Canadian Dividend Stocks: TransAlta | Sustainable Personal Finance

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If you are considering a?Canadian dividend stockwith a focus on sustainability, TransAlta might not be a bad choice. There has been a dividend payout?since 1993, and TransAlta shows no intention of cutting the dividend anytime soon.

What Does TransAlta Do?

TransAlta is a power generator, and energy marketer. Originally, TransAlta was called Calgary Power, and was founded in 1911. The headquarters is still in Calgary, Alberta. One of the defining characteristics of TransAlta is that the company takes a diversified approach to power generation, and includes facilities in Canada, the United States, and Australia that operate using:

• Wind
• Hydro
• Coal
• Geothermal
• Natural gas

Even though TransAlta does make use of coal and natural gas, the other energy sources focused on by the company are enough for it to be classified as a renewable energy company. In fact, TransAlta is considered a leader in sustainability, and is included on the Dow Jones Sustainability North America Index, the FTSE4Good Index, and the Jantzi Social Index.

While some might argue that the use of coal might be a reason to dismiss TransAlta as a sustainable company, others believe that the other efforts from TransAlta outweigh some of the non-renewable aspects of the company, as does the company?s active efforts to improve sustainability and eco-friendliness.

Right now, TransAlta (TSX: TA) has a dividend yield of 6.40%, and a five-year average of 5.30%. While the yield is reasonably high, the dividend growth rate hasn?t been huge. The dividend growth rate for the last three years 1.82%, and 3.06% for the last five years. However, the fact of the matter is that TA has been boosting dividends in small increments. The dividend payout ratio is 90% currently, and the five-year average is 89%. TransAlta also features a dividend reinvestment plan (DRIP) that can help you build your portfolio a little faster.

The current payout is $0.29 per share, paid quarterly. As you can see, the dividend yield is mostly a factor of the relatively low share price; TA closed at just over $18 per share on April 6, 2012. The 52-week high for TA is $23.24 a share. The total return in the last five years has been -7.60%. However, that could be due to the general problems in the stock market; the last three years, the total return has been 17.33%. So far, though, in the last 12 months TA is down, so that might be an indication that TransAlta isn?t quite ready for recovery.

In terms of financial stability, TransAlta features a debt to equity ratio of 123%, and a P/E ratio of 14%. TA features a debt/equity ratio to industry of 265% and a P/E ratio to industry of 26%. There is a revenue of $701,000,000 with a net income of $28,000,000. The high payout, and the relatively high yield may not be sustainable if continued volatility is seen in the energy sector ? and if TransAlta continues to lose ground in terms of share price.

For now, TA is still an interesting opportunity. If you are looking primarily for yield, TA might not be a bad choice especially if you can keep trading fees low via a discount trading brokerage. And, if you think that TransAlta has a good prospect for the future with its focus on renewable energy, you can improve your portfolio and add a little sustainability.

What do you think of TransAlta?

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