Recent buys – VCN, Emera

With US and Canadian stock markets tumbling down last Friday Sept 9, I decided to pull the buy trigger on a couple of stocks using some of the cash sitting on the sideline.

We purchased:

10 shares of Vanguard Canada All Cap Index ETF (VCN.TO)
78 shares of Emera (EMA.TO)

10 shares of VCN.TO cost about $300. It’s not a lot of money because it was the left over cash from all the dividend DRIPs in one of our TFSA accounts. Since Questrade does not charge commissions for purchasing ETFs, it makes sense to add a few shares of ETFs incrementally. (Note: If you want a Questrade referral code, give me a shout).

The main reason for adding Emera to our dividend portfolio is to increase our exposure in the utilities sector. Before the Emera purchase, the only utilities stocks that we own were Fortis (FTS.TO) and Brookfield Renewable Energy (BEP.TO). 

From Google Finance:

Emera Incorporated is an energy and services company that invests in electricity generation, transmission and distribution, as well as gas transmission and utility services. The Company operates through six segments: NSPI; Emera Maine; Emera Caribbean, which includes Emera (Caribbean) Incorporated and its subsidiaries, which includes The Barbados Light & Power Company Limited, Dominica Electricity Services Ltd., Grand Bahama Power Company Limited, Emera Utility Services (Bahamas) Limited and an equity investment in St. Lucia Electricity Services Limited; Pipelines, including Brunswick Pipeline and an equity investment in Maritimes & Northeast Pipeline; Emera Energy, including Emera Energy Services, New England Gas Generating Facilities, Bayside Power, Brooklyn Energy, equity investments in Bear Swamp Power Company LLC and Northeast Wind Partners II, LLC; and Corporate and Other, which includes Emera Utility Services, Emera Newfoundland & Labrador Holdings Inc., and holding companies.

Emera has a 9 year dividend increase streak. The stock currently has a PE ratio of 14.61, a dividend yield of 4.44%, a payout ratio of 65%, a return on equity rate of 12.63%, and a price/book ratio of 2.0. The company has grown its revenue by 10.7% the last 3 years while increase its dividend by about 6.9% in the same period. Just recently Emera announced a 10% dividend increase.

The company also recently acquired Florida based TECO Energy. I really like this acquisition because it gives Emera further geographically diversification and a larger client base. In addition to the recent 10% dividend increase, Emera has extended its 8% annual dividend growth target through to 2020 from 2019. This means our yield on cost is expected to increase to about 6% by 2020. Hopefully the expected dividend growth will trigger more investors to buy Emera moving forward and drive the stock price higher.

The two purchases will add $169.28 in our annual dividend income.

Dear readers, what do you think about these two recent buys?

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23 Comments

  • Reply
    DiviCents
    September 13, 2016 at 9:36 am

    I’m just looking at EMA on morningstar. Any idea why their current ratio is so high? It’s sitting at 8.68 which is too good to be true.

    I always look at the balance sheets to check out the debt level, EMA looks really healthy as of the last quarter but I need to look further. doesn’t seem right.

    • Reply
      DiviCents
      September 13, 2016 at 9:41 am

      Just checked google finance and I calculated the CR there. It’s sitting at a healthy 1.26. Thanks for bringing this stock to my attention.
      I might add a small position myself.

      • Reply
        Tawcan
        September 13, 2016 at 10:31 am

        I was a little surprised at these healthy looking ratios too, especially in a heated market.

  • Reply
    Brian
    September 13, 2016 at 11:35 am

    As I am looking at the stock on Tuesday, EMA has dropped to 46.45 at the time of this writing, and I see considerable support in the 45 range, which is where I am looking to add to my position.

    • Reply
      Tawcan
      September 13, 2016 at 11:46 am

      Maybe I purchased too early but you can’t time the market right? May buy more if the price drops further.

  • Reply
    Mr. Tako @ Mr. Tako Escapes
    September 13, 2016 at 1:03 pm

    Interesting company, not one I’ve researched before.

    Normally I ignore the electrical utility business. Returns typically are poor in that industry because energy use is declining. On a quick glance this seems to be the case with EMA.

    Under-utilized industrial assets lead to poor returns on capital (which is the case here), and the biggest red flag for me.

    I would have to do some major research on this one.. Just offhand it looks too difficult to tell if it’s a buy or not.

    • Reply
      Tawcan
      September 13, 2016 at 2:07 pm

      Good point. We have been limiting our exposure to utilities but adding Emera seemed to make sense. Will have to continue monitor the growth closely.

      • Reply
        Team CF
        September 15, 2016 at 10:31 pm

        Energy use per capita may be declining but overall use is still increasing due to population growth, plus when energy prices recover (and they inevitably will at some point) the price of electricity will increase as well, which should help improve EMA’s (and others) positions. We also own some shares, and despite having the same doubts as Mr Tako, we also decided to add positions in utility companies. It remains to be seen what will happen.

        • Reply
          Tawcan
          September 16, 2016 at 10:04 am

          Just need to keep an eye on these utility stocks. 🙂

  • Reply
    Financial Canadian
    September 13, 2016 at 2:11 pm

    I had never considered Emera before this but it looks like they might be worth some further consideration.

    Thanks for the insightful post.

    • Reply
      Tawcan
      September 14, 2016 at 8:24 am

      No problem, take a closer look at Emera for sure.

  • Reply
    Dividends Down Under
    September 13, 2016 at 3:28 pm

    Emera sounds like a good one, Tawcan. A very nice starting yield for you – with growth to match.

    I hope it’s a good, long term one for you guys 🙂

    Tristan

    • Reply
      Tawcan
      September 14, 2016 at 8:25 am

      Thanks Tristan, hopefully it will continue its dividend growth for many years to come.

  • Reply
    Finance Solver
    September 13, 2016 at 8:06 pm

    I like investing in utilities because their dividend payout is so safe. It’s hard for consumers to say they suddenly don’t want electricity, because that will never happen. Have to keep a close eye out on the utility company’s customer base / regulation!

    • Reply
      Tawcan
      September 14, 2016 at 8:25 am

      My thoughts exactly but need to keep a closer look on this stock as Mr. Tako pointed out.

  • Reply
    Investing Pursuits
    September 13, 2016 at 9:36 pm

    Tawcan,

    Emera is a good stock to hold. They are expanding through acquistions and the Muskrat Falls Project to name a few. Nova Scotia Power has a “monopoly” as the power provider in Nova Scotia. There are windturbines in Nova Scotia own by other companies, but ultimately the residents of Nova Scotia only pay Nova Scotia Power.

    I have owned for years about 4 years so far.

    • Reply
      Tawcan
      September 14, 2016 at 8:26 am

      Hi Investing Pursuits,

      Good information to know. Having monopoly in a specific region when it comes to utility supplier is always a good sign.

  • Reply
    FerdiS
    September 14, 2016 at 7:48 am

    These look like interesting buys. I’m not familiar with Emera but the charts look really impressive. (I look at 5 year and 10 year charts to quickly get an idea of how a stock performs). And who can complain about that yield!?

    • Reply
      Tawcan
      September 14, 2016 at 8:27 am

      Thanks FerdiS. 🙂

  • Reply
    misterslm
    September 14, 2016 at 9:53 am

    Nice purchases! We bought some EMA this month as well, nearly the exact same amount too!

    • Reply
      Tawcan
      September 14, 2016 at 10:33 am

      Nice, hard to say no to this great company.

  • Reply
    Jay @ the expat investor
    September 22, 2016 at 9:36 pm

    Nice buy I also need to increase my utility stock in my portfolio too. Good luck with your progress.

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