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Opinions Brian Acker, CA
Emera IncEMA.TOCOMMENTMar 14, 2023
Brian Acker, CAStock price when the opinion was issued
As of Jun 19, 2026. Market Open.
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Premium contentEMA is Nova Scotia's largest utility, operating across Canada and the north east US. Operating income has grown over 11% annually for the past five years and EPS has grown by 40%. It trades at 1.3x book and pays a good dividend, backed by a payout ratio under 60% of cash flow. We recommend placing a stop at $42, looking to achieve $57 -- upside potential of 16%. Yield 5.6%
(Analysts’ price target is $57.00)All utilities have seen share prices fall since the spring, being bond proxies given rising interest rates. People are buying bonds, and selling utilities. Now is a good entry point at 15x PE, and pays over a 6% dividend yield, which has grown 17 straight years. Low risk, because 95% of their business are regulated and there's little cyclicality (recession-resilient).
All energy stocks, from renewables to this one, are down. Pays a roughly 6% dividend, and it's safe. Generally, you can start to buy these. It's all about interest rates, which continue to rise. Dividend stocks are competing with GICs and other bank deposits offering 6% yields. Doubts that any utilities will cut dividends, but the share prices may come down further. You can buy a tranche, cautiously.
Electricity demand in North America continues to rise. Emera will sort out issues in Nova Scotia. Their New Meico and Tampa centres are growing, needing more electricity. It pays over a 5% dividend.
(Analysts’ price target is $59.31)
Ryan BushellEMA will experience lower earnings this year, with a recovery in 2024. Growth is relatively low, but this is common for the industry. The Q1 was fine and exceeded expectations. We see nothing overly wrong with the company. Payout ratio is about 73%, so there is not huge room for dividend increases, but this may change next year. We think it is mostly a sector and higher-interest-rates rate problem. The stock is up 4% this year, more or les inline with the TSX's return.
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Weak finish last year due to regulatory problems in Nova Scotia, plus Florida storm damage. All utilities had a downdraft in Sept/Oct last year. Likes it here, buying at these levels. Electricity demand will continue, and distribution infrastructure will increase as a multi-decade story.
Ryan Bushell
The big question is: What will happen to interest rates? These stocks are sensitive to them. Rates have to rise above inflation in order to slow the latter. We are not there yet. If inflation takes off (50/50 chance), then Emera won't do well. This is worth $39.