# Utility - ACO.X vs EMA vs FTS



## treva84 (Dec 9, 2014)

Hey guys,

In Jan of this year I created a small dividend portfolio in my TFSA which is essentially a mom fund - I anticipate I'll start to have to financially support her in the next 10-15 years when she retires (interestingly she gave me this money when my grand mother passed away; essentially I'm just managing it for her). 

It consists mostly of boring Canadian dividend stocks (T, RY, CNR, SU) and international index funds. I'm thinking about adding a utility company to the portfolio, one that has consistent history of growing dividends. My plan is to buy and hold. 

I've been looking at Atco, Emera and Fortis. They all seem to be relatively expensive with Fortis having the highest P/E. Atco and Emera have similar PE and similar EPS but Emera has a higher yield, although I think Atco has a longer history of raising dividends.

Which would you buy and why?


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## AltaRed (Jun 8, 2009)

Warning: I am biased.

I believe FTS (especially) and EMA are overpriced while ACO.X is fairly valued. I bought ACO.X in the low 40s during the Nov-Dec O&G downturn. ATCO is not a 100% utility given it has a Structures business which will suffer some during the O&G crisis but this latter business is not a major part of their business. The Southern family which still controls ATCO is not wealthy for no reason. 

One thing to think about: It is not so much dividend yield in isolation that is the most important criteria - it is total return (price appreciation + dividend yield).


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## 1980z28 (Mar 4, 2010)

?????


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## My Own Advisor (Sep 24, 2012)

FTS raised their dividend a few months ago 

Treva84, I'm also biased, if you're buying and holding for years, decades in fact, then today's price is likely as good as any. You can wait, but I have no idea what the future holds.

Nothing wrong with boring stocks...T, RY, CNR, SU and using international index funds. I absolutely think this is a great way to invest given 50% of Canadian economy runs off financial companies and energy companies, and you can count all the big players on two hands in those sectors.

Buy, hold, collect dividends, reinvest dividends and prosper.


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## AltaRed (Jun 8, 2009)

1980z28 said:


> History is that FTS has raised it`s dividend for a very long time


http://www.dividendchannel.com/symbol/fts.ca/ Sometimes only a penny a share per quarter but tripled in 20 years (1.175 cents/share per quarter average).

Added: ACO.X went up by almost exactly 10 fold during the same period.


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## treva84 (Dec 9, 2014)

AltaRed said:


> http://www.dividendchannel.com/symbol/fts.ca/ Sometimes only a penny a share per quarter but tripled in 20 years (1.175 cents/share per quarter average).
> 
> Added: ACO.X went up by almost exactly 10 fold during the same period.


Thanks for the suggestions guys. Very interesting website Alta, I found the little Performance Box on the bottom right and compared the three together over 20 years (with dividends reinvested) 

$10,000 initial investment over 20 years, with divvy's reinvested, would yield the following:

ACO.X - $153,394.63
FTS - $111,228.33
EMA - $74,356.83

Of course, past performance is no indication of future success but I think I'm likely to buy ACO.X given i) consistent dividend growth and ii) price appreciation.

Now, to get to the point where my dividends can yield re-invested shares rather than $$ (as no fractional shares via synthetic DRIP).


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## AltaRed (Jun 8, 2009)

You are welcome. That website does not get much attention from forum members best I can tell and I profess not to use it much either. 

That said, dividend investing IS currently expensive given lack of income alternatives. From The Connelly Report http://www.dividendgrowth.ca/dividendgrowth/


> $31.54 is average cost of a dollar's worth of dividends from Connolly Report list as of March 1st 2015. In contrast, on March 7 2009, it was $16.46. Will that bargain price be reached again is the question? It could easily happen. If the economy was in good shape, interest rates would not be so low. To mention one cause, stock prices have been rising because of quantitative easing. It's an expensive time to buy dividends now. Hope prices fall soon if you have cash to buy dividend growth common and want greater returns. Except for one stock mentioned inside this site, I'm still waiting for better valuations: lower valuations on purchases increase future returns.


Which is why I sort of threw a cold towel on FTS. It is a great stock and I would love to have it but it's been bid up to great heights. It probably won't fall out of favour until we have interest rate increases and all utilities will be hit. Still on my Watchlist.....watching...watching...watching. Some analysts say current fair value is about $32 give or take a few dollars.


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## fatcat (Nov 11, 2009)

i don't understand the notion of "fair value" for a stock you plan to hold for 15 years 
buy the _best _company regardless of price and forget about it
in a few years you'll be happy you did

i own equal shares of fts, ema and cu .. ema has killed, cu has lagged
i'm glad i have all 3 and plan to keep them forever


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## leeder (Jan 28, 2012)

I personally own CU and am happy with it. As fatcat mentioned, it has lagged in the past year or so, which gives me more reason to buy more because it is currently trading cheaper than its competitors. Although the dividend increases haven't been as long as FTS, you can bet that the company will continue to raise it in the future. In the past number of years, CU have had bigger raises than FTS.


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## 1980z28 (Mar 4, 2010)

?????


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## treva84 (Dec 9, 2014)

leeder said:


> I personally own CU and am happy with it. As fatcat mentioned, it has lagged in the past year or so, which gives me more reason to buy more because it is currently trading cheaper than its competitors. Although the dividend increases haven't been as long as FTS, you can bet that the company will continue to raise it in the future. In the past number of years, CU have had bigger raises than FTS.


I just quickly looked up CU on google finance and the company description is as follows:



> Canadian Utilities Limited is a holding company. The Company is engaged in Utilities (pipelines, natural gas and electricity transmission and distribution), Energy (power generation, natural gas gathering, processing, storage and liquids extraction), and Technologies (business systems solutions). The Company operates in threes segments: TCO Electric, ATCO Gas and ATCO Pipelines. ATCO Electric is engaged in the regulated business of transmitting and distributing electricity to 245 communities as well as rural areas in east-central and northern Alberta. ATCO Gas is engaged in the business of distributing natural gas throughout Alberta and in the Lloydminster area of Saskatchewan. ATCO Pipelines is a regulated business engaged in the transmission of natural gas in Alberta. ATCO Pipelines receives natural gas on its pipeline system at various gas processing plants and transports it to end users within the province or other pipeline systems for export out of the province.


The CEO is Nancy Southern, the same CEO of Atco. Of note their prices and divvy yields are different. From an investors point of view, how are they different? It seems Atco may offer a bit more diversification as there are Atco operations not held within CU. Does it make sense to hold one over the other?


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## AltaRed (Jun 8, 2009)

Just a matter of choice of the degree of diversification. Same as whether to: 1) hold POW, or some of its constituents like PWF, or IGM/GWO, or 2) hold BAM, or some of its constituents. Prices and dividend yields of each of the constituents will be different than the conglomerate because the conglomerate only holds a portion (majority) of the subsidiary's shares, the rest being public float.

A reason to hold the conglomerate is for potentially higher growth in non-regulated utility areas, while holding the utility subsidiary is likely more steady state. Hence CU is likely more like a FTS or EMA than ACO.X is.


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## My Own Advisor (Sep 24, 2012)

You raise a great point AR, re: hold the conglomerate or its component parts. 

There are a few those in various sectors in Canada.


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## fatcat (Nov 11, 2009)

loblaw and weston


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## besmartrich (Jan 11, 2015)

I purchased some Atco shares a couple of days ago. I think it is one of the Canadian utilities companies that is fairly valued at this time. I am considering to hold this for a long time and milk the dividend payments. It has currently fairly low dividend yield of around 2% but it has increased its dividend for over 20 years at 10 years of dividend growth rate of 10%. Well... I am in!


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## 1980z28 (Mar 4, 2010)

????


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## treva84 (Dec 9, 2014)

1980z28 said:


> I am bias FTS but they are all good
> 
> Just keep adding,win win


After moving money at the middle - end of last week I'm about to pull the trigger on some ACO.X today - I noticed it's slipped about 1.5%. How fortuitous


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## My Own Advisor (Sep 24, 2012)

I have the same bias. I just keep buying these guys.


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