The Just controversy
Just Energy is a natural gas utility.It distributes natural gas to consumers in Canada and U.S.A. mostly.It does have five or six utilities in New York state and in Texas.One even sells solar energy.Part of the controversy is what is the trend of their earnings.Net income swings up and down probably because of non-cash items. It's revenues continue to rise;revenues have been gradually higher over the last four quarters and especially the last quarter.Revenue was up by more than $100 million over the previous quarter.
The Good Times
But Just Energy has been trading at the $12 to $15 per share in the past two years.Management needs to recapture those prices again.On the bright side Just has traded as low as $6 per share and now has bounced upwards to the $8 range at present.Just is dependent on the price of it's main product -natural gas.It has a fairly low operating margin so a good movement in natural gas prices goes right to their operating margin.Just has seen it's revenues and it's assets go up in the last year;debt has only slightly increased.It sold an ethanol producer in Saskatchewan and reduced it's debt but it may have to sell one or more of these small American utilities;it is not clear how profitable they are and this might further reduce debt.In addition, they need to keep adding customers to their main utility in Canada as they have been doing.Their earnings and earnings per share swing from $1.61 per share for 2013(according to TD Securities) to $3.71 for the last quarter (according to small brokers).Some quarters show earnings per share of as low as $.20 per share.This makes their payout ratio almost meaningless;one quarter it is low and the next quarter it is very high.It needs to stabilize a bit more.
The Dividend
The real controversy surrounds their dividend.Just used to pay out $1.24 a share and now it has been reduced to $.84 a share.There is little doubt that raising the dividend would raise the price of the stock but could Just Energy maintain it?Some quarters it could have no trouble paying out the old dividend but some quarters would be very lean as the dividend would be onersome.However it seems to this writer that Just is on the right track.Revenues keep rising and with a couple more sales of non-core assets earnings will start to stabilize at a higher level.
The Good Times
But Just Energy has been trading at the $12 to $15 per share in the past two years.Management needs to recapture those prices again.On the bright side Just has traded as low as $6 per share and now has bounced upwards to the $8 range at present.Just is dependent on the price of it's main product -natural gas.It has a fairly low operating margin so a good movement in natural gas prices goes right to their operating margin.Just has seen it's revenues and it's assets go up in the last year;debt has only slightly increased.It sold an ethanol producer in Saskatchewan and reduced it's debt but it may have to sell one or more of these small American utilities;it is not clear how profitable they are and this might further reduce debt.In addition, they need to keep adding customers to their main utility in Canada as they have been doing.Their earnings and earnings per share swing from $1.61 per share for 2013(according to TD Securities) to $3.71 for the last quarter (according to small brokers).Some quarters show earnings per share of as low as $.20 per share.This makes their payout ratio almost meaningless;one quarter it is low and the next quarter it is very high.It needs to stabilize a bit more.
The Dividend
The real controversy surrounds their dividend.Just used to pay out $1.24 a share and now it has been reduced to $.84 a share.There is little doubt that raising the dividend would raise the price of the stock but could Just Energy maintain it?Some quarters it could have no trouble paying out the old dividend but some quarters would be very lean as the dividend would be onersome.However it seems to this writer that Just is on the right track.Revenues keep rising and with a couple more sales of non-core assets earnings will start to stabilize at a higher level.
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