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Here's Why You Should Add TransAlta (TAC) to Your Portfolio Now
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TransAlta (TAC - Free Report) is committed to being a leader in clean electricity by delivering customer-centered power solutions. It is well-positioned to shift toward a low-carbon future, owing to its focus on sustainable energy projects. Given its growth opportunities, TAC makes for a solid investment option in the utility sector.
Let’s focus on the factors that make this Zacks Rank #2 (Buy) company a promising investment pick at the moment.
Growth Projections & Surprise History
The Zacks Consensus Estimate for TAC’s 2024 earnings per share (EPS) has increased 14% to 50 cents in the past 60 days.The Zacks Consensus Estimate for 2025 EPS has increased 17.8% to 53 cents in the past 60 days.
The company delivered an average earnings surprise of 142.6% in the last four quarters.
Return on Equity
Return on equity (ROE) indicates how efficiently a company has been utilizing its funds to generate higher returns. Currently, TransAlta’s ROE is 48.42%, higher than the industry’s average of 8.67%. This indicates that the company has been utilizing its funds more constructively than its peers in the electric power utility industry.
Solvency
The times interest earned (TIE) ratio is a solvency ratio. It is used to measure how well the company can cover its interest obligations. The TIE ratio at the end of fourth-quarter 2023 was 4.1, which being greater than one indicates that TransAlta is in a good position to meet its interest obligations.
Dividend & Share Buyback
The company has been consistently increasing the value of its stockholders through dividends and share buybacks. TAC has raised dividends 13 times in the past five years. Its current dividend yield is 2.62%, better than the Zacks S&P 500 Composite's average of 1.32%.
TransAlta’s management announced an enhanced common share repurchase program for 2024 of up to $150 million toward the repurchase of common shares. The company has plans to return nearly 40% of its free cash flow to shareholders in 2024, through dividends and share buybacks.
Growth Strategy
By investing nearly $3.5 billion to develop, build, or acquire new assets through the end of 2028, TAC hopes to add up to 1.75 gigawatts (GW) of additional capacity to its fleet. The company is focusing on customer-centered renewables and storage through the advancement of its 4.8 GW development pipeline, which it plans to expand to 10 GW by 2028.
Price Performance
In the past month, TransAlta’s shares have lost 4% compared with the industry’s decline of 9.9%.
NI’s long-term (three to five years) earnings growth rate is 6%. The company delivered an average earnings surprise of 5.6% in the last four quarters.
PNW’s long-term earnings growth rate is 7.6%. The Zacks Consensus Estimate for Pinnacle West Capital’s 2024 EPS implies a year-over-year improvement of 7.9%.
DTE’s long-term earnings growth rate is 6%. The Zacks Consensus Estimate for DTE Energy’s 2024 EPS implies a year-over-year increase of 16.9%.
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Here's Why You Should Add TransAlta (TAC) to Your Portfolio Now
TransAlta (TAC - Free Report) is committed to being a leader in clean electricity by delivering customer-centered power solutions. It is well-positioned to shift toward a low-carbon future, owing to its focus on sustainable energy projects. Given its growth opportunities, TAC makes for a solid investment option in the utility sector.
Let’s focus on the factors that make this Zacks Rank #2 (Buy) company a promising investment pick at the moment.
Growth Projections & Surprise History
The Zacks Consensus Estimate for TAC’s 2024 earnings per share (EPS) has increased 14% to 50 cents in the past 60 days.The Zacks Consensus Estimate for 2025 EPS has increased 17.8% to 53 cents in the past 60 days.
The company delivered an average earnings surprise of 142.6% in the last four quarters.
Return on Equity
Return on equity (ROE) indicates how efficiently a company has been utilizing its funds to generate higher returns. Currently, TransAlta’s ROE is 48.42%, higher than the industry’s average of 8.67%. This indicates that the company has been utilizing its funds more constructively than its peers in the electric power utility industry.
Solvency
The times interest earned (TIE) ratio is a solvency ratio. It is used to measure how well the company can cover its interest obligations. The TIE ratio at the end of fourth-quarter 2023 was 4.1, which being greater than one indicates that TransAlta is in a good position to meet its interest obligations.
Dividend & Share Buyback
The company has been consistently increasing the value of its stockholders through dividends and share buybacks. TAC has raised dividends 13 times in the past five years. Its current dividend yield is 2.62%, better than the Zacks S&P 500 Composite's average of 1.32%.
TransAlta’s management announced an enhanced common share repurchase program for 2024 of up to $150 million toward the repurchase of common shares. The company has plans to return nearly 40% of its free cash flow to shareholders in 2024, through dividends and share buybacks.
Growth Strategy
By investing nearly $3.5 billion to develop, build, or acquire new assets through the end of 2028, TAC hopes to add up to 1.75 gigawatts (GW) of additional capacity to its fleet. The company is focusing on customer-centered renewables and storage through the advancement of its 4.8 GW development pipeline, which it plans to expand to 10 GW by 2028.
Price Performance
In the past month, TransAlta’s shares have lost 4% compared with the industry’s decline of 9.9%.
Image Source: Zacks Investment Research
Other Stocks to Consider
A few other top-ranked stocks from the same industry are NiSource (NI - Free Report) , Pinnacle West Capital Corporation (PNW - Free Report) and DTE Energy (DTE - Free Report) , each holding a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
NI’s long-term (three to five years) earnings growth rate is 6%. The company delivered an average earnings surprise of 5.6% in the last four quarters.
PNW’s long-term earnings growth rate is 7.6%. The Zacks Consensus Estimate for Pinnacle West Capital’s 2024 EPS implies a year-over-year improvement of 7.9%.
DTE’s long-term earnings growth rate is 6%. The Zacks Consensus Estimate for DTE Energy’s 2024 EPS implies a year-over-year increase of 16.9%.