I do not own this stock (TSX-CNQ). I am writing on this company to contrast the different dividend policies of oil and gas companies. This stock has very low dividend yield and an increasing dividend. Husky Energy has a high dividend yield, but fluctuating dividends. Another contrast of these two companies is that most analysts are negative about Husky Energy, but very positive about CDN Natural Resources. Of course, the analysts could be wrong.
First, let us talk about dividends. The 5 year median dividend yield on this stock is 0.54%. To me, that is hardly a dividend. However, the increase in dividends per year is high. Over the past 5 and 10 years, the dividends have grown at 20% and 22% per year, respectively. These are great growth rates. The Payout ratios are exceedingly low. The 5 year median Payout Ratio for Earnings 7% and the 5 year median Payout for Cash Flow is 3.9%.
The comparative data for Husky Energy is a 5 year median dividend yield of 4.37%. The 5 and 10 years dividend growth is 18% (although dividends have fluctuated over these time periods). For Husky the 5 year median Payout Ratio for Earnings is 70% and the 5 year median Payout Ratio for Cash flow is 40%.
The total return over the past 5 and 10 years has been at 14% and 23%, with the dividend portion at 0.75% and 0.95%. Compare this with Husky Energy’s total return over the past 5 and 10 years of 9% and 24% per year, respectively. The dividend portion of this return for Husky is 7% and 8.8%.
This company has done much better in growing Earnings per Share and Cash Flow than Husky. The 5 and 10 year growth in EPS is 7% and 10% per year, respectively. The 5 and 10 year growth in Cash Flow is 4% and 12% per share, respectively. This company has done a better job than Husky in regards to the Book Value as 5 and 10 year growth was at 20% and 19% per year, respectively.
The one area that Husky is better than this company is the growth in revenue. The 5 and 10 year growth in revenue for this company is 5% and 16%. The 5 year figure is low, but the 10 year figure is quite good. The Growth in Revenue for the last 5 and 10 years for Husky is 12% and 14% per year, respectively. A lot of analysts feel and I think quite rightly, that you need revenue growth for long term earnings and cash value growth.
The next thing to talk about is Debt Ratios. The Liquidity Ratio for this company is low at 0.69 and a 5 year median ratio of 0.73. This means that the current assets cannot cover current liabilities. The Asset/Liability Ratio is very good at 1.97 as is the 5 year median A/L Ratio of 1.76. The Leverage and Debt/Equity Ratios are ok at 2.03 and 1.03. (The Husky Debt Ratios are better.)
The last thing to talk about is Return on Equity. For both this company and Husky, the ROE for the financial year ending in 2010 are worse than the 5 year median ROE. For this company, ROE for the financial year ending in 2010 is 8.1% and the 5 year median is 19.6%. For the 1st quarterly financial period, this company has an ROE of just 4.9%. In contrast the ROE for the 1st quarter on Husky is better at 9.6%.
Canadian Natural Resources Ltd. is a senior oil and natural gas exploration, development and production company. The Company's operations are focused in Western Canada, in the U.K. sector of the North Sea and in offshore West Africa. Its web site is here Canadian Natural Resources. See my spreadsheet at cnq.htm.
My spreadsheet on Husky Energy is at hse.htm.
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on twitter.
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