Northland Power has a good quarter
On November11,2015 Northland Power reported it's third quarter results.It is a Canadian utility with most of it's projects in Ontario but has decided to diversify in a big way.It has 1032 MW of power coming onstream by 2017.Two are off the Dutch and German coast and the third one is in Grand Bend, Ontario.All are reportedly on schedule and on budget.In fact, Nordsee One (off the Dutch coast) is ready to commence operation in the first half of 2017.
Increases in EBITDA
With the huge cash drain expected from three large projects being constructed at the same time many investors thought that earnings would suffer.But Northland has proven in the past to be an excellent project manager.And they are so again.Sales and gross profit were up by 9 and 22%.But surprisingly EBITDA was up 37% from Q3 2014.This included a nice compensation package for unexpectedly shutting down their Kirkland Lake project.This also included a $16 million gain in EBITDA from their wind projects.But this gain in EBITDA lead to a gain in free cash flow of $63 million which is up a whopping 77% over 2014.Consequently their cash dividend payout ratio was at 57% versus 82% in 2014.
What about a dividend increase?
This tremenduous increase in free cash flow and the acceptable payout ratio should lead to the question of whether a dividend increase is in the offing.This very question was addressed in my blog of November 12 on my blog called Econothon on Wordpress.After all Northland did move their guidance up by $15 million for 2015.But their cash flow while ahead by 63% for the quarter is only ahead by 18% for 9 months.Their three big projects are now on budget but can get off course easily.I concluded in Econothon that it would be better to wait for the next quarter.Also there is not likely to be any new revenues coming onstream in Q4. If Northland meets it's guidance and it should then e.p.s will be about $2.15 per share and it's price/ earnings ratio will be about 9 times.This is a very cheap multiple and could propel Northland towards $20.A dividend increase might help but it's yield is already at about 6%.So if there is going to be a dividend increase it will likely be a small one. see Blogdaleupsome for analysis of utilities
Increases in EBITDA
With the huge cash drain expected from three large projects being constructed at the same time many investors thought that earnings would suffer.But Northland has proven in the past to be an excellent project manager.And they are so again.Sales and gross profit were up by 9 and 22%.But surprisingly EBITDA was up 37% from Q3 2014.This included a nice compensation package for unexpectedly shutting down their Kirkland Lake project.This also included a $16 million gain in EBITDA from their wind projects.But this gain in EBITDA lead to a gain in free cash flow of $63 million which is up a whopping 77% over 2014.Consequently their cash dividend payout ratio was at 57% versus 82% in 2014.
What about a dividend increase?
This tremenduous increase in free cash flow and the acceptable payout ratio should lead to the question of whether a dividend increase is in the offing.This very question was addressed in my blog of November 12 on my blog called Econothon on Wordpress.After all Northland did move their guidance up by $15 million for 2015.But their cash flow while ahead by 63% for the quarter is only ahead by 18% for 9 months.Their three big projects are now on budget but can get off course easily.I concluded in Econothon that it would be better to wait for the next quarter.Also there is not likely to be any new revenues coming onstream in Q4. If Northland meets it's guidance and it should then e.p.s will be about $2.15 per share and it's price/ earnings ratio will be about 9 times.This is a very cheap multiple and could propel Northland towards $20.A dividend increase might help but it's yield is already at about 6%.So if there is going to be a dividend increase it will likely be a small one. see Blogdaleupsome for analysis of utilities
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