Recent Buy – Canadian Utilities

On January 23rd I purchased 75 shares of Canadian Utilities (CU.TO) for 33,33 C$ per share. The total cost of the purchase was 1 668 €

Overview

Canadian Utilities Limited is a Canada-based worldwide organization of companies with assets of 21 billion C$ and approximately 5200 employees. 

Main three business divisions of Canadian Utilities are:

  • Electricity (power generation, transmission and distribution of electricity)
  • Pipelines and Liquids (transmission and distribution of natural gas)
  • Retail Energy

Stock

I found mixed statistics from different sources, so I decided to calculate P/E and payout ratios with the estimated EPS:

  • Sector: Utilities
  • Estimated EPS (2019): 2,23 C$
  • P/E Ratio: 14,9 (with estimated EPS)
  • Beta: 0,37
  • Yield: Pays a quarterly dividend of 0,4277 C$ per share which equals 5,13 % yield.
  • Payout ratio: Dividend payout ratio is 77 % (with estimated EPS).
  • Dividend History: CU.TO is a dividend aristocrat with 47 consecutive years of dividend growth.
  • Dividend Growth Rate: Average dividend growth rate for the past five years is 10,2 %. They recently announced a 7,5 % dividend increase.

Summary

CU.TO is a new stock in my portfolio. With current yield it increases my annual passive income by 83,2 €. After the purchase weight of CU.TO is 2,3 % of my portfolio.

Have you purchased any stocks this month? What do you think about this buy? Please share your thoughts in the comment section below!

Thanks for reading.

8 thoughts on “Recent Buy – Canadian Utilities

  1. Mark Reply

    Hi DD (Sorry, I don’t know your name),
    I recently came across your blog and ironically the description in your About section: “An engineer in early thirties who has always been more interested in saving money instead of spending it.” is a 100% accurate description of me as well! 🙂
    Canadian Utilities sounds like a great buy but I am now considering it also, but I am wondering how can I learn to pick companies myself as you did? In other words, it looks like you used metrics such as Estimated EPS, P/E Ratio, Beta, etc. to make a decision, well I don’t know anything about P/E Ratios and such. What is a good P/E Ratio (is it “the higher-the better”?)
    How can I learn to make the determination you made when you decided to buy Canadian Utilities based on a number of factors? Thanks!

    • Dividend Deluge Post authorReply

      Hi Mark,

      It’s nice to find an another engineer with similar interests!

      Picking stocks is always hard. There is a huge amount of statistics that can be used to assess the stock, such as P/E ratio, P/B ratio and beta. For example P/E ratio is the share price relative to its per-share earnings, so a lower number is usually better. I would recommend reading more about these statistics before trying to pick stocks by yourself, because there is usually a reason why the stock looks cheap (very low P/E ratio etc).

      I would also recommend reading some books, like The intelligent investor by Benjamin Graham. It’s a really old book, but I learned a lot about value investing and the behavior of the market. Even the Warren Buffett says it is the best book written on investing that he has ever read!

      • Mark Reply

        Hi DD,
        Thanks for your reply and the book recommendation, I’ll be sure to read it.
        Yes absolutely I realize picking stocks can be challenging. Your post made me think… and I came up with a strategy that I would like to run by you.
        Plan:
        1. Learn how to analyze financials (pick stocks). I understand some things to look at are solid dividend history, low beta and decent multiple but I need a lot more education.
        2. After learning the basics, come up with my own criteria, for example: Dividend history must be so-and-so, P/E ratio 20 or below, dividend yield 4% or more, etc.
        3. Short-list ~100 companies and then get it down to 20 companies. These are stocks that I would like to “buy and hold forever”.
        4. When a buying decision is made, buy TWICE as much as I need. For example, if total allocated to this strategy is $100k and I’d like to hold 20 stocks in equal portions, investment in one stock would be $5k. However I go ahead and buy $10k worth of this stock.
        5. If price goes up by a certain percentage, SELL half, return it to the portfolio and repeat(invest in other stocks following same strategy).
        Example: Suppose in January of this year I decided to buy CU @ 32CAD (price on January 8th)
        I buy $10k worth of CU @32. However immediately place a GTC order to sell $5k of CU @35CAD. This order would have executed yesterday as the price is now 35.65. Optionally, I could place an order to buy CU back @32 (if this ever happens). Under no circumstances do I touch the order half, regardless of price.
        Well what happens if the price never goes up or goes down? Answer-same as “buy and hold forever”-do nothing.
        I’d like to argue that this is not “daytrading” or speculative trading because I am only doing it with stocks I made a decision to own ANYWAY, and I NEVER touch the other half.
        P.S. I have the discipline to follow the strategy i.e. ignore the temptation to actively trade on price movement.
        Any thoughts? Any flaws to this strategy that I didn’t think of?
        Thanks!!!

        • Dividend Deluge Post authorReply

          I cannot recommend any specific investing strategies as I am not an investment professional, but investors often have a few stocks as a core holdings like you have planned to do.

          It might be smart to set your own criteria, but I don’t think you should use the same criteria for every sector. For example, you should not try to valuate REIT’s (real estate investment trusts) with P/E ratios, because it is much more accurate to estimate REIT’s value with FFO and AFFO than EPS.

          I personally don’t like to sell my investments if they go up a certain percentage, because then I have to pay a 30 % tax for the profit. For example, if I purchase some shares for 50 euros and sell them for 100 euros, I will earn 35 euros after the tax. This means the shares will have to drop at least 15 % (to 85 euros) if I want to break even and purchase the same shares again. Of course every country has different tax laws, so this might not be the case in your country.

          It usually takes a while to find the right investing style for yourself and you should not be discouraged even if your original plan changes a bit in the future. I think I have modified my plan for at least three or four times!

    • Dividend Deluge Post authorReply

      Thanks for the comment Frankie! I have purchasing more defensive companies in the past year, because I don’t want to be too heavily invested in cyclical companies when the next economical depression arrives.

    • Dividend Deluge Post authorReply

      I would love to add more Canadian stocks in the future. I will keep my eye on your purchases, because I am sure you have more knowledge about Canadian stocks than I do!

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