield on the low stock price of that year. Over to the right, I give the 10 year median “yield on low”. This will give you an idea on what sort of dividend highs a stock has had in the past.
My best advice is to not worry how well other people are doing, but only worry about how well you are doing. If you are making progress towards your investment goals, you are probably doing ok. There are always going to be bull markets and bear markets, so your portfolio value will fluctuate. But if you are looking for income and you are making progress in the long term in in getting higher and higher income, you are probably doing ok.
Also, if you have a good company, do not sell it off because it price goes lower than what you paid for it. If it is a good company, it will come back. The beauty of dividend growth stocks is that you can focus instead on the income you are collecting rather than on the portfolio value. There have been bear markets in the past and there will be bear markets in the future. It is just the way it is.
When markets go down there are temptations to sell your stock to buy back at a cheaper prices. This is called “Timing the Market”, and not even pros can get this right. You may get it right once in a while, but no one can do this consistently and it is a great way of losing money. Also, when you sell to buy later there are fees to pay and maybe taxes to pay, so it may not be as simple or as easy as it sounds.
I have statistics on the TSX going back to 1956 and there is only one 10 years period, 1974, when the stock market was lower over a 10 years period. The statistics do not include dividends, which can be a large part of your return. The TSX index has been lower after 5 years over the same time period 3 times, in 1974, 1977 and 2002. So, the thing to do is, invest for the long term.
For more information on this subject, see Investing for the Long Term. I believe the US had another 10 year period with a negative return just recently, but Canada has not. I believe there was 10 year loss period ending in 2009 for the US. We do somewhat follow the US markets, but not exactly. Sometimes we are hit by weaker markets than they are and sometime we get off lighter. The latest recession has been easier on Canada than US.
Also, buy what you know. You should understand how the companies you invest in make their money. I have a bias to financial and tech companies. I used to work in IT in the financial sector. I think you should also approve of the way your companies make their money.
I may follow a lot of companies now, but I started off investing in just 3 companies, BCE (TSX-BCE), Labatt and Bank of Montreal (TSX-BMO). I still have BCE and BMO. Labatt was bought out. Start small and with few stocks and get to know them. You do not need to have a balanced portfolio when you have little invested. You can balance your portfolio later when it has grown.
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on twitter.
Tuesday, July 26, 2011
Dividend Growth Stocks
Or, why buy SNC-Lavalin (TSX-SNC) and all that. Not only is SNC a dividend growth stock, it is a growth stock per se. It has grown its dividends over the past 5 and 10 years at 24%. Over the past 5 and 10 years it has increased its stock price by 18% and 30% (it got hit by the last recession). The company’s Dividend Yield is low at a 5 year median rate of 1.1%.
It’s Dividend Payout Ratios for earnings and cash flow is 25% and 21% per year over the past 5 year. Having a low DPR gives the company room for dividend increases and also room to spend on expansion. Also, because it is a growth company it can and it does get hit at recession times. Growth companies have been more volatile in stock prices than more mature or the value investment type companies.
I know that there is a lot of controversy on the “yield on cost” (YOC) concept, but there is no doubt that buying such stock can really boost your income and portfolio, especially if you are saving for retirement. My purchase price for shares in this SNC (accounting for splits) is $3.40. I bought my shares some 13 years ago. The current dividend on this stock is $.84.
Therefore, on my original cost, I get a dividend yield of 25%. One problem with yield on cost is that it is not taking inflation into account. If we include a 3% per year background inflation rate, my yield would, of course be lower at approximately 18%. But, I think the main point remains and that is you can make a lot of dividend income from investments in dividend growth stocks.
In a lot of ways, SNC is in a class of its own as far as being a great dividend payer and a growth company. However, there are a few other such stocks in Canada. But there are a few, as far as I can see, that have potential. They are shown below. Please note that any such lists are entirely subjective. Also, growth stocks do not remain growth stocks forever.
Saputo (TSX-SAP),
Metro (TSX-MRU.A),
Home Capital Group (TSX-HCG),
Toromont Industries Ltd. (TSX-TIH),
Reitmans (TSX-RET.A),
Finning International Inc. (TSX-FTT),
Richelieu Hardware Ltd (TSX-RCH), and
Leon's Furniture Ltd (TSX-LNF).
Some of the best “yield on cost” stocks I have, I have listed below.
For Bank of Montreal(TSX-BMO), after 27 years, I have a YOC of 19.3%.
For Fortis (TSX-FTS), after 24 years, I have a YOC of 16.2%.
For Pembina Pipelines Corp (TSX-PPL), after 10 years, I have a YOC of 16%.
For RioCan Real Estate(TSX-REI.UN), after 13 years, I have a YOC of 12.6%.
For Royal Bank (TSX-RY), after 15 years, I have a YOC of 28%.
For SNC-Lavalin (TSX-SNC), after 13 years, I have a YOC of 25%.
As shown above on stocks from my portfolio, there are other ways besides growth companies with low dividends and high increases to get good YOC. Take for example Fortis, a stock that provides a good dividend and good increases. The 5 year median dividend is 3.7%. The 5 and 10 year dividend increases are 14% and 9%. The 5 year median DPR on EPS and Cash Flow are 65% and 27%. This is a utility company and utility companies did better in the last recession than financials did.
The Globe and Mail recently had an article on this very subject. See New names among the dividend growth stars.
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on twitter.
It’s Dividend Payout Ratios for earnings and cash flow is 25% and 21% per year over the past 5 year. Having a low DPR gives the company room for dividend increases and also room to spend on expansion. Also, because it is a growth company it can and it does get hit at recession times. Growth companies have been more volatile in stock prices than more mature or the value investment type companies.
I know that there is a lot of controversy on the “yield on cost” (YOC) concept, but there is no doubt that buying such stock can really boost your income and portfolio, especially if you are saving for retirement. My purchase price for shares in this SNC (accounting for splits) is $3.40. I bought my shares some 13 years ago. The current dividend on this stock is $.84.
Therefore, on my original cost, I get a dividend yield of 25%. One problem with yield on cost is that it is not taking inflation into account. If we include a 3% per year background inflation rate, my yield would, of course be lower at approximately 18%. But, I think the main point remains and that is you can make a lot of dividend income from investments in dividend growth stocks.
In a lot of ways, SNC is in a class of its own as far as being a great dividend payer and a growth company. However, there are a few other such stocks in Canada. But there are a few, as far as I can see, that have potential. They are shown below. Please note that any such lists are entirely subjective. Also, growth stocks do not remain growth stocks forever.
Saputo (TSX-SAP),
Metro (TSX-MRU.A),
Home Capital Group (TSX-HCG),
Toromont Industries Ltd. (TSX-TIH),
Reitmans (TSX-RET.A),
Finning International Inc. (TSX-FTT),
Richelieu Hardware Ltd (TSX-RCH), and
Leon's Furniture Ltd (TSX-LNF).
Some of the best “yield on cost” stocks I have, I have listed below.
For Bank of Montreal(TSX-BMO), after 27 years, I have a YOC of 19.3%.
For Fortis (TSX-FTS), after 24 years, I have a YOC of 16.2%.
For Pembina Pipelines Corp (TSX-PPL), after 10 years, I have a YOC of 16%.
For RioCan Real Estate(TSX-REI.UN), after 13 years, I have a YOC of 12.6%.
For Royal Bank (TSX-RY), after 15 years, I have a YOC of 28%.
For SNC-Lavalin (TSX-SNC), after 13 years, I have a YOC of 25%.
As shown above on stocks from my portfolio, there are other ways besides growth companies with low dividends and high increases to get good YOC. Take for example Fortis, a stock that provides a good dividend and good increases. The 5 year median dividend is 3.7%. The 5 and 10 year dividend increases are 14% and 9%. The 5 year median DPR on EPS and Cash Flow are 65% and 27%. This is a utility company and utility companies did better in the last recession than financials did.
The Globe and Mail recently had an article on this very subject. See New names among the dividend growth stars.
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on twitter.
Monday, July 25, 2011
Northland Power Inc 2
I do not own this stock (TSX-NPI). 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 my utilities investment. I read a report on this stock that said it was a good defensive stock to buy. I am not sure about that.
As far as Insider Trading goes, the report only starts for 2010 that is the last 7 months. During that time there has been a minimal of insider buying. There is not insider selling. There are 41 institutional holding some 21% of this stock. Over the past three months there has been buying and selling and they have decreased their shares by 6% overall. (See my site for information on Insider Trading.) Also, the Chairman of the Board owns some 26% of this company.
For this stock, I have a 5 year median low Price/Earnings ratios of 20.13 and a high P/E ratio of 25.40. These are rather high for a utility stock. Based on estimated earnings for 2010, I get a current P/E ratio of 44.72, an even higher value. The only positive note is that this P/E Ratio is lower than the low of last year, which was 253.00.
When I look at the Graham Price, I get a current one of $6.95. The stock price of $16.10 is 131% higher. The 10 year average difference between the Graham Price and the stock price is 31%. All I can say is that the current difference is better than last year where the difference between the Graham Price and stock price reach over 500%. (See my site for information on calculating Graham Price.)
I get a 10 year median Price/Book Value of 1.67, a not unreasonable value. The current one of 2.70 is rather high and is over 60% higher than the 10 year median. This stock used to be an income trust stock. Lot of income trust stock did not grow their book values. This is the same with this stock and the book value over the past 5 and 10 years has declined by 3% and 2% per year, respectively.
The 5 year median yield is 8.48%. The current yield is lower at 6.71%. This also says the current price is rather high. However, as with lots of companies going from income trust to corporations, this stock has not been raising their dividends. I do not see things improving next year as the earnings are expected to go down in 2012, not up.
When I look at analyst ratings, I find a few Strong Buy, more Buy and even more Hold recommendations. However, the consensus recommendation is a Buy recommendation. I find it strange that even when the company admits that they will be paying in distributions more than their distributable income until 2013 that analysts are so positive on this stock. I, for one, do not like companies that payout more than they should. To me, this implies that they will do into debt to pay distributions.
With Hold recommendations, analysts say that they feel this stock is fully valued. Analysts with Buy recommendations say that the company has good prospects for the future and they like the current yield. Another analyst says that the dividend is safe. One analyst remarks that the stock has good support at $15 level. (This means that it should not go below $15.) The risk level of this stock is given as medium.
I will keep an eye on this stock. However, I have no plans to buy it.
Northland Power Inc. indirectly owns interests in power projects. Northland's assets comprise facilities that produce electricity from "clean" natural gas and "green" renewable sources such as wind and biomass. Electricity generation is sold under long-term PPAs with creditworthy customers, and any fuel for natural-gas-fired projects, where required, is purchased under long-term contracts to assure stability of operating margins. This company operates in Canada, US and Germany. Its web site is here Northland Power. See my spreadsheet at npi.htm.
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on twitter.
As far as Insider Trading goes, the report only starts for 2010 that is the last 7 months. During that time there has been a minimal of insider buying. There is not insider selling. There are 41 institutional holding some 21% of this stock. Over the past three months there has been buying and selling and they have decreased their shares by 6% overall. (See my site for information on Insider Trading.) Also, the Chairman of the Board owns some 26% of this company.
For this stock, I have a 5 year median low Price/Earnings ratios of 20.13 and a high P/E ratio of 25.40. These are rather high for a utility stock. Based on estimated earnings for 2010, I get a current P/E ratio of 44.72, an even higher value. The only positive note is that this P/E Ratio is lower than the low of last year, which was 253.00.
When I look at the Graham Price, I get a current one of $6.95. The stock price of $16.10 is 131% higher. The 10 year average difference between the Graham Price and the stock price is 31%. All I can say is that the current difference is better than last year where the difference between the Graham Price and stock price reach over 500%. (See my site for information on calculating Graham Price.)
I get a 10 year median Price/Book Value of 1.67, a not unreasonable value. The current one of 2.70 is rather high and is over 60% higher than the 10 year median. This stock used to be an income trust stock. Lot of income trust stock did not grow their book values. This is the same with this stock and the book value over the past 5 and 10 years has declined by 3% and 2% per year, respectively.
The 5 year median yield is 8.48%. The current yield is lower at 6.71%. This also says the current price is rather high. However, as with lots of companies going from income trust to corporations, this stock has not been raising their dividends. I do not see things improving next year as the earnings are expected to go down in 2012, not up.
When I look at analyst ratings, I find a few Strong Buy, more Buy and even more Hold recommendations. However, the consensus recommendation is a Buy recommendation. I find it strange that even when the company admits that they will be paying in distributions more than their distributable income until 2013 that analysts are so positive on this stock. I, for one, do not like companies that payout more than they should. To me, this implies that they will do into debt to pay distributions.
With Hold recommendations, analysts say that they feel this stock is fully valued. Analysts with Buy recommendations say that the company has good prospects for the future and they like the current yield. Another analyst says that the dividend is safe. One analyst remarks that the stock has good support at $15 level. (This means that it should not go below $15.) The risk level of this stock is given as medium.
I will keep an eye on this stock. However, I have no plans to buy it.
Northland Power Inc. indirectly owns interests in power projects. Northland's assets comprise facilities that produce electricity from "clean" natural gas and "green" renewable sources such as wind and biomass. Electricity generation is sold under long-term PPAs with creditworthy customers, and any fuel for natural-gas-fired projects, where required, is purchased under long-term contracts to assure stability of operating margins. This company operates in Canada, US and Germany. Its web site is here Northland Power. See my spreadsheet at npi.htm.
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on twitter.
Friday, July 22, 2011
Northland Power Inc
I do not own this stock (TSX-NPI). 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 my utilities investment. 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. I am not sure that this is a utility stock I would use for that purpose.
At least this stock is earning money (i.e. Earnings per Shares (EPS) is mostly positive. However, the median Dividend Payout Ratio (based on earnings) on this stock is 180% over the past 5 years. The DPR, based on cash flow is better at a 5 year median of 92.3%. The company has also announced that they will be paying out more than 100% of their Free Cash Flow (FCF) until 2013. They have no plans on reducing their distributions.
The dividend yield on this stock is certainly very good. The current yield is at 6.7%. However, the 5 year median yield is higher at 8.5%. Also, they lowered the dividend payments in 2009 from $1.12 per year per share to $1.08 per year per share. Note that the dividend payments in 2007 were also $1.08 per year per share. This company was also an Income Trust and just made the transition to a corporation as of 1 January 2011.
What do I not like about this company? First of all, earnings (EPS) have fluctuated over the years. Also, the EPS are currently lower than they were 10 years ago. Distributable Cash has also been declining over the last few years. Of course, the problem with Distributable Cash is that there has been also sorts of changes to the methods used to calculate this figure over the years.
Cash flow, no matter how you calculate it, has either remained flat or declined over the past 5 and 10 years. Part of the problem is that Cash Flow is calculated per share and shares have been increasing. The 10 year median increase for shares is 5% per year. Book Value has also been decreasing over the past 5 and 10 years. This can be normal for Income Trust stock. Book Value is also calculated per share and increase in shares has therefore affected this stock’s Book Value
If you look just at revenue, it has been increasing over the by past 5 and 10 years at around 18% per year. However, the crucial figure is the revenue per share and this has only increased by 2.8% and 4% per year over the past 5 and 10 years, respectively.
Total Return on this stock has been good over the past 5 and 10 years and this has mainly to do with distributions. The 5 and 10 year Total Return is 8 and 15% per year. The portion of this return due to distributions is around 7% and 9% per year, respectively. So, you would have made money on this stock, but a lot of the return is in distributions.
Also, in the early years, a lot of the distributions were considered Return of Capital (that is the distributions affected your Adjusted Cost Basis (ACB)) and were not taxable. Later more and more became taxable, until almost all the distributions of recent years were taxable. Going forward, the distributions should be taxed as dividends.
As far as debt ratios go, the ones on this stock are very good. The Liquidity and Asset/Liability Ratios have been very good. The current ones of 1.75 and 1.68 are particularly good. Also, these Ratios are usually lower on most utility stocks. The same can be said about the Leverage Ratio and Debt/Equity Ratio of 2.99 and 1.78. These are quite good for a utility stock.
However, we should move on to Return on Equity (ROE). This stock seems to have done poorly on this measure in the past. The year 2010 was not good and it has a ROE under 1%. The 5 year median is just 5% per year. These are very low, even for a utility stock. According to the statements of March 31, 2011, the ROE for the last 12 months would be 17%. A very good figure and the absolute best one ever for this stock.
I would never expect a utility company to have great growth. What I expect is that it has slow steady growth. The point with defensive stock is that they should make money in good times and in bad times. They should be selling things that people need, no matter what. I am not sure I like this particular stock. However, it may improve with age.
Northland Power Inc. indirectly owns interests in power projects. Northland's assets comprise facilities that produce electricity from "clean" natural gas and "green" renewable sources such as wind and biomass. Electricity generation is sold under long-term PPAs with creditworthy customers, and any fuel for natural-gas-fired projects, where required, is purchased under long-term contracts to assure stability of operating margins. This company operates in Canada, US and Germany. Its web site is here Northland Power. See my spreadsheet at npi.htm.
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on twitter.
At least this stock is earning money (i.e. Earnings per Shares (EPS) is mostly positive. However, the median Dividend Payout Ratio (based on earnings) on this stock is 180% over the past 5 years. The DPR, based on cash flow is better at a 5 year median of 92.3%. The company has also announced that they will be paying out more than 100% of their Free Cash Flow (FCF) until 2013. They have no plans on reducing their distributions.
The dividend yield on this stock is certainly very good. The current yield is at 6.7%. However, the 5 year median yield is higher at 8.5%. Also, they lowered the dividend payments in 2009 from $1.12 per year per share to $1.08 per year per share. Note that the dividend payments in 2007 were also $1.08 per year per share. This company was also an Income Trust and just made the transition to a corporation as of 1 January 2011.
What do I not like about this company? First of all, earnings (EPS) have fluctuated over the years. Also, the EPS are currently lower than they were 10 years ago. Distributable Cash has also been declining over the last few years. Of course, the problem with Distributable Cash is that there has been also sorts of changes to the methods used to calculate this figure over the years.
Cash flow, no matter how you calculate it, has either remained flat or declined over the past 5 and 10 years. Part of the problem is that Cash Flow is calculated per share and shares have been increasing. The 10 year median increase for shares is 5% per year. Book Value has also been decreasing over the past 5 and 10 years. This can be normal for Income Trust stock. Book Value is also calculated per share and increase in shares has therefore affected this stock’s Book Value
If you look just at revenue, it has been increasing over the by past 5 and 10 years at around 18% per year. However, the crucial figure is the revenue per share and this has only increased by 2.8% and 4% per year over the past 5 and 10 years, respectively.
Total Return on this stock has been good over the past 5 and 10 years and this has mainly to do with distributions. The 5 and 10 year Total Return is 8 and 15% per year. The portion of this return due to distributions is around 7% and 9% per year, respectively. So, you would have made money on this stock, but a lot of the return is in distributions.
Also, in the early years, a lot of the distributions were considered Return of Capital (that is the distributions affected your Adjusted Cost Basis (ACB)) and were not taxable. Later more and more became taxable, until almost all the distributions of recent years were taxable. Going forward, the distributions should be taxed as dividends.
As far as debt ratios go, the ones on this stock are very good. The Liquidity and Asset/Liability Ratios have been very good. The current ones of 1.75 and 1.68 are particularly good. Also, these Ratios are usually lower on most utility stocks. The same can be said about the Leverage Ratio and Debt/Equity Ratio of 2.99 and 1.78. These are quite good for a utility stock.
However, we should move on to Return on Equity (ROE). This stock seems to have done poorly on this measure in the past. The year 2010 was not good and it has a ROE under 1%. The 5 year median is just 5% per year. These are very low, even for a utility stock. According to the statements of March 31, 2011, the ROE for the last 12 months would be 17%. A very good figure and the absolute best one ever for this stock.
I would never expect a utility company to have great growth. What I expect is that it has slow steady growth. The point with defensive stock is that they should make money in good times and in bad times. They should be selling things that people need, no matter what. I am not sure I like this particular stock. However, it may improve with age.
Northland Power Inc. indirectly owns interests in power projects. Northland's assets comprise facilities that produce electricity from "clean" natural gas and "green" renewable sources such as wind and biomass. Electricity generation is sold under long-term PPAs with creditworthy customers, and any fuel for natural-gas-fired projects, where required, is purchased under long-term contracts to assure stability of operating margins. This company operates in Canada, US and Germany. Its web site is here Northland Power. See my spreadsheet at npi.htm.
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on twitter.
Thursday, July 21, 2011
Atlantic Power Corp 2
I do not own this stock (TSX-ATP). Although I started to investigate this based on a favorable analyst report, I was quite surprised at the fact that that this company cannot seem to earn any money.
When I look at insider trading, I find that there is no insider selling or insider buying. Some of the directors have recently retained shares granted as options. I have found that Caisse de dépôt et placement du Québec owns some 53% of this company. Also, some 95 institutions own 18% of this company. Over the last 3 months institutions have bought and sold shares of this company, but overall they have increased their shares by 4.2%.
First, I have no 5 year median Price/Earnings Ratios because this company had only one year of profits. For that one year P/E Ratio would be between 3 and 4 (very low P/E Ratios). Currently the P/E Ratio for 2011, based on expected earnings is 32.3, a very high P/E Ratio.
As far as Graham Price goes, based on estimated earnings for 2011, I get $7.99 as a Graham Price. The Current stock price of $15.28 is some 92% above this. Because this is a utility company, you would expect the difference between the stock price and the Graham Price to move from a negative difference to a positive difference. That is, a stock price that moves around the Graham Price. The difference for this stock is much, much higher than would be expected for a utility company.
Surprisingly, this stock has grown its Book Value over the years. The 5 year median Price/Book Value is 3.28 (a high one for a utility company). The current one of 2.55 is some 77% lower than the 5 year median ratio. Normally this would be good, expect 2.55 is rather high P/B Ratio for a utility company.
The 5 year median dividend yield is 10.3% and the current one is 7.2%. This shows the current stock price to be rather high. Some people that analysis stocks, think that dividend yield is the only way to measure whether or not a stock price is a good one or not. And, by this measure, the stock price is too high.
When I look at analysts’ recommendations, I find Buy, Hold and Underperform recommendations. The consensus would be a Hold recommendation. (See my site for information on analyst ratings.)
Companies just starting out often do not have earnings. However, they also so not give out dividends. This stock still has a very high dividend yield at 7.3%. Positives are that they have revenue and they cash flow. Also, the Company says that they can maintain their present distributions until 2016.
Personally, I do not like companies with no earnings. I also do not chase high dividend yields. I think an investment in this company is risky, but they do have a great yield. Since they have no earnings analysts talk about their EBITDA. This is earnings before interest, taxes etc. It is not that I think it is invalid to talk about this, it is just it is the only thing they can talk about on this stock because it has no earnings.
Atlantic Power Corporation is an independent power producer that owns interests in a diversified fleet of power generation and transmission projects located in the United States. This company has a collection of gas-fired plants in the US and is generally in the lower cost quadrant of generation in its region. ATP owns interests in a diversified portfolio of independent, non-utility power generation projects and one transmission line situated in major U.S. markets. Its web site is here Atlantic Power. See my spreadsheet at atp.htm.
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on twitter.
When I look at insider trading, I find that there is no insider selling or insider buying. Some of the directors have recently retained shares granted as options. I have found that Caisse de dépôt et placement du Québec owns some 53% of this company. Also, some 95 institutions own 18% of this company. Over the last 3 months institutions have bought and sold shares of this company, but overall they have increased their shares by 4.2%.
First, I have no 5 year median Price/Earnings Ratios because this company had only one year of profits. For that one year P/E Ratio would be between 3 and 4 (very low P/E Ratios). Currently the P/E Ratio for 2011, based on expected earnings is 32.3, a very high P/E Ratio.
As far as Graham Price goes, based on estimated earnings for 2011, I get $7.99 as a Graham Price. The Current stock price of $15.28 is some 92% above this. Because this is a utility company, you would expect the difference between the stock price and the Graham Price to move from a negative difference to a positive difference. That is, a stock price that moves around the Graham Price. The difference for this stock is much, much higher than would be expected for a utility company.
Surprisingly, this stock has grown its Book Value over the years. The 5 year median Price/Book Value is 3.28 (a high one for a utility company). The current one of 2.55 is some 77% lower than the 5 year median ratio. Normally this would be good, expect 2.55 is rather high P/B Ratio for a utility company.
The 5 year median dividend yield is 10.3% and the current one is 7.2%. This shows the current stock price to be rather high. Some people that analysis stocks, think that dividend yield is the only way to measure whether or not a stock price is a good one or not. And, by this measure, the stock price is too high.
When I look at analysts’ recommendations, I find Buy, Hold and Underperform recommendations. The consensus would be a Hold recommendation. (See my site for information on analyst ratings.)
Companies just starting out often do not have earnings. However, they also so not give out dividends. This stock still has a very high dividend yield at 7.3%. Positives are that they have revenue and they cash flow. Also, the Company says that they can maintain their present distributions until 2016.
Personally, I do not like companies with no earnings. I also do not chase high dividend yields. I think an investment in this company is risky, but they do have a great yield. Since they have no earnings analysts talk about their EBITDA. This is earnings before interest, taxes etc. It is not that I think it is invalid to talk about this, it is just it is the only thing they can talk about on this stock because it has no earnings.
Atlantic Power Corporation is an independent power producer that owns interests in a diversified fleet of power generation and transmission projects located in the United States. This company has a collection of gas-fired plants in the US and is generally in the lower cost quadrant of generation in its region. ATP owns interests in a diversified portfolio of independent, non-utility power generation projects and one transmission line situated in major U.S. markets. Its web site is here Atlantic Power. See my spreadsheet at atp.htm.
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on twitter.
Wednesday, July 20, 2011
Atlantic Power Corp
First, I got a number of questions in connection with my SNC-Lavalin investment. I will try to answer them in the next few days.
Now, on to the stock that I want to review, Atlantic Power Corp (TSX-ATP) a stock I do not own. 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 my utilities investment. Although I started to investigate this based on a favorable analyst report, I was quite surprised at the fact that that this company cannot seem to earn any money.
According to the company they were covered by Distributable Cash until 2009. My spreadsheet shows that Cash Flow (adjusted for changes in the Balance Sheet) covers distributions in all years but 2009. I just wish they had some earnings. The only year that they had some earnings is 2008.
Although this is a company on the TSX and they pay the distributions or dividends in CDN$, all their assets seem to be in the US and they report in US$. Recently, instead of switching their accounting to the new IFRS standards, they switched to US GAAP standards.
This company is also interesting in that when it started, investors were given a share and a note under an Income Participating Securities (IPS) structure. When they again changed their structure for just shares in 2009, each IPS received one share. Old shares were considered to be worth 44% of new shares. This makes it difficult to value past and present shares.
One good thing has been the dividend yield on this stock. The 5 year median yield is 10.3%. The current yield is 7.2%. Also, total return has been positive. Over the past 5 years, total return has been around 15% per year with 9% of that in distributions. This is a very good return. I just wished they had some earnings.
As far as growth figures go, even in US$, they have not been great. Growth in Revenue in US$ over the past 5 years is 1% and in CDN$ is negative. I think that CDN$ is important, as they do pay out dividends in CDN$. Growth in Cash Flow over the past 5 years is around 2.5%. I do not have any other growth figures as this company has just been around since 2004.
Debt Ratios on this company are not bad at all, especially looking at Assets versus Liabilities. The Liquidity Ratio is currently at 1.64 and it has a 5 year median of 1.93. The Asset/Liability Ratio is currently at 1.76 which is good. The 5 year median ratio at 1.20 is quite low. Leverage Ratio is at 2.46 and the Debt/Equity Ratios is at 1.39. Both are fine. With all these ratios, it does not matter what currency you look at, they are the same.
Of course, the Return on Equity is dismal. This is because there is no net income. The ROE at the end of 2010 is -3.5% and the 5 year median ROE is -3.8%. However, the ROE for the 1st Quarter of 2011 is a respectable if low 7.8%.
I personally would not buy this stock. I would rather be able to sleep at night and not worry about my investments. I think that chasing yield can end in grief. I would personally want to go with a stock with much lower dividend yield that can earn money. I like Fortis (TSX-FTS) or Emera (TSX-EMA) or ATCO Ltd (TSX-ACO) or Canadian Utilities (TSX-CU) much better. It is also the sleeping at night thing that really says it all for me. My electricity utility stocks are Fortis and Emera. Both have been good stocks for me, especially Fortis, which I have owed since 1987.
I also like to invest, not speculate. So, I like companies that are making money. Even my investment in Computer Modelling (TSX-CMG) is an investment. The company is making money and I share in their success in making money by owning a piece of this company.
I have in the past left my portfolio totally alone for 6 months at a time to do other things. I would not worry about doing this is CMG in it. They are making money and have no debt. I worked in IT, so I understand how they make their money. But to me ATP would be different. Analysts look at Free Cash Flow (FCF) to determine if they can afford their distributions. However, to me that sounds like they are mortgaged to the hilt. Any misstep and it all could go south. To me, it all gets back to could you sleep at night with this investment?
The other thing is that this company is rated as a low risk. First, it would not be how I would rate this company. Secondly, low risk can just mean that you are unlikely to lose a lot of money on a stock. It does not say you would make any.
I also know that Dividend Girl has invested in this stock. It will be interesting to see how it all turns out for here. See Dividend Girl.
Atlantic Power Corporation is an independent power producer that owns interests in a diversified fleet of power generation and transmission projects located in the United States. This company has a collection of gas-fired plants in the US and is generally in the lower cost quadrant of generation in its region. ATP owns interests in a diversified portfolio of independent, non-utility power generation projects and one transmission line situated in major U.S. markets. Its web site is here Atlantic Power. See my spreadsheet at atp.htm.
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on twitter.
Now, on to the stock that I want to review, Atlantic Power Corp (TSX-ATP) a stock I do not own. 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 my utilities investment. Although I started to investigate this based on a favorable analyst report, I was quite surprised at the fact that that this company cannot seem to earn any money.
According to the company they were covered by Distributable Cash until 2009. My spreadsheet shows that Cash Flow (adjusted for changes in the Balance Sheet) covers distributions in all years but 2009. I just wish they had some earnings. The only year that they had some earnings is 2008.
Although this is a company on the TSX and they pay the distributions or dividends in CDN$, all their assets seem to be in the US and they report in US$. Recently, instead of switching their accounting to the new IFRS standards, they switched to US GAAP standards.
This company is also interesting in that when it started, investors were given a share and a note under an Income Participating Securities (IPS) structure. When they again changed their structure for just shares in 2009, each IPS received one share. Old shares were considered to be worth 44% of new shares. This makes it difficult to value past and present shares.
One good thing has been the dividend yield on this stock. The 5 year median yield is 10.3%. The current yield is 7.2%. Also, total return has been positive. Over the past 5 years, total return has been around 15% per year with 9% of that in distributions. This is a very good return. I just wished they had some earnings.
As far as growth figures go, even in US$, they have not been great. Growth in Revenue in US$ over the past 5 years is 1% and in CDN$ is negative. I think that CDN$ is important, as they do pay out dividends in CDN$. Growth in Cash Flow over the past 5 years is around 2.5%. I do not have any other growth figures as this company has just been around since 2004.
Debt Ratios on this company are not bad at all, especially looking at Assets versus Liabilities. The Liquidity Ratio is currently at 1.64 and it has a 5 year median of 1.93. The Asset/Liability Ratio is currently at 1.76 which is good. The 5 year median ratio at 1.20 is quite low. Leverage Ratio is at 2.46 and the Debt/Equity Ratios is at 1.39. Both are fine. With all these ratios, it does not matter what currency you look at, they are the same.
Of course, the Return on Equity is dismal. This is because there is no net income. The ROE at the end of 2010 is -3.5% and the 5 year median ROE is -3.8%. However, the ROE for the 1st Quarter of 2011 is a respectable if low 7.8%.
I personally would not buy this stock. I would rather be able to sleep at night and not worry about my investments. I think that chasing yield can end in grief. I would personally want to go with a stock with much lower dividend yield that can earn money. I like Fortis (TSX-FTS) or Emera (TSX-EMA) or ATCO Ltd (TSX-ACO) or Canadian Utilities (TSX-CU) much better. It is also the sleeping at night thing that really says it all for me. My electricity utility stocks are Fortis and Emera. Both have been good stocks for me, especially Fortis, which I have owed since 1987.
I also like to invest, not speculate. So, I like companies that are making money. Even my investment in Computer Modelling (TSX-CMG) is an investment. The company is making money and I share in their success in making money by owning a piece of this company.
I have in the past left my portfolio totally alone for 6 months at a time to do other things. I would not worry about doing this is CMG in it. They are making money and have no debt. I worked in IT, so I understand how they make their money. But to me ATP would be different. Analysts look at Free Cash Flow (FCF) to determine if they can afford their distributions. However, to me that sounds like they are mortgaged to the hilt. Any misstep and it all could go south. To me, it all gets back to could you sleep at night with this investment?
The other thing is that this company is rated as a low risk. First, it would not be how I would rate this company. Secondly, low risk can just mean that you are unlikely to lose a lot of money on a stock. It does not say you would make any.
I also know that Dividend Girl has invested in this stock. It will be interesting to see how it all turns out for here. See Dividend Girl.
Atlantic Power Corporation is an independent power producer that owns interests in a diversified fleet of power generation and transmission projects located in the United States. This company has a collection of gas-fired plants in the US and is generally in the lower cost quadrant of generation in its region. ATP owns interests in a diversified portfolio of independent, non-utility power generation projects and one transmission line situated in major U.S. markets. Its web site is here Atlantic Power. See my spreadsheet at atp.htm.
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on twitter.
Tuesday, July 19, 2011
SNC-Lavalin Group Inc 2
I own this stock (TSX-SNC). I bought this stock first in December 1998. I sold some in July 2008. To date I have a total return of 30% per year on this stock. Only 1.8% of this total return can be attributed to dividends. This stock is considered to be a dividend paying growth stock. The current dividend yield is 1.5% and this is above the 5 year median dividend yield of 1.1%.
As with other companies that are liberal with stock options, there is some $26.8M of insider selling under this company. The vast majority appears to be stock options of officers at $25.4M. There are an awful lot of officers at this company receiving stock options. Both the CEO and officers of this company have more options than shares. The CFO and Directors do not. For example, at present prices, the CEO has $5.1M of shares and $16.5M of options.
Some 137 institutions own 42% of this company. There was both buying and selling over the 3 month period. However, institutions have increased their shares by 1.8M over the past 3 months. This is an increase of $99M in their investment in this company.
For the 5 year median Price/Earnings Ratio, I get a low of 14.6 and a high of 28. The current one of 20.1 is just above the 5 year median P/E of 21. So, this shows a relatively reasonable stock price. I get a Graham Price of $27.67 and the current stock price of $55.35 is some 100% above this. The median difference over the past 10 years of Graham Price and stock price is 102%, so relatively speaking the stock price is reasonable. (See my site for information on calculating Graham Price.)
I get a 10 year median Price/Book Value Ratio of 5.06 and a current one of 4.47. The current one is some 88% of the 10 year median and also points to a current reasonable stock price. The last thing to look at is the dividend yield. The current one at 1.52% is higher than the 5 year median one of 1.1% and therefore shows a very good current stock price. (Also, the 10 year median high yield is also lower at 1.45%.) So, my spreadsheet points to a relatively good stock price.
When I look at analysts’ recommendations I find a number of Strong Buy, lots and lots of Buy and at least 1 Hold recommendations. The consensus is probably a Buy. Buy recommendations come with a 12 months stock price between $66 and $68.
Some analysts are concerned about their projects in the Middle East in connection with unrest there. Stock price has recently decreased because of this. Many feels this provides are good buying opportunity. Some think it is not the time to buy because of difficulties in the Middle East. However, this probably depends on whether you buy stocks for the short term or the long term. They are especially hit because of problems in Libya. The company does have projects all around the world.
I plan to continue to hold this stock in my portfolio. I will not be buying more at present because I already have enough invested in this company.
SNC-Lavalin are involved with engineering and construction work around the world, this includes infrastructure and Buildings; infrastructure and construction; power (nuclear, thermal, hydro etc.); chemicals and petroleum; environmental projects; mining and metallurgy projects. They have offices and Canada and around the world, from Algeria to Vietnam, including Australia, Europe, Russia, Africa, Middle East, Asia, South America, USA. Its web site is here SNC-Lavalin. See my spreadsheet at snc.htm.
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on twitter.
As with other companies that are liberal with stock options, there is some $26.8M of insider selling under this company. The vast majority appears to be stock options of officers at $25.4M. There are an awful lot of officers at this company receiving stock options. Both the CEO and officers of this company have more options than shares. The CFO and Directors do not. For example, at present prices, the CEO has $5.1M of shares and $16.5M of options.
Some 137 institutions own 42% of this company. There was both buying and selling over the 3 month period. However, institutions have increased their shares by 1.8M over the past 3 months. This is an increase of $99M in their investment in this company.
For the 5 year median Price/Earnings Ratio, I get a low of 14.6 and a high of 28. The current one of 20.1 is just above the 5 year median P/E of 21. So, this shows a relatively reasonable stock price. I get a Graham Price of $27.67 and the current stock price of $55.35 is some 100% above this. The median difference over the past 10 years of Graham Price and stock price is 102%, so relatively speaking the stock price is reasonable. (See my site for information on calculating Graham Price.)
I get a 10 year median Price/Book Value Ratio of 5.06 and a current one of 4.47. The current one is some 88% of the 10 year median and also points to a current reasonable stock price. The last thing to look at is the dividend yield. The current one at 1.52% is higher than the 5 year median one of 1.1% and therefore shows a very good current stock price. (Also, the 10 year median high yield is also lower at 1.45%.) So, my spreadsheet points to a relatively good stock price.
When I look at analysts’ recommendations I find a number of Strong Buy, lots and lots of Buy and at least 1 Hold recommendations. The consensus is probably a Buy. Buy recommendations come with a 12 months stock price between $66 and $68.
Some analysts are concerned about their projects in the Middle East in connection with unrest there. Stock price has recently decreased because of this. Many feels this provides are good buying opportunity. Some think it is not the time to buy because of difficulties in the Middle East. However, this probably depends on whether you buy stocks for the short term or the long term. They are especially hit because of problems in Libya. The company does have projects all around the world.
I plan to continue to hold this stock in my portfolio. I will not be buying more at present because I already have enough invested in this company.
SNC-Lavalin are involved with engineering and construction work around the world, this includes infrastructure and Buildings; infrastructure and construction; power (nuclear, thermal, hydro etc.); chemicals and petroleum; environmental projects; mining and metallurgy projects. They have offices and Canada and around the world, from Algeria to Vietnam, including Australia, Europe, Russia, Africa, Middle East, Asia, South America, USA. Its web site is here SNC-Lavalin. See my spreadsheet at snc.htm.
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on twitter.
Monday, July 18, 2011
SNC-Lavalin Group Inc
I own this stock (TSX-SNC). I bought this stock first in December 1998. I sold some in July 2008. Why I sold is because this stock was becoming too big a percentage of my portfolio. I never let anyone stock dominate my portfolio. If a stock becomes 5% of my portfolio, I keep an eye one it to sell some. I definitely sell some if a stock becomes 10% of my portfolio.
To date I have a total return of 30% per year on this stock. Only 1.8% of this total return can be attributed to dividends. This stock is considered to be a dividend paying growth stock. The current dividend yield is 1.5% and this is above the 5 year median dividend yield of 1.1%. Although for the last 3 years, the median dividend yields have been higher around 1.3% or 1.4%.
I have a mix of high dividend yield, but low dividend increase type stock and low dividend yield and high dividend increase type stock and some in between. This stock is a low dividend yield and high dividend increase type stock. The 5 and 10 year dividend increases has been at 24% and 23% per year, respectively.
I have a mix because it provides a bigger pool of stocks to choose from and provides me with a reasonable dividend yield and a reasonable dividend increase each year. I generally do not invest in stocks with less than 1% dividend yield. I also do not chase after stocks with very high dividend yields. My 5 year median dividend yield is 3.5% and my 5 year median dividend increase is 11%.
When you review this stock, you find that growth in revenues, earnings per share, cash flow and book value are all great. For example, the revenue per share growth over the past 5 and 10 years has been at 11% and 13% per year, respectively. Book Value growth has been at 17% and 16% per year, respectively.
The Return on Equity has generally always been good, especially over the past 3 years. The current ROE for the financial year ending in December 2010 is 25.6%. The ROE for the 12 months ending at the end of March 2011 is a bit lower at 22.8%.
As far as debt ratios goes, this company has been fine, but not great. However, it is considered an industrial stock and ratios are pretty normal for this sort of stock. The Liquidity Ratio is current at 1.20 and the Asset/Liability Ratio is at 1.35. These are both better than the 5 year median ratios of 1.09 and 1.21, respectively. The current Leverage Ratio is 4.12 and the Debt/Equity Ratio is at 3.06. These are better than the 10 year median ratios of 5.03 and 3.79.
I plan to continue to hold this stock in my portfolio. It is currently in my RRSP funds portion of my portfolio. If I sell from this set of funds, I will buy into it from my trading funds portion of my portfolio.
SNC-Lavalin are involved with engineering and construction work around the world, this includes infrastructure and Buildings; infrastructure and construction; power (nuclear, thermal, hydro etc.); chemicals and petroleum; environmental projects; mining and metallurgy projects. They have offices and Canada and around the world, from Algeria to Vietnam, including Australia, Europe, Russia, Africa, Middle East, Asia, South America, USA. Its web site is here SNC-Lavalin. See my spreadsheet at snc.htm.
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on twitter.
To date I have a total return of 30% per year on this stock. Only 1.8% of this total return can be attributed to dividends. This stock is considered to be a dividend paying growth stock. The current dividend yield is 1.5% and this is above the 5 year median dividend yield of 1.1%. Although for the last 3 years, the median dividend yields have been higher around 1.3% or 1.4%.
I have a mix of high dividend yield, but low dividend increase type stock and low dividend yield and high dividend increase type stock and some in between. This stock is a low dividend yield and high dividend increase type stock. The 5 and 10 year dividend increases has been at 24% and 23% per year, respectively.
I have a mix because it provides a bigger pool of stocks to choose from and provides me with a reasonable dividend yield and a reasonable dividend increase each year. I generally do not invest in stocks with less than 1% dividend yield. I also do not chase after stocks with very high dividend yields. My 5 year median dividend yield is 3.5% and my 5 year median dividend increase is 11%.
When you review this stock, you find that growth in revenues, earnings per share, cash flow and book value are all great. For example, the revenue per share growth over the past 5 and 10 years has been at 11% and 13% per year, respectively. Book Value growth has been at 17% and 16% per year, respectively.
The Return on Equity has generally always been good, especially over the past 3 years. The current ROE for the financial year ending in December 2010 is 25.6%. The ROE for the 12 months ending at the end of March 2011 is a bit lower at 22.8%.
As far as debt ratios goes, this company has been fine, but not great. However, it is considered an industrial stock and ratios are pretty normal for this sort of stock. The Liquidity Ratio is current at 1.20 and the Asset/Liability Ratio is at 1.35. These are both better than the 5 year median ratios of 1.09 and 1.21, respectively. The current Leverage Ratio is 4.12 and the Debt/Equity Ratio is at 3.06. These are better than the 10 year median ratios of 5.03 and 3.79.
I plan to continue to hold this stock in my portfolio. It is currently in my RRSP funds portion of my portfolio. If I sell from this set of funds, I will buy into it from my trading funds portion of my portfolio.
SNC-Lavalin are involved with engineering and construction work around the world, this includes infrastructure and Buildings; infrastructure and construction; power (nuclear, thermal, hydro etc.); chemicals and petroleum; environmental projects; mining and metallurgy projects. They have offices and Canada and around the world, from Algeria to Vietnam, including Australia, Europe, Russia, Africa, Middle East, Asia, South America, USA. Its web site is here SNC-Lavalin. See my spreadsheet at snc.htm.
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on twitter.
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