I bought this stock (TSX-TA) in 1987, some 24 years ago. I brought some more in 2009 because the price was good. I have made a total return of 7.8% per year on this stock. About 4.5% of my total return would be in dividends. This is a solid, conservative dividend paying utility stock that increases their dividend at the inflation rate and gives you a good dividend yield..
I cannot find any Insider Trading report on this stock. I do not know why this should be. There are a lot of institution owners of this stock and they own about 50% of this company. The stock price has been basically flat since early in 2009. There is a problem with TransCanada over the permanent shutdown of Units 1 and 2 of the Sundance Coal Fired power plant. This will probably end up in court.
No one thinks that the dividend is in jeopardy, and that the dividend will hold up the stock price until better times for this company. The dividend at the moment is quite attractive at 5.7%. This is higher than the 5 year median dividend yield of 4.1%.
I get a 5 year high median Price/Earnings Ratio of 28 and a 5 year low median P/E of 19.6. These ratios are rather high ones. The current P/E Ratio at 19.34 is at the lower end for this ratio. I get a Graham Price of $17.55 and the current stock price of $20.51 is some 17% higher. However, the stock price of this company has seldom been at or below the Graham Price. The average difference between the Graham Price and the stock price is 31%. The difference at the 5 year median low stock price is a Graham Price/Stock Price difference of 8%. So this difference today is in the low range.
I get a 10 year median Price/Book Value ratio of 1.80 and a current P/B Ratio of 1.59. So the current ratio is some 88% of the 10 year median ratio and points to a good relative stock price. In fact, all my spreadsheet indicators point to a relatively good current stock price. Where you see a problem is in the Dividend Payout Ratios and the one for Earnings shows that the company is currently paying out more in dividends that it is earning. The Dividend Payout Ratios for the last 2 years is 129% and 116%. This Dividend Payout Ratio for 2011 is expected to be around 109%.
When I look at analysts’ recommendations, I find Strong Buy, Hold, Underperform and Sell. I do not find any Buy recommendations. The consensus recommendation would be a Hold. (See my site for information on analyst ratings.) The reason analysts give for the Strong Buy is the dividend rate of 5.7%.
Most analysts give this a rating of Hold because they do not see any change in the stock price over the next 12 months. Their 12 months stock price is either $20 or $21. The current stock price is $20.51. Analysts that give Underperform and Sell recommendations say the same thing, that they see no stock movement over the next 12 months. No one sees any dividend increase over the next 12 months.
Since I own this stock, I will hold on to what I have. However, I do wonder about any buy recommendations, as I would think that there would be better utility stocks, with the promise of both capital gain and dividend income over the next year. I personally would not sell a stock just because it is going through a rough patch and that is why I will hold.
TransAlta is a power generation and wholesale marketing company. TransAlta maintains a low-to-moderate risk profile by operating a highly contracted portfolio of assets in Canada, the United States and Australia. TransAlta's focus is to efficiently operate our biomass, geothermal, wind, hydro, natural gas and coal facilities in order to provide our customers with a reliable, low-cost source of power. Its web site is here Transalta. See my spreadsheet at ta.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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