Is it a good company at a reasonable price? I do not sell one of my long time holdings just because it is overpriced. I plan to hold on to the shares I have. I probably will not buy more as I have enough. I would be careful about buying at the present time as the stock price seems to be in the expensive range. Analysts recommendations mean nothing as most stocks are always listed as a Buy.
I own this stock of AltaGas Ltd (TSX-ALA, OTC-ATGFF). I bought this stock in 2009 and therefore started to follow it. When I bought this stock in 2009 it was on many dividend growth stock lists. In 2009, I saw that this stock also had good growth in Revenues, Earnings, Dividends, and Stock Prices over the last 5 and 10 years. The stock had a fairly strong balance sheet. I took a small position in this stock, and planned to wait and see how things go with this stock before buying more. I bought more in 2010 and 2012.
When I was updating my spreadsheet, I noticed this company had problems in 2018 with an earnings loss because of higher expenses, higher interest payments and provisions for taxes. They repositioned themselves that year but had to cut the dividends by over 50% in 2019. They started to increase the dividends again in 2021.
This is a big difference on this stock for those who have bought it 5 or 10 years ago. See the charts below. For people buying it 10 years ago in 2014 it was around an all-time high. You should avoid buying stocks at their all time highs. You cannot time the market, but you do know, relatively speaking, where a stock is currently. It is often hard to find a good stock cheap, but you can find ones at a reasonable price.
I have held this stock for over 15 years and I have made a total return of 9.73% per year with 3.42% from capital gains and 6.31% from dividends. For utilities you would expect a good portion of your total return from dividends.
If you had invested in this company in December 2014, for $1,040.16 you would have bought 24 shares at $43.34 per share. In December 2024, after 10 years you would have received $349.39 in dividends. The stock would be worth $803.52. Your total return would have been $1,152.91. This would be a total return of 1.24% per year with 2.55% from capital loss and 3.79% from dividends.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $43.34 | $1,040.16 | 24 | 10 | $349.39 | $803.52 | $1,152.91 |
If you had invested in this company in December 2019, for $1,008.78 you would have bought 51 shares at $19.78 per share. In December 2024, after 5 years you would have received $276.06 in dividends. The stock would be worth $1,707.48. Your total return would have been $1,983.54. This would be a total return of 15.56% per year with 11.10% from capital gain and 4.46% from dividends.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $19.78 | $1,008.78 | 51 | 5 | $276.06 | $1,707.48 | $1,983.54 |
The current dividend yield is moderate with dividend growth low. The current dividend yield is moderate (2% to 4% ranges) at 3.27%. The 5 year median dividend yield is also moderate at 4.32%. The 10 year and historical median dividend yields are good (5% to 6% ranges) at 5.25% and 5.29%. The dividends are currently increasing at a low rate (less than 8% per year) at 4.4% per year over the past 5 years. The last dividend increase was in 2025 and it was for 5.9%.
The Dividend Payout Ratios (DPR) are fine for a utility. The DPR for 2024 for Earnings per Share (EPS) is fine at 61% with 5 year coverage at 66%. The DPR for 2024 for Adjusted Earnings per Share (AEPS) is fine at 55% with 5 year coverage at 59%. The DPR for 2024 for Cash Flow per Share (CFPS) is good at 32% with 5 year coverage at 29%. The DPR for 2024 for Free Cash Flow (FCF) is non-calculable because of a negative FCF with 5 year coverage at 313%. However, there is no agreement with sites on what FCF is and MS does not even agree with itself.
| Item | Cur | 5 Years |
|---|---|---|
| EPS | 61.34% | 66.25% |
| AEPS | 54.84% | 59.41% |
| CFPS | 32.00% | 28.50% |
| FCF | 0.00% | 313.88% |
Debt Ratios are fine for a utility, but it does have lots of debt. The Long Term Debt/Market Cap Ratio for 2024 is high at 0.90 and currently at 0.80. However, we need also to look at the Long Term Debt/Covering Assets Ratio for 2024 which is still high at 0.89 and currently fine at 0.59 because this is a more important Ratio for a Utility. The Liquidity Ratio for 2024 is too low at 0.81 and 0.81 currently. If you added in Cash Flow after dividends, the ratios are still low at 1.14 and currently at 1.05. If you add back in the current portion of the long term debt, the 2024 ratio is fine at 1.51 with the current one low at 1.39. The Debt Ratio for 2024 is good at 1.53 and 1.53 currently. The Leverage and Debt/Equity Ratios for 2024 are fine at 2.88 and 1.88 and currently at 2.88 and 1.88.
| Type | Year End | Ratio Curr |
|---|---|---|
| Lg Term R | 0.90 | 0.80 |
| Lg Term R+A | 0.89 | 0.59 |
| Intang/GW | 0.58 | 0.51 |
| Liquidity | 0.81 | 0.81 |
| Liq. + CF | 1.14 | 1.05 |
| Liq. + CF + D | 1.51 | 1.39 |
| Debt Ratio | 1.53 | 1.53 |
| Leverage | 2.88 | 2.88 |
| D/E Ratio | 1.88 | 1.88 |
The Total Return per year is shown below for years of 5 to 25 to the end of 2024. 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. |
|---|---|---|---|---|---|
| 2019 | 5 | 4.39% | 15.56% | 11.10% | 4.46% |
| 2014 | 10 | -3.33% | 1.24% | -2.55% | 3.79% |
| 2009 | 15 | -3.90% | 10.52% | 3.92% | 6.60% |
| 2004 | 20 | -0.03% | 8.59% | 1.86% | 6.73% |
| 1999 | 25 | 9.42% | 17.91% | 7.12% | 10.79% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 13.97, 16.19 and 18.40. The corresponding 10 year ratios are 14.90, 17.54 and 20.19. The corresponding historical ratios are 13.02, 15.83 and 18.51. The current P/E Ratio is 17.23 based on a stock price of $38.55 and EPS estimate for 2025 of $2.24. This 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 also have Adjusted Earnings per Share (AEPS) data. The 5-year low, median, and high median Price/Adjusted Earnings per Share Ratios are 11.34, 13.11 and 15.94. The corresponding 10 year ratios are 12.21, 14.55 and 17.15. The corresponding historical ratios are 13.76, 23.58 and 27.68. The current P/AEPS Ratio is 17.29 based on a stock price of $38.55 and AEPS estimate for 2025 of $2.23. This ratio is above the high ratio of the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
I also have Funds from Operations (FFO) data. The 5-year low, median, and high median Price/Funds from Operations Ratios are 5.21, 5.82 and 6.37. The corresponding 10 year ratios are 5.28, 6.61 and 8.07. The corresponding historical ratios are 6.76, 7.83 and 9.69. The current P/FFO Ratio is 9.61 based on a stock price of $38.55 and FFO for last 12 months of $4.01. This ratio is above the high ratio of the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
I also have Adjusted Funds from Operations (AFFO) data. The 5-year low, median, and high median Price/Adjusted Funds from Operations Ratios are 5.83, 6.33 and 7.27. The corresponding 10 year ratios are 5.99, 7.34 and 5.99. The current P/AFFO Ratio is 9.01 based on a stock price of $38.55 and AFFO estimate for 2025 of $4.28. This ratio is above the high ratio of the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
I get a Graham Price of $37.52. The 10-year low, median, and high median Price/Graham Price Ratios are 0.68, 0.84 and 0.97. The current ratio is 1.03 based on a stock price of $38.55. The current ratio is above the high ratio of the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
I get a 10-year median Price/Book Value per Share Ratio of 1.10. The current P/B Ratio is 1.37 based on a Book Value of $8.361M, Book Value per Share of $28.06 and a stock price of $38.55. The current ratio is 25% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
I also have a Book Value per Share estimate for 2025 of $26.68. The analysts based this on a different book value calculation which has a 10 year P/B Ratio is 0.97. The current ratio is 1.44 based on a stock price of $38.55 and Book Value of $7,949M. This ratio is 49% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
I get a 10-year median Price/Cash Flow per Share Ratio of 8.26. The current P/CF Ratio is 9.44 based on Cash Flow per Share estimate for 2025 of $4.09, Cash Flow of $1,217M and a stock price of $38.55. The current ratio is 14% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get an historical median dividend yield of 5.29%. The current dividend yield is 3.27% based on dividends of $1.26 and a stock price of $38.55. The current dividend yield is 38% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively expensive. However, this test works best on dividend growth and dividends have been cut for this stock and dividends are still some 42% below the dividends before they were cut. Another problem is that dividend cuts are not good.
I get an historical median dividend yield of 5.25%. The current dividend yield is 3.27% based on dividends of $1.26 and a stock price of $38.55. The current dividend yield is 38% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively expensive. However, this test works best on dividend growth and dividends have been cut for this stock and dividends are still some 42% below the dividends before they were cut. Another problem is that dividend cuts are not good.
The 10-year median Price/Sales (Revenue) Ratio is 0.84. The current P/S Ratio is 0.78 based on Revenue estimate for 2025 of $14,248, Revenue per Share of $47.82 and a stock price of $38.55. 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 sort of wonder about the estimated Revenue for 2025 as it is an increase of $15% over 2024.
Results of stock price testing is that the stock price is probably relatively expensive. The dividend tests say the stock is expensive, but they are suspect. The P/S Ratio test says the stock is reasonable, but above the median, but I do wonder if revenue will go up 15% this year. The last 12 month estimate shows Revenue down 4%. Most of the rest of the testing shows the stock price as expensive. My next favourite test after dividend and P/S Test is the P/GP Ratio test and this says that the stock price is relatively expensive. If you look at the stock chart, and the stock price is at a high. That is generally not a good time to buy.
When I look at analysts’ recommendations, I find Strong Buy (3), Buy (4), Hold (2) and Underperform (1). The consensus is a Buy. The 12 month stock price consensus is $39.50 with a high of $42.00 and low of $35.00. The consensus 12 month stock price of $39.50 implies a total return of 5.73% with 2.46% from capital gains and 3.27% from dividends based on a current stock price of $38.55.
Most analysts on Stock Chase says it is a buy, but one says hold because it is at a high and will probably correct. Stock Chase gives this stock 5 stars out of 5. Christopher Liew on Motley Fool suggests that risk adverse investors might want to buy this stock. Robin Brown on Motley Fool says this is a safe stock for Canadians to buy. The company put out a Press Release about their fourth quarter of 2024.
Simply Wall Street on Yahoo Finance talks about this company missing 2024 earnings expectations. Simply Wall Street has 3 warnings of interest payments are not well covered by earnings; dividend of 3.28% is not well covered by free cash flows; and significant insider selling over the past 3 months. Simply Wall Street thinks this stock is undervalued as they calculate a Fair Value is $139.63. See their Valuation site. Simply Wall Street gives this stock one and one half stars out of 5.
AltaGas Ltd owns and operates a diversified basket of energy infrastructure businesses. Business is conducted through given segments: Midstream, Utilities and Corporate/other. Revenue is derived from customers in both Canada and the United States, with Canadian customers contributing the most. Its web site is here AltaGas Ltd.
The last stock I wrote about was about was TC Energy Corp (TSX-TRP, NYSE-TRP) … learn more. The next stock I will write about will be Hydro One Ltd (TSX-H, OTC-HRNNF) … learn more on Monday, March 24, 2025 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.
See my site for an index to these blog entries and for stocks followed. I have three blogs. The first talks only about specific stocks and is called Investment Talk. The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter. I am on Instagram. Or you can just Google #walktoronto spbrunner8166 to see my pictures.
