Algonquin Power & Utilities Corp T.AQN

Superb Entry Point

[Accountprince]

I love this stock - a beaten down regulated utility!  Bash away if you want but you're being Penny foolish as the saying goes.  Now that tax loss season is over look at the facts:

1. Regulated utility - this is conceptually costs plus a return on capital.  So when cost of capital (interest rates) rise then so do the allowable return rates for utilities.  Short term lag only until the next rate adjustment.
2. Tax credits - timing issue only.  These will arrive in due course.
3. Kentucky Power acquisition - probably the biggest opportunity.  If approval is stalled because of keeping utility rates low for the consumer then - after the April deadline - Algonquin is in the best position of anyone to buy at a lower market price based on the revised DCF at today's cost of capital!  Splendid position to be in.  And if they are smart enough to go floating rates when interest rates peak next year they will enjoy the windfall when rates start to decline.

I see nothing but upside on this.  Oh yeah - management has bought in the $12 a share range.  We can buy at sub $9 a share.  Don't you think it'll get back to $12 a share in a relatively short time?  The bargain basement prices can't last long.  And you can collect the divi in the meantime.

[svsingh83]

I second.

[pennydredful]

WHAT  DIVIDEND ?

[Accountprince]

Penny - WHAT DIVIDEND? - I thought you owned some shares here.  Anyway, if you had owned some shares a couple of days ago (Dec 28) you'd be paid around $0.24 a share around mid-January.  Hard to believe I'm breaking this news to someone who posts here several times a day. You'll be even more delighted to know they do this every quarter - that's four times a year!! 

[pennydredful]

Yes    like  you  I  will  receive  that  " historical"  dividend  .  Given   the company's  obligations  re  rising   floating interest   rates  ,  completion  of  the  Kentucky   Power  property  purchase  ( in need  of 

[malx1]

Is it? Would you pay $2.8B for $1.6B in assets that historically generated just 6.6% ROE from 2015 to 2020? Debt costs have changed. Coal costs and natural gas costs much higher. Interest rates materially higher today vs early 2021. For a company who professes clean power, Kentucky is a coal producing and coal consuming state. So many red flags here. Can't issue equity at today's

[Capharnaum]

You don't understand regulated utilities. There is always a premium to the rate base because when you own the utility, all your reinvestments in the utility get paid at costs. As to the return on the rate base, it includes the debt portion (as a pass-through). The portion of capital based on the capital structure is loosely based on 10 year bonds rate + premium. At the moment, most utilities

[malx1]

In case you missed it, past 12mo BOC's overnight rate went from 0.25% to 4.25% and headed higher. The impact of possible falling AQN credit rating combined with higher borrowing costs on the projected profitability of leveraged buyout now showing up in price of common stock. This AQN fiasco may be a nice lesson in understanding the value of interest sensitive assets and their negative

[AlwaysLong683]

Most utility company investors look for two things:   1) A sound, stable, conservative business model that provides lower than average share price volatility.   2) Reliable dividend income.   AQN has already failed on 1) and will likely drop the ball on 2) with a dividend cut (and it better be the first and last cut, so management / BOD should err on the side of a larger

[DeanEdmonton]

Alwayslong - that is a very good summary.

[rad10]

  I thought the stock would bounce after the December FERC decision.  The math is as you outlined.

[pennydredful]

It  did  bounce  initially perhaps to the end of  that  trading today . However  the   next  day  it  reversed as  it was realized  the  FERC    ruling  is not  definitive in   that  they  can  re apply and try to address the deficiences that FERC   outlined. The 

[newcoin]

I'll be buying first thing Tuesday morning. This is an outstanding opportunity. As soon as Investor Day is announced, the stock will run up to $10. After Investor Day it will be $11-$12.  

[malx1]

Then why is it still at $9?