AltaGas Ltd

I own this stock of AltaGas Ltd (TSX-ALA, OTC-ATGFF). 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.

This company started to pay dividends in 2001. In 2004 it became an income trust and increased their dividends by over 220%. In 2010, the company became a corporation and decreased the dividends by almost 40%. Since then the company has increased their dividends again.

If you look at the 5 and 10 years change in dividends, dividends are down by 7.8% per year over the past 5 years, however, they are up by 16.7% per year over the past 10 years. Dividend increases have varied greatly since dividends have started. The last increase was in 2013 and it was for 2%. However, dividends were raised twice in 2013 and the dividends for 2013 were greater than dividends for 2012 by 7.2%.

A number of old income trusts decreased their dividends when they became corporations. Payout Ratios are different for income trusts and corporations. For corporations the Dividend Payout Ratio for earnings is important, whereas for income trusts Dividend Payout Ratios for distributable income is important. For this company the DPR for earnings was over 100% until 2013 when it was at 98%.

The DPR for cash flow is fine at 45% for 2013 and with a 5 year median of 58%. Analysts are still looking at and calculating Funds from Operations (FFO) and Adjusted Funds from Operations (AFFO) and looking at the payout based on these values. The DPR for FFO for 2013 was 43% and for AFFO for 2013 was 50%.

I have done very well on this stock with my total return at 30.23% per year with 6.92% from dividends and 23.31% from capital gains. It was expected that old income trust's dividend yields would go down, probably to 4 to 5% level. This would occur because of dividend decreases and stock price increases. The dividend yield has gone down to the 3 to 4% range for this stock.

The 5 and 10 year total return on this stock is 24.92% and 12.28% per year. The dividend portion of this total return is at 5.86% and 6.41% per year. The capital gains portion of this total return is at 19.06% and 6.87% per year. I personally do not expect to get such good returns on this stock in the future. First, the dividend yield is lower and secondly, the capital gains made on the switch from income trust to corporation will not occur again.

Outstanding shares have increased by 11% and 10% per year over the past 5 and 10 years. Shares have increased due to stock options DRIP and Share Issues. For this company revenue, earnings and cash flow were all hit in 2009 and had lower values than for 2008. Revenues, earnings and cash flow have gone up for the company quite well, but the important values are per share values and these have not done that well. The 5 year growth is not as good as the 10 year growth.

Revenue is up by 2.4% and 11% per year over the past 5 and 10 years. However, Revenue per Share is down by 8% per year over the past 5 years and is only up by 2% per year over the past 10 years. After revenues declined in 2009 they have been recovering, a bit uneven, but they are recovering. Revenue per Share was up some 21% in 2013.

Net Income is up by 5% and 18.5% per year over the past 5 and 10 years, but EPS is down by 13.8% over the past 5 years and up by 7.2% per year over the past 10 years. Earnings declined in 2009 and hit their low point in 2011 and since then they have been recovering. EPS is up by 43% in 2013.

The Cash Flow has increased by 13% and 16% per year over the past 5 and 10 years. Cash Flow per Share has increased by 1.6% and 5.1% per year over the past 5 and 10 years. After a decline in 2009, cash flows hit a low in 2010 and have since been recovering. Cash Flow per Share was up some 35% in 2013.

The Return on Equity was over 10% from 2003 to 2009 and has been under 10% since then. The ROE for 2013 was just 7.4%. However, the ROE on comprehensive income was 12% in 2013 so this is a good sign.

The Liquidity Ratio for 2013 is at 0.85. If you add in cash flow after dividends, the ratio becomes 1.11. If you take off the current portion of the long term debt, the ratio is 1.20 and if you add in cash flow after dividends, the ratio is 1.56. This stock is really a utility and they tend to count on cash flow to bolster their Liquidity Ratios.

The Debt Ratio is quite good at 1.64 for 2013. This ratio has always been good. The Leverage and Debt/Equity Ratios at 2.57 and 1.57 are normal for this sort of company.

I am pleased with my investment in this company. I will not be buying any more for the simple fact I have enough of this stock. I do not let any stock get a too high of percentage of my portfolio. See my spreadsheet at ala.htm.

This is the first of two parts. The second part will be posted on Friday, March 28, 2014 and will be available here. The first part talks about the stock and the second part talks about the stock price.

AltaGas operates physical assets and provides essential services to customers who produce and consume natural gas and power. Their gas business provides gathering, processing, transportation, storage and marketing of natural gas and natural gas liquids. Their power business generates and delivers power in Alberta and British Columbia and is developing a significant portfolio of renewable power projects. Its web site is here AltaGas.

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. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

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