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Algonquin Power & Utilities Corp (AQN)

58K views 304 replies 51 participants last post by  AltaRed 
#1 ·
Wondering if anyone holds this?
Seems like it has performed well over the past few year.
The P/E is high at 30 but it also has a beta of 0.17 and a 5.16% dividend.

I have not had the chance yet the comb through the financials yet, but wondering what you guys think about it?
 
#95 ·
makes sense, thanks for the reply.

Maybe another dumb question but I've seen the dividend listed in CAD on Morningstar, the past 5 quarters are CDN, 6 quarters before that are US then again CDN way back. TD has the annual dividend as 0.47 US. I'm assuming it's still US though as previous posts suggest. If i'm wrong please let me know but i'm going with US
 
#97 ·
the situation with algonquin dividend may be more complicated than above black-&-white statement. AQN may group with brookfield & potash in a trio of canadian stocks that do, initially, pay USD dividends; however these companies send certain brokers bulk dividend payments in CAD directly from their treasury departments.

altaRed, i believe you yourself have, in the recent past, confirmed that POT is paying clients of scotia Itrade dividends in CAD, with no FX fee being charged, is that not so?

if i am not mistaken, i believe that royal bank clients also receive POT dividends in CAD. If clients of these 2 brokers are unfortunate enough to be holding their potash shares in US accounts - hoping to receive USD dividends without broker FX fees - they will be disappointed.

yet potash is a USD dividend payor & most other brokers in canada are receiving their bulk POT dividend payments in USD.

brookfield asset management is another with a confused dividend payment history.

i've posted previously about these detailed circumstances, not going to repeat here.
 
#98 ·
I don't recall exactly. I've been out of POT for at least a few (if not more) years and don't trust my memory, but I tend to think so.

In my case for AQN, I get the full USD dividend for shares held on the USD side of my account. I don't hold it on the CAD side so cannot comment about forex conversion commissions.
 
#99 ·
i don't believe we're talking about the same dividend payment procedures though.

i believe that you're talking about the better-known procedure in which a canadian USD dividend payor sends its bulk dividend payment to brokers in USD, who then proceed to charge their own FX fees when they distribute the dividend in pro-rated amounts into canadian accounts that hold the shares?

the solution to this problem is to hold those shares in USD account. This workaround has been discussed/explained thousands of times in cmf forum.

but i'm talking about an unknown, different & more recent procedure, in which a few canadian companies that pay USD dividends have decided to convert those dividends in their own treasury departments, usually using spot rate, prior to sending out the bulk dividend payments to brokers. These self-converted dividends are then sent in CAD. However - just to be really really difficult - "some" dividends get sent to "some" brokers in USD.

the problem for investors in these rogue cases is that it's difficult to know in avance what company X is going to do with broker Y. Take Potash, for example. Potash sends CAD bulk dividends to scotia iTrade & apparently also to roybank. But Potash sends USD bulk dividends to TDDI & BMO Investorline.

it was yourself & haroldCrump - most notably HC who researched the process extensively - who established back in 2014 that Potash had recently begun delivering CAD dividends to scotia iTrade.

brookfield asset management is another rogue payor of what are basically supposed to be USD dividends. BAM's history is erratic. Sometimes it pays dividends in USD. However for a few years - through 2016 - BAM was paying "some" dividends to "some" brokers - including TDDI - in CAD.

algonquin is a fairly recent convert to USD dividends. There is some slight evidence that algonquin dividends are following the split pattern described above for potash & brookfield. If so, this would be a pity.


.
 
#100 ·
Yeah, I do get what you were saying. My solution was to do a best guess on how the dividend was handled, put it into the CAD or USD side as appropriate and wait for one dividend to come to see if there was forex leakage and then journal it to the other side if there was forex leakage. I seem to recall a similar issue with ECA some years back when I held it.

I don't have any such stocks in my BMO IL account so cannot attest to anything they do, or don't do.
 
#101 ·
^^ is absolutely the only thing to do. Hold new stock in whichever account seems the most reasonable, see what happens, adjust if necessary.

i keep chasing my BAM shares from one currency to the other. Currently they are in USD. My BAM shares have been to the US more often in recent years than i have.

as the regional vp e-mailed when i asked Why this Constant Uproar in BAM dividends, "We have to take whatever they send us."

.
 
#104 ·
Won't be selling my AQN anytime soon , probably add if it dips more tomorrow . Other "utility" stocks in my portfolio didnt drop even close to what AQN has in the last 2 days though , thats why i was wondering ..

And even with the drop in weed stocks today I'm still killing it with them , Weed @ $4 long time ago ..
 
#105 ·
AQN appears substantially overpriced for what it is. It's a fairly new company and seems to have a small amount of room to grow, so I'm giving it some credit. Still, it doesn't appear to have a ton of headroom for growth so the price seems unjustified.

How much opportunity for growth are we looking at, here? I understand that solar and wind installations will increase over the years but I wonder how long it will be before the current valuation is justified.

Any thoughts? Has anyone else taken a stab at valuing this company?
 
#111 ·
It means they continue to fund development and acquisition opportunities to grow the company. They have to balance using debt and equity to keep the balance sheet healthy. As long as development provides double digit ROC and acquisitions are accretive, it is an effective use of money. Of course, that is the trust one puts in management....that they spend the money wisely to avoid dilution of existing shareholders. Not the first time AQN has gone to the market and it won't be the last time either.
 
#114 ·
The value of the company has increased -- it has the cash from the share sale on its books.

Grossly simplified: Company A has 100 shares worth $1 each. It issues 10 new shares at $1. It adds the $10 to its assets, to be used for general corporate purposes. The company now ought to be worth $110 -- still $1 a share.
 
#115 ·
That is a monster issue of shares - almost 10% of the company. You would hope that they can invest that money at a rate of return that is better than their current assets, or the overall value of the shares could decrease. The problem with many of these types of companies, is that they can't. They went public or developed excellent assets and get a high multiple. But because they are so slow growth, the only way to grow the company is to issue shares.
 
#117 ·
Yet, did they deploy their shares well from those issuances? Compare annual 2019 results to 2018. 2019 revenue below 2018 revenue. Adjusted net earnings up 3% in total, but down 5% per share because of dilution. And that was before another 10% dilution. You are getting less revenue, net earnings, EBITDA, funds from operation, per share than you were 2 years ago. It doesn't mean it isn't a buy, and the share price can go up for any reason, but it is just a cause for further investigation. I would be concerned a little and my assumption is that AQN's per share metrics and dividend growth will probably be slowing down.
 
#118 ·
While I agree with you using the 2019 vs 2018 result comparisons on a per share basis, it is not entirely fair to compare narrow snapshots. AQN has $9B in the development pipeline to generate even more earnings. The assumption of course is the injection of capital today to fund that program depresses near term per share metrics, but will pay off when the new projects start generating cash/earnings themselves. Only time will tell of course. If they don't deliver, share prices will get hammered in the next 2-4 years if results are not forthcoming. Or they deliver and have an appetite for obtaining yet more capital for further growth, and so on.
 
#120 ·
I am a long time holder of AQN (first purchased in 2012 ACB under $6). I have tried to add to this position from time to time without success. My most recent attempt was after it raised it's dividend again this year. I have yet to process the implications of such a large issuance of shares. The dialogue that has followed in this thread the past couple days has given me additional insight and forced me to reevaluate my confirmation bias. I still believe AQN is a great company and stock but would agree that execution will determine future share price. I have been burnt a few times with what I believed to be solid companies failing to execute. This is perhaps why I lean towards dividend growth companies so that I can derive income while the price fluctuates. One can easily trap themselves by holding a bad company that continues to pay a dividend it can no longer afford. I have learned a lot about this in my journey of DIY. One must monitor their positions and if one takes the time they can see the warning signs. I plan to hold my position in AQN but now must decide if I want to add and at what price. Thanks to all for sharing the posts above.
 
#122 ·
Rapid growth companies often come back to the equity markets for capital in order to fund their growth. This is completely normal and good as long as the opportunities are indeed accretive to the company's operations. The problem comes when that growth is no longer as good as the base company and increased share issuance becomes true dilution as noted by Doctrine.

Many investors, including many CMF members, fell over themselves for years buying into the Crescent Point Energy pacman. That worked as long as the opportunities were, or appeared to be, truly accretive. It went to hell when the company kept overpromising and undelivering and it became apparent this company was a house of cards. It may be in the doghouse forever, even if oil prices bounce back. It will (should) be whipped back in the woodshed if it tries to go to the equity markets again.
 
#123 ·
The Crescent Point comparison is a good one. CPG was valued because of its high margin oil business. Because it paid out such a high dividend, to grow the company they had to issue shares. They were fairly cavalier about it and bought assets they claimed were valuable. However, the last few years has shown this not to be the case. They have unwound many of those in order to improve the company's profile and are slowly reverting back to what they were in the first place. Except, with a share price that is 90%+ lower.

Altagas is another comparison. They also got hurt by continually growing by acquisition and also new projects, and eventually when execution failed the share price fell. They are still down over 50% from their 2014-2015 highs.

AQN unlikely to drop 90%, and are in a favourable industry especially with their renewable business, which is on trend. You just can't depend on share price appreciation, and you should be hesitant about dividend growth moving forward as that dividend is closing in on $500M a year. You just know this company is going to issue shares every time the share price grows.
 
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