Atco (Symbol-ACO.X) & Canadian Utilities (Symbol-CU.X)

Discuss your favourite picks, broker, and trading or investment style.
User avatar
yielder
Veteran Contributor
Veteran Contributor
Posts: 4911
Joined: 16 Feb 2005 07:47
Location: Hastings, Ontario

Atco (Symbol-ACO.X) & Canadian Utilities (Symbol-CU.X)

Post by yielder »

This stock is really starting to look expensive on no news. I hate when this happens especially in a stock that doesn't have high volume. The dividend and earnings growth is strong but at a current yield of 2%, it is at its most expensive yield. Similarily at a PE of 14, it is the most expensive that it has been in 10 years.

I buy stocks for the growing income stream and pay little attention to the unrealized gains but it's tough when they represent 19 years of dividends at the current level.

I expect that I will sell at some arbitrary price that is very close and wait for an opportunity to buy again cheaply.

Added: Well, I've got a limit order in at 77 (the bid/ask of 73.91/77 is nasty. ) I'll do my bit to provide liquidity.

Added: I just got filled. Somebody wants this stock at any price.
User avatar
Shakespeare
Veteran Contributor
Veteran Contributor
Posts: 23396
Joined: 15 Feb 2005 23:25
Location: Calgary, AB

Post by Shakespeare »

CU [which is most of Atco's earnings] is also pretty expensive right now.

Added: Down 100. There's the money for the windows. :wink:
Sic transit gloria mundi. Tuesday is usually worse. - Robert A. Heinlein, Starman Jones
User avatar
NormR
Veteran Contributor
Veteran Contributor
Posts: 5234
Joined: 18 Feb 2005 11:19
Contact:

Post by NormR »

Hey, stop talking trash about my stock :wink:
User avatar
yielder
Veteran Contributor
Veteran Contributor
Posts: 4911
Joined: 16 Feb 2005 07:47
Location: Hastings, Ontario

Post by yielder »

Shakespeare wrote:CU [which is most of Atco's earnings] is also pretty expensive right now.
Yep but I held 3x (on a cost basis) as much ACO as I did CU so I have neither the exposure nor the same unrealized gain/current income ratio. I'll probably continue to hold CU because there's less risk to the income stream although more risk to the price. I'll chew on this a bit before I sell it. I've already sold my EMA & don't own TA so I don't have much in the way of Canadian high current yield right now to pay the bills other than BCE, MBT, and AIT which is a bit concentrated in one industry and TRP.
User avatar
Shakespeare
Veteran Contributor
Veteran Contributor
Posts: 23396
Joined: 15 Feb 2005 23:25
Location: Calgary, AB

Post by Shakespeare »

CU is splitting 2:1

CU Splits
Sic transit gloria mundi. Tuesday is usually worse. - Robert A. Heinlein, Starman Jones
User avatar
Springbok
Veteran Contributor
Veteran Contributor
Posts: 5438
Joined: 22 Mar 2005 16:47

Post by Springbok »

Yielder wrote:
Shakespeare wrote:CU [which is most of Atco's earnings] is also pretty expensive right now.
I've already sold my EMA & don't own TA so I don't have much in the way of Canadian high current yield right now to pay the bills other than BCE, MBT, and AIT which is a bit concentrated in one industry and TRP.
Advice here and in press has been to sell (or at least not buy) high dividend yield utilities and telecoms.

But, for those of us living off income, don't we need to think a little differently. At some time in past we bought stocks like EMA/TA/TRP/BCE/MBT because of their dividend yield. We are still getting the cash flow from the yield.

It's hard to sell unless there is another investment that will produce a similar cash flow. Trusts and corporate bonds will do this.

For those of you who have sold TA, EMA, BCE etc - What did you do to maintain your cash flow?
User avatar
Shakespeare
Veteran Contributor
Veteran Contributor
Posts: 23396
Joined: 15 Feb 2005 23:25
Location: Calgary, AB

Post by Shakespeare »

Just looking at the cash flow is misleading. Preservation of capital and capital growth are also goals for many of us.

At a current yield of 3.1%, with slow growth, why would you not sell CU and buy CM at 3.4% yield, unless you already had a full position in CM? CM has less risk of capital loss if interest rates rise and better growth opportunities.

Disclosure: I have reduced my CU holdings by 50% this year. I am overweight CM.
Sic transit gloria mundi. Tuesday is usually worse. - Robert A. Heinlein, Starman Jones
User avatar
Springbok
Veteran Contributor
Veteran Contributor
Posts: 5438
Joined: 22 Mar 2005 16:47

Post by Springbok »

Shakespeare wrote:Just looking at the cash flow is misleading. Preservation of capital and capital growth are also goals for many of us.

Disclosure: I have reduced my CU holdings by 50% this year. I am overweight CM.
OOPS :cry: (I have some too , but definitely not overweight)

I was going to swap some cash in RSP for my unregistered EMA holdings, but after discussions here, perhaps I should sell EMA (my cost was $16.94 in late 2003) and buy a different div growth stock in RSP?

Thinking about Thomson
- Any other suggestions?

Just bought some more Methanex (MX) - one of my favourites, currently slightly depressed.
User avatar
yielder
Veteran Contributor
Veteran Contributor
Posts: 4911
Joined: 16 Feb 2005 07:47
Location: Hastings, Ontario

Post by yielder »

Springbok wrote:Thinking about Thomson
http://www.financialwisdomforum.org/for ... =3318#3318
Last edited by Peculiar_Investor on 07 Feb 2014 07:04, edited 1 time in total.
Reason: replace old domain name with www.financialwisdomforum.org to reflect new domain name effective 19-Jan-2014
User avatar
Shakespeare
Veteran Contributor
Veteran Contributor
Posts: 23396
Joined: 15 Feb 2005 23:25
Location: Calgary, AB

Post by Shakespeare »

CU split effective today.
I earlier wrote:At a current yield of 3.1%, with slow growth, why would you not sell CU and buy CM at 3.4% yield, unless you already had a full position in CM? CM has less risk of capital loss if interest rates rise and better growth opportunities.
Ahhshit.
Sic transit gloria mundi. Tuesday is usually worse. - Robert A. Heinlein, Starman Jones
User avatar
gossg
Contributor
Contributor
Posts: 375
Joined: 20 Feb 2005 02:10
Location: Calgary
Contact:

Post by gossg »

I, too, decided that this stock was expensive, even on the employee's purchase plan.

BTW, for those who know me, I think I last posted from Toronto. Since then I've moved to BC and then to Calgary. Atco made my wife an offer she couldn't refuse.
User avatar
Shakespeare
Veteran Contributor
Veteran Contributor
Posts: 23396
Joined: 15 Feb 2005 23:25
Location: Calgary, AB

Post by Shakespeare »

even on the employee's purchase plan.
If the company offers matching funds, that should be taken into account.

[Welcome back, Greg! I hope Cowtown works out for you.]
Sic transit gloria mundi. Tuesday is usually worse. - Robert A. Heinlein, Starman Jones
User avatar
gossg
Contributor
Contributor
Posts: 375
Joined: 20 Feb 2005 02:10
Location: Calgary
Contact:

Post by gossg »

Shakespeare wrote:
even on the employee's purchase plan.
If the company offers matching funds, that should be taken into account.
There is a small discount. She wants to keep up her RRSP savings. We don't have the money for both.
User avatar
yielder
Veteran Contributor
Veteran Contributor
Posts: 4911
Joined: 16 Feb 2005 07:47
Location: Hastings, Ontario

Post by yielder »

gossg wrote:
There is a small discount. She wants to keep up her RRSP savings. We don't have the money for both.
Welcome back.

Maybe discounted Atco is a better bet than your more aggressive bets???? :P

Mike
unicef01
Contributor
Contributor
Posts: 161
Joined: 02 May 2005 23:59

ATCO

Post by unicef01 »

looks like it has been declining a fair bit the last few trading days..

any theories?

http://stockcharts.com/def/servlet/SC.web?c=ACO/NX.TO

down 0.88 last check..
User avatar
Shakespeare
Veteran Contributor
Veteran Contributor
Posts: 23396
Joined: 15 Feb 2005 23:25
Location: Calgary, AB

Post by Shakespeare »

any theories?
IMO the price levels obtained by ACO and CU were unsupportable on a historical yield basis. Perhaps this is now being realized.
Sic transit gloria mundi. Tuesday is usually worse. - Robert A. Heinlein, Starman Jones
Taggart
Veteran Contributor
Veteran Contributor
Posts: 6893
Joined: 05 Dec 2005 07:34

Post by Taggart »

Just after checking the dividend payout ratio for cu.nv at msn.ca, and it's up to 183%. :shock:

Anyone heard any news?
User avatar
Shakespeare
Veteran Contributor
Veteran Contributor
Posts: 23396
Joined: 15 Feb 2005 23:25
Location: Calgary, AB

Post by Shakespeare »

CU and ACO split 2:1. Did they do the split adjustment right?
Sic transit gloria mundi. Tuesday is usually worse. - Robert A. Heinlein, Starman Jones
Taggart
Veteran Contributor
Veteran Contributor
Posts: 6893
Joined: 05 Dec 2005 07:34

Post by Taggart »

Shakes wrote:

>>>CU and ACO split 2:1. Did they do the split adjustment right?<<<

Did a bit more digging, and I think the earnings per share figure of .58 per share is possibly wrong. Anyhow, looking at globeinvestor the consensus earnings estimate for 2005 is $2.05 a share. Take that against the yearly dividend of $1.10 and the payout ratio turns out to be a lot more reasonable.
User avatar
Shakespeare
Veteran Contributor
Veteran Contributor
Posts: 23396
Joined: 15 Feb 2005 23:25
Location: Calgary, AB

Post by Shakespeare »

As mentioned by andyt here, Atco, although not "really, really cheap", is a lot less expensive than it was and now yields a not-unreasonable 2.3%.

I may nibble next week, depending on the opening price.
Sic transit gloria mundi. Tuesday is usually worse. - Robert A. Heinlein, Starman Jones
User avatar
Shakespeare
Veteran Contributor
Veteran Contributor
Posts: 23396
Joined: 15 Feb 2005 23:25
Location: Calgary, AB

Post by Shakespeare »

Got my toe in to Atco this morning, having missed Monday's low opener while walking the dog.

This is a holder, not a trader, and will replace AIT (which I will sell later this year).
Sic transit gloria mundi. Tuesday is usually worse. - Robert A. Heinlein, Starman Jones
User avatar
scomac
Veteran Contributor
Veteran Contributor
Posts: 7788
Joined: 19 Feb 2005 09:47
Location: The Gateway to Wine Country

Post by scomac »

Shakes and andyt,

I've been doing some work on Atco lately and I just can't seem to come up with a compelling reason to own this stock. I've looked at it from a number of different valuation models and everyone seems to indicate to me that the stock must go a lot lower before it will deliver an acceptable RoR going forward.

My work is indicating that a price of around $28 is necessary to generate returns in the neighbourhood of 10%-12% CAGR. Sales have been flat, earnings growth is declining, running about 4%/yr. for the past 5 yrs. vs. 4.6%/yr. over the last 10. Long term debt continues to climb and runs in excess of 2.5 times tangible book value. It appears that the company has been slowly converting short term liabilities into long term debt. :x

I haven't dug into things too deeply and I haven't yet looked into future prospects to see how that would impact things. But, I must say that I'm really curious to hear what it is that makes this company look attractive to you at the current price.

Thanks,

Scott
"On what principle is it, that when we see nothing but improvement behind us, we are to expect nothing but deterioration before us?"
Thomas Babington Macaulay in 1830
User avatar
yielder
Veteran Contributor
Veteran Contributor
Posts: 4911
Joined: 16 Feb 2005 07:47
Location: Hastings, Ontario

Post by yielder »

scomac wrote:the stock must go a lot lower before it will deliver an acceptable RoR going forward.
Yep, it looks expensive to me.

Image

Disclosure: I sold my position. This is not a recommendation to sell. People should do their own research and make their own decisions, ie, I'm not responsible for what you do.
Last edited by yielder on 08 Apr 2006 12:24, edited 1 time in total.
User avatar
bailey
Contributor
Contributor
Posts: 355
Joined: 24 Feb 2005 09:18
Location: Ontario

Post by bailey »

To yielder:
I'm looking at your spreadsheet and the 10-year growth rates for Revenue,EPS and Div/Shr are listed as 4.0%,7.4% and 11.3%. This is based on the CAGR formula with n=10. However for the time period that you have 1996 - 2005, n=9 and the results should be 4.42%,8.20% and 12.7%. You don't count the initial year. This will also affect the 5-year growth rate. The value should be n=4.

http://www.moneychimp.com/calculator/di ... ulator.htm
User avatar
yielder
Veteran Contributor
Veteran Contributor
Posts: 4911
Joined: 16 Feb 2005 07:47
Location: Hastings, Ontario

Post by yielder »

bailey wrote:I'm looking at your spreadsheet
Argggh. Fixed. Thank you. I have two copies of my spreadsheet that are not in sync. :cry: :cry:
Post Reply