Monday, July 13, 2020

Stock Analysis: Emera Inc (EMA)

As we are in the middle of a COVID19 pandemic, a lot of people were laid from their jobs or had to work from home to due to things like providing childcare to their children.   

As the economies are starting up all around the world, precautions are still need to prevent the spread of the virus.  

The pandemic might of led people to have an epiphany when it comes to their finances. Some of these people will have to want to drastically change their financial situation for the better.

An individual could improve their finances by budgeting their money and fast tracking their debt repayment.  An individual might want to grow their passive income through investing. 

When it comes to investing, a person could invest for more income via dividend growth stocks.

Investing in dividend growth stocks is a strategy is just as it sounds.  Investing in companies the pay dividends and increase the dividends on a regular basis.  

When it comes to investing, you do not want to over pay for a stock.  Over paying for a stock results in higher risk and lower starting yield.

To determine if a stock is undervalued or overvalued, we due a quantitative analysis on the company in question.

Ultimately, you want to purchase a stock far below the price determined by doing a valuation analysis. The lower the purchase price the better.  The lower the purchase the greater the starting yield, which means your money will be working harder for you.

Emera is a utility holding company that started as a single electrical utility in Nova Scotia to a conglomerate in the utility space.  Nova Scotia is a small province on the east coast of Canada.  Emera has operations in eastern Canada, United States and the Caribbean.  

Emera has grown into a major company in the utility space with over $32 billion in assets at end of 2019.  At the end of 2019, Emera had approximately 7400 employees and 65% US earnings.  

One of the major projects Emera was involved in was the Maritime Link. The Maritime Link which would bring hydro generated electricity produced at Muskrat Falls in the province of Newfoundland and Labrador to Nova Scotia.  This project provides electricity to Newfoundland and electricity to Nova Scotia via undersea cable. 

Now, I will to an fundamental analysis on Emera Inc.  Emera trades on the Toronto stock exchange under the ticker symbol EMA.  

Dividend Information

Currently, Emera is trading at $53.75 at the close on July 10.  Emera pays an annual dividend of $2.45 per share, or $0.6125 per share quarterly.  The stock is currently yielding 4.56%.  This yield is 7 bps above the stock's own 5 year average and around 100 bps above that of broader market.

The earnings per share (EPS) for the trailing 12 months is 3.57.  The dividend payout ratio is currently  68.6%.  This dividend payout ratio for a company in this space is great.  The earnings with a company in this space deal with outages and major weather events leading to high costs from time to time.  

The 5 year dividend growth rate is 10%.  The 10 year dividend growth rate is 8.7%.

Emera has increased their dividend for 13 consecutive years.  

Revenues and Earnings 

People use utilities to live their everyday lives.  Earnings in the short term will be effected due to the COVID19 shutdowns of their industrial and commercial customers.  This decrease in revenue will be offset by small increase in revenues from residential customers who utilities will cost more due to being at home more.  

Emera grew revenues from $1.5537 Billion in 2010 to $6.111 billion in 2019.  That is a CAGR of 16.44% over the last 10 years.  

Emera grew by acquisitions by buying utilities and entering generating deals with other energy providers. 

Emera grew earnings per share from $1.65 per share in fiscal year 2010 to $2.76 per share in fiscal year 2020.  That is a compound annual growth rate of 5.88%.

This EPS growth is lower than what I expected.  As the company is transitioning to more renewable energy, I expect the EPS will growth at larger rate due to lower costs to produce electricity.  

In 2020, Nova Scotia's block of energy from Muskrat Falls will start to flow. Muskrat Falls is located in Newfoundland and Labrador and will bring electricity to Nova Scotia via an undersea cable.  This will help to reduce Nova Scotia's use of coal to provide its electricity needs.  

As the companies owned by Emera Inc increase the amount of energy from renewables, the earnings should increase as a result.  Emera also has entered into generation agreements with other energy providers to provide energy to customers. 

Financial Position

We now move over to the balance sheet.  The long term debt to equity ratio is 1.59.

The interest coverage ratio comes in at 2.04.  I look for the interest coverage ratio to be over 5 to be comfortable.  As their cost will likely go down as energy is produced by more and more renewable sources and paying down their debt, I am not too concerned about this. Their cost should also be reduced to due lower prices of oil, natural gas and coal.  

Emera announced they are aiming to grow their dividend between 4 to 5 percent to 2022 a few years back due to their debt.  This dividend growth rate still beats the rate of inflation.  The dividend was growing at a rate 6 to 9 percent yearly before that.  

Over the last 5 years, the average net margin is 9.11% and the average return on equity is 8.24%.

The net margin is basically the amount of revenue, after all expenses, hits the bottom line expressed as a percentage.  So, the higher the net margin the better.  

Stock Valuation

The P/E ratio is currently 14.93.  

This P/E ratio is roughly the same as the broader market, which in this case is the TSX composite index.  

The current P/E ratio is a lot lower than the stock's own 5 year average P/E of 24.4.

Looking at cashflow, the current P/CF of 8.4 is slightly higher than the stocks own 5 year average P/CF of ratio of 7.5

The current yield of 4.56% is less than 10 bps higher than the stock own 5 year average yield.

These metrics do not look like the stock is undervalued. 

I will use a dividend discount model analysis to try to value the stock.  

I factor in a discount rate of 9% and a long term dividend growth rate of 4.25% for 7 years and then grow at 6% thereafter.

This long term dividend growth rates are lower than the stock's 5 year and 10 year dividend growth rate.  As the company announced a few years, they are aiming for 4 to 5 percent growth in their dividend out to 2022.  So, I being conservative in my approach with the growth rate to err on the side of caution.

The Dividend Discount Analysis gives me a fair value of $58.17.

I like to compare this to a 3rd party, so see if my analysis is reasonable.  

Morningstar currently rates Emera as a 3 star stock.  This would indicate the stock is equally valued.

Morningstar has a quantitative fair value of $55.68.

I take the average of these two numbers are get a fair value of $56.92.


The stocks appears to be approximately 6% undervalued as of closing price on June 10. 

I would not be a buyer of this stock at this price as the margin of safety is too low. Valuing a stock is not an exact science. 

Disclosure:  Long EMA in margin account


I am not a financial planner, financial advisor, accountant or tax attorney. The information on this blog represents my own thoughts and opinions and should NOT be taken as investment or business advice.

Every individual should do their due diligence to make their own financial decisions based on their financial situation and tolerance for risk.

Saturday, July 4, 2020

Dividend Income Update - June 2020

The month of June 2020 is another month of dividend income landing in my accounts. Recently, I switched my pay yourself first model to concentrate a little on debt repayment.  The interest on debt is 7.16% 5.66% plus the insurance on the debt.  The decrease in the interest rate is a result of emergency rate cutes by the Bank of Canada over the COVID19 pandemic.  Right now, I am paying myself 15% to my TFSA and 10% towards line of credit. The latter is not actually paying yourself first, but that is the percentage of income I am putting on my debt.  I am looking to make another purchase in TFSA.  

Note:  All the dividends and totals below are in Canadian Dollars. 
 Non-registered Accounts 
  • Enbridge (ENB) - $21.29
  • Enbridge (ENB) - $243.00
  • Enerplus (ERF) - $7.34
  • Shaw Communications (SJR.B)  - $19.75
  • Restaurant Brands International (QSR) - $70.08
  • Intertape Polymer Group (ITP) - $23.85
Subtotal : $385.31

  • Brookfield Renewable Partners - $24.12
  • Canadian National Railway - $21.85
  • Cominar REIT (CUF.UN) - $13.50
  • Enbridge (ENB) - $26.73
  • Killam Properties REIT (KMP.UN) - $17.11
Subtotal: $103.31

Total = $488.62

 I received a total of $488.62 in dividend income for the month of June 2020.  This represents a 12.8% increase from 3 months ago and 8.84% increase year over year.  

 The increase from 3 months ago do to a few things.  My dividend income from Intertape Polymer Group is larger due to the recent purchase of more shares.  Also, Restaurant Brands International paid the dividend on May 30 instead of during the first week of July.  The increase in dividend income was offset by suspension of distributions from Boston Pizza Royalties Income Fund and A&W Royalties Income Fund and Cineplex stopped paying a dividend.  Cineplex stopped a dividend due to closing theatres and other venues due to the COVID19 pandemic and to help satisfy conditions of the planned sale of the company to Cineworld of the UK.

Towards the end of June, Cineworld has pulled out the the deal citing Cineplex did not satisfy the terms of the deal.  Cineplex is going ahead with a lawsuit stating they did satisfy the conditions of the sale and that Cineworld is having buyer's remorse due to COVID19 shutdown.  

I received dividend / distribution income from 9 different companies. 

I received $0.00 in option premiums within my investment accounts in June  2020.

Below is a visual of my dividend totals for the last 5 years.  

Click to Enlarge

I will update my dividend income tab with the new amount.  I will include my option premium income also.  It is great to see money from passive income sources deposited into my brokerage account every single month.

Note:  Any activity in my RRSP account is not included in these totals. 

How was your dividend income for June 2020?

Disclosure : Long all mentioned securities


I am not a financial planner, financial advisor, accountant or tax attorney. The information on this blog represents my own thoughts and opinions and should NOT be taken as investment or business advice.

Every individual should do their due diligence to make their own financial decisions based on their financial situation and tolerance for risk.

Wednesday, July 1, 2020

Portfolio Update : June 2020

The month of June 2020 now behind us. Some major things have happened in the world, which affect the markets in some way.

COVID19 continues to rear its ugly head as it continues to spread across the world.  Governments at all levels have started to relax some of their rules when it comes to businesses operating and how they are to operate.  Businesses in most jurisdictions have to have social distance protocols and strict cleaning regimes in place in order to operate.  People are still concerned about the dangers to their health and the state of their jobs and finances.

Some employers have mandated that each employer fill out COVID19 questionnaires and temperature checks for an employee to complete prior being able to work that day.  Other employers (i.e. white collar jobs) have had employees work at home.

During the past week, another virus is starting to make news.  This is a swine flu virus that has been discovered in pigs in China.  It was stated that this could lead to a pandemic, but nothing to worry about at the present time.  We all heard something like that a few months back about COVID19.

Portfolio Activity

Margin Account Activity

I built up cash in my margin account in recent months.  So, I decided to make a purchase.

I decided to average down on my position of Intertape Polymer Group.  The ticker symbol is ITP and trades on the Toronto Stock Exchange.  I purchased 70 shares of Intertape Polymer Group at $12.05 per share on June 11.  The total cost of this purchase was $848.70 including commissions.

Intertape Polymer Group pays a quarterly dividend of $0.1475 USD per share, or $0.59 USD per share annually.  Most of the companies operations are in the United States, although the company is headquartered in Canada.  The dividends are converted to Canadian dollars prior to being placed in my margin account.  

This purchase adds $41.30 USD to my annual dividend income.  At the time of this writing, this is equivalent to $56.15 in Canadian dollars. 

TFSA Activity

There has been no buys or sells in this account. I have not taken any money out of this account in several months. 

After my recent purchase of Intertape Polymer Group in my margin account,  I started paying myself first with placing the money in my TFSA.  

Shares Purchased Via DRIP

1 unit of CUF.UN @ $8.2335 for a total cost of $8.23 (TFSA)

1 shares of ERF.TO @ $3.9835 for a total cost of $3.98 (Margin Account)

Cominar REIT pays a monthly distribution of $0.06 per unit per month, or $0.72 per unit annually. This DRIP adds $0.72 to my annual dividend income. The yield on cost for the DRIP unit is 8.75%.

Enerplus pays a monthly dividend of $0.01 per share monthly, or $0.12 per share annually. This drip adds $0.12 to my annual dividend income. The yield on cost for this DRIP is 3.02%.

I have some other positions with the DRIP turned on, but might not have enough of a dividend to purchase a whole share. Boston Pizza Royalties Income Fund (BPF.UN) have suspended their dividend due to restrictions put in the place due to COVID19. 

Please note that if some brokerages DRIP shares when there is no DRIP program by the actual company. This DRIP is when the brokerage buys the shares directly off the public market stock exchanges. 

Dividend Increases

There has been no dividend increases in June 2020. 

Dividend Decreases

There has been no dividend decreases in June 2020. 


As of July 1, 2020 , the total value of the portfolio is $107082.98. This is a 4.31% decrease over last month's total. 

The portfolio is estimated to produce an estimated $5188.44 in dividend income over the next 12 months. This is an increase of $59.32 CAD , or 1.157%. Some of the dividends in the Canadian stocks section are paid in US dollars, which are converted to Canadian dollars. The US dollar has weakened over the last month which results in the lower exchange rate when converting US dollars to Canadian dollars. 

Please Note: Positions in Restaurant Brands International (QSR.TO) and Intertape Polymer Group (ITP.TO) pay dividends in US dollars. Brookfield Renewables Partners (BEP.UN) pays distributions in US dollars. My investment tab spreadsheet displays the Canadian dollar equivalent within 15 to 20 minutes of real time. 

Did the pandemic change how you will live going forward regarding finances?

Disclosure: Long aforementioned stocks


I am not a financial planner, financial advisor, accountant or tax attorney. The information on this blog represents my own thoughts and opinions and should NOT be taken as investment or business advice. Every individual should do their due diligence to make their own financial decisions based on their financial situation and tolerance for risk.