Monday, July 4, 2011

Husky Energy Inc

I own this stock (TSX-HSE, OTC- HUSKF). This company is also listed on the Berlin, Frankfurt and Munich stock exchanges (as HSE). It might soon be listed on the Hong Kong Exchange also.

It is a nominal investment in oil and gas. I first bought this stock in July 2008 and then some more in December 2010. I have lost 3% per year on this stock. The dividends part of this total return is probably around 2.5%. I have not done well in this investment. I probably paid too much for the shares I bought in 2008, but I got the second lot at a better than average price. This second purchase will help my return in the long run.

This is a small investment. I do not invest much in the oil and gas industry, especially the oil industry. However, because I am Canadian, and oil and gas is a big part of the TSX, I like to keep an eye on this industry. I find I do so better, if I have an investment in this industry. This is, of course, a risky investment.

Since this is in the oil and gas industry and has a good dividend yield, the dividends over the long term, will tend to fluctuate in line with the price of oil and gas. What you will find is that, although the dividends fluctuate, you can make, over the long term, very good dividend returns. The 5 and 10 year portion of the total return that can be attributed to dividends is 7% and 8.8% per year, respectively.

There are other companies in the oil and gas industry that give increasing dividend, like Canadian Natural Resources (TSX-CNQ). However, such companies give insignificant dividends. CNQ’s 5 and 10 year portion of its total return attributed to dividends is less than 1% per year.

The growth figures are mostly good for this stock. There are exceptions. The 5 and 10 year growth in Earnings per Share is -10% and 8.5% per year, respectively. EPS tend to fluctuate because the price of oil and gas tends to fluctuate. The 5 and 10 year growth in Cash Flow is -2.5% and 8.8% per year, respectively. The Cash Flow will also tend to fluctuate with the price of oil and gas.

Revenue growth and Book Value growth is much better. The 5 and 10 year growth in Revenue per share is 11% and 13% per year, respectively. The Book Value per share growth is 14% and 11% per year, respectively. However, these values can also fluctuate with the price of oil and gas.

The next thing to talk about is debt ratios. The Liquidity Ratios is currently at 1.40 and the one for the financial year ending in 2010 is 1.50. Both these ratios are good. However, this ratio is often below 1.00, but liabilities can be fully covered by current assets and current cash flow. (A Liquidity Ratio below 1.00 means that current assets cannot cover current liabilities.) The Asset/Liability Ratios have always been very good and is currently at 2.11. The 5 and 10 year median values are 2.16 and 2.07 respectively.

The current Leverage Ratio at 1.92 is good and the current Debt/Equity Ratio of 0.92 is also good. The ones for the end of the financial year of 2010 at 1.88 and 0.88 are also good. These ratios have generally been good on this stock, but they do fluctuate also.

The Return on Equity at the end of the 2010 financial year at 7.6% is a little low. The ROE at the end of the 1st quarter of 2011 is better at 9.6%. The 5 year median ROE at the end of the 2010 financial year was very good at 26.1%. The 5 year median ROE at the end of the 1st quarter of 2011 is lower at 9.6%. We are coming out of a recession, so this is probably quite normal.

I will keep my stock in this company. I think that it is a good company and it has oil and gas investments in Canada and around the world. For an investment in this industry I decided to go with a company with good dividend yield that fluctuates rather than in a company with very low rates that increase. The reason is that, over the long term, you can make a lot more in dividends in a company like Husky. I am a dividend orientated type of investor.

This company is one of Canada's largest energy and energy-related companies. The Company's operations include the exploration, development and production of crude oil and natural gas. Husky has operations in Western Canada, Eastern Canada, US, China, Indonesia and Greenland. This company is mostly foreign owned. It is listed under TSX Energy Index. Its web site is here Husky. See my spreadsheet 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.

1 comment:

  1. I bought it in May 2008 and am down 48.3% not including dividends, it's the worst performing stock in my portfolio.

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