Utilities sector

[fenders53]

Another solid quarter from WEC. Earnings call was informative. They are very confident in growth around 7% without new laws. Dividend raises to go with it as they are in the middle of payout range. Balance sheet is solid too. If I get a dip I will add. I have more confidence in WEC growth than XEL or NEE for the next year. They will be sub 10% coal by 2025. They will be pure renewables and nat gas before too long. Way ahead of schedule.

[ken-do-nim]

(05-04-2021, 11:31 PM)fenders53 Wrote: Another solid quarter from WEC.  Earnings call was informative.  They are very confident in growth around 7% without new laws.  Dividend raises to go with it as they are in the middle of payout range.  Balance sheet is solid too.  If I get a dip I will add.  I have more confidence in WEC growth than XEL or NEE for the next year.  They will be sub 10% coal by 2025.  They will be pure renewables and nat gas before too long.  Way ahead of schedule.

WEC was one of, if not the best, tips you gave me.  If I had any money, I would buy more, but I probably won't have new money for the stock market until the end of the year.

[fenders53]

I would add UTEs on dips or I think the share price will test your patience. In normal times anything over 5% share price annual growth isn't too bad for a UTE. IMO the next five years will be a time when the best run utilities can execute well above normal growth if they can pull off the transition to green gradually without wrecking their balance sheets. WEC is one with that stated goal and track record. Love my XEL but they throw the CAP money around on some projects. I need to update myself on that.

[fenders53]

At this stage of my life I am just more comfortable with a large position in a quality UTE than I am in an overpriced consumer staple with a historically high PE. UTE PEs are historically high as well but I see a growth tail wind. I can wait for my dip and buy a soap and toilet paper company some other year. If I don't that is a recipe for dead money.

[vbin]

NEE back to trading ~$74. Below $70 would be real nice.

[fenders53]

(05-06-2021, 10:03 PM)vbin Wrote: NEE back to trading ~$74. Below $70 would be real nice.

Finally taking a break and consolidating for more than two weeks.  Seems like NEE just went straight up for years and lately the earnings growth has been a little thin to justify it.  That would concern me more if I didn't think incentives are coming for the green projects.  Most of the UTEs I own serve a lot of iron ore mills.  I think they are about to enjoy a few nice quarters with steel prices going wild.  I had 100 shares of a couple UTEs called away a few weeks ago.  That worked out OK as I really do like to be able to add on dips.    

On a side note, I do my own DD, but I really do need to find other analysts than CFRA.  I noticed they had a sell or strong sell rating on WEC and XEL even on the hard dip.  They'll have a buy rating on underperforming utilities at the same time.

[crimsonghost747]

AQN.
By far the wildest utility I've seen. I'm exhausted just from reading through a couple of their reports, still trying to wrap my head around everything they actually own and how it all fits together. And this is a small ($10b) market cap utility, yet they have their fingers in everything and simply the amount of instruments they use to raise capital (ATM offering, direct share offerings, there are some preferred shares, now they are doing some weird baby bond coupled with an option(?) offerings) makes my brain hurt.

Majority of the revenue/earnings come from electricity and natural gas distribution though, so it shouldn't be TOO risky. And the large majority of the generating side is in renewables, they are aiming for 75% in a little over a year. (hydro, wind, solar, thermal) About everything else seems risky though, especially the cash flows that fluctuate way more than usual. Lots of share dilution and high debt levels resulting from purchasing a lot of assets. Overall the financials remind me more of a tech growth company rather than a utility.

The growth is there, both in terms of assets, EPS and dividend. Yielding over 4% now with a historical yearly growth rate of about 10%.
High risk, high reward. Might as well own a bit?

[fenders53]

It had a steady run higher for a long time. They intend to double their capital by 2025 and continue 10% Div raises. It seems like dilution and/or much more debt for years. I watched a pretty good video by a very capable guy. He couldn't find the positive cashflow for the current dividend. Price targets have been lowered by 40% this year. They are BBB but I am skeptical this game works with any increase in interest rates.

Forget all that. You should load up on shares. I'll hold your beer for you.

[crimsonghost747]

Dilution has been their game for years, and will continue to be. Interest rates will definitely hurt them, just like they will hurt all utilities but yeah, more leverage here than what most of the big boys have.

I might indeed load up on some shares. If they can keep those 10% dividend increases going for a few more years, then I'd be sitting on a pretty great yield on cost while they figure out how to not go bankrupt just yet. This is a risky one, no doubt about that.

[fenders53]

(07-25-2021, 09:54 AM)crimsonghost747 Wrote: Dilution has been their game for years, and will continue to be. Interest rates will definitely hurt them, just like they will hurt all utilities but yeah, more leverage here than what most of the big boys have.

I might indeed load up on some shares. If they can keep those 10% dividend increases going for a few more years, then I'd be sitting on a pretty great yield on cost while they figure out how to not go bankrupt just yet. This is a risky one, no doubt about that.

I listen to a lot of utility conference calls as I oft mention.  My UTEs also have their eyes on renewables growth.  They also make it clear they are going to act responsibly and grow with little or no new debt or share issue.  That works if last years new solar or windfarm farm goes instantly cashflow positive, which they have.  ALE will remain my spec UTE.  Their yield is close enough and I know they have adults in charge.  Just volatile enough to make option income every month and a good Div.  

If I was going to play AQN I would wait for the next capital raise because that is their published plan.  A share price dip would make the entry less risky, at least in the short-term.  Also it's a Canadian company with a majority of their revenue from the US.  I have no idea if they benefit from possible US infrastructure bills.  US jobs so maybe?

[crimsonghost747]

(07-25-2021, 10:35 AM)fenders53 Wrote:

(07-25-2021, 09:54 AM)crimsonghost747 Wrote: Dilution has been their game for years, and will continue to be. Interest rates will definitely hurt them, just like they will hurt all utilities but yeah, more leverage here than what most of the big boys have.

I might indeed load up on some shares. If they can keep those 10% dividend increases going for a few more years, then I'd be sitting on a pretty great yield on cost while they figure out how to not go bankrupt just yet. This is a risky one, no doubt about that.

I listen to a lot of utility conference calls as I oft mention.  My UTEs also have their eyes on renewables growth.  They also make it clear they are going to act responsibly and grow with little or no new debt or share issue.  That works if last years new solar or windfarm farm goes instantly cashflow positive, which they have.  ALE will remain my spec UTE.  Their yield is close enough and I know they have adults in charge.  Just volatile enough to make option income every month and a good Div.  

If I was going to play AQN I would wait for the next capital raise because that is their published plan.  A share price dip would make the entry less risky, at least in the short-term.  Also it's a Canadian company with a majority of their revenue from the US.  I have no idea if they benefit from possible US infrastructure bills.  US jobs so maybe?

From what I can tell, the last real capital raise was in June. That is  the $16 to $15 dip you see in the middle of june. The one before that was July of last year. They do have an active ATM offer authorization but I guess this is more of a "little by little" way of raising capital and sales made through this are only reported on the quarterly reports?

[fenders53]

(07-25-2021, 10:58 AM)crimsonghost747 Wrote:

(07-25-2021, 10:35 AM)fenders53 Wrote:

(07-25-2021, 09:54 AM)crimsonghost747 Wrote: Dilution has been their game for years, and will continue to be. Interest rates will definitely hurt them, just like they will hurt all utilities but yeah, more leverage here than what most of the big boys have.

I might indeed load up on some shares. If they can keep those 10% dividend increases going for a few more years, then I'd be sitting on a pretty great yield on cost while they figure out how to not go bankrupt just yet. This is a risky one, no doubt about that.

I listen to a lot of utility conference calls as I oft mention.  My UTEs also have their eyes on renewables growth.  They also make it clear they are going to act responsibly and grow with little or no new debt or share issue.  That works if last years new solar or windfarm farm goes instantly cashflow positive, which they have.  ALE will remain my spec UTE.  Their yield is close enough and I know they have adults in charge.  Just volatile enough to make option income every month and a good Div.  

If I was going to play AQN I would wait for the next capital raise because that is their published plan.  A share price dip would make the entry less risky, at least in the short-term.  Also it's a Canadian company with a majority of their revenue from the US.  I have no idea if they benefit from possible US infrastructure bills.  US jobs so maybe?

From what I can tell, the last real capital raise was in June. That is  the $16 to $15 dip you see in the middle of june. The one before that was July of last year. They do have an active ATM offer authorization but I guess this is more of a "little by little" way of raising capital and sales made through this are only reported on the quarterly reports?

I checked out the annual report, and sorted through some hypester youtube videos to find intelligent analysis from several.   Here is what I am sure of. 

-Payout ratio exceeds 100% and it has for most of the past five years, yet the dividend grows reliably at 10% so far.
-Share count goes up every year.
-They intend to spend about $9B for expansion in four years.  That is half their current market cap. 
-They were definitely caught up in the Texas winter storm failures.  So were a lot of UTEs. Is a charge against earnings coming?  I didn't look at last QTR report.  Next one is in a few weeks and I expect it will be enlightening.
-They are good at growing net income and this sector isn't going away.  There is no doubt management intends to grow the business quickly.       

An interesting UTE.  There are others on a similar path that pay no dividend at all yet.  My gut says they over promised on the dividend and there will be creative finance solutions that will keep a lid on the share price. IMO there is a price where the risk-reward is right, at least for a moderate term hold.

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