Keyera Corp 2

I should probably start off with what I am doing during the current stock market volatility. The short answer is nothing. I do not have extra money to spend so I am not buying. I am certainly not selling. The stocks I have invested in are healthy dividend paying companies.

I have been though such markets before and this to will pass. The problem, I guess is that no one knows what all this volatility means. Some think we are heading into another recessions, others think that investor are just worried and nothing much will come of this. I do not know who is right, but I do not panic sell good companies because investors are worried about something.

The last point to make is that my dividend income is up 8.6% as of the end of July 2011. We have just past the half way mark, so this is a good increase. Now, back to the stock I want to review. That stock is Keyera Corp (TSX-KEY).

When I look at Insider Trading, I find only insider selling for $1M, which is a small amount for the size of this company. There is no insider buying. Although this company does not give out stock options, they do give out share rights. That is insiders, with these rights, can participate in the increase in share price without actually owning stock. The CEO, CFO and officers of this company have more share rights than actual stock. There are also 72 institutions that hold 33.6% of this company’s shares. In the last 3 months these institutions have increased their shares in this company by 7.2%.

I get a 5 year median low Price/Earnings Ratio of 13.14 and a 5 year median high P/E Ratio of 19.90. So the current stock price of 16.94 is reasonable as it about the same as the median P/E Ratio. I get a Graham Price of $23.71. The current stock price of $42.35 is some 78% higher. Although the median high difference between the Graham Price and Stock price is lower at 38%, the stock price and Graham Price differences have varied greatly over the years for this stock and therefore, you have to wonder if this is a good measurement of the stock price.

I get a 10 year median Price/Book Value Ratio of 1.91. The current one is more than twice this at 4.24. Part of this problem is that the Book Value has gone nowhere since this company’s stock was issued. On the other hand a Price/Book Value Ratio of 4.24 is rather high.

The current dividend yield is 4.53% and the 5 year median dividend yield is 8.33%. This would normally show a higher than normal stock price. However, it has been expected that the dividend yields would come down on Income Trust companies once they convert to corporations.

From all this, it would appear that only the P/E Ratio shows a reasonable stock price. However, the earnings on this company is expected to be lower in 2012 that in 2011. The forward P/E Ratio is higher at 19.61. This P/E is at the high range for this company and this would indicator a rather high current stock price.

So what do the analysts say? Well, their recommendations are all over the place. I see Strong Buy, Buy, Hold, Underperform and Sell recommendations. Most recommendations are in the Strong Buy, Buy and Hold portions and the consensus recommendations would be a Buy.

The Underperform and Sell recommendations come with a 12 month stock price lower than it is today. Analysts with Hold recommendations point to the fact that the stock price has gone up a lot recently and they do not expect much in the way of stock appreciation for a while. They feel the stock is fully valued.

Even the Buy recommendations do not show much in a stock price increase over the next 12 months, with a 12 month stock price around $44. However, they do like the 4.5% dividend yield. The management of this company is well thought of. The company has good assets and lots of free cash flow.

I have not in the market to buy anything at the moment, so I will not be buying this stock. However, if I held it, I would not be selling either. I think that price is rather high, but all my stocks have been overpriced at some point and I do not sell stocks just because they are currently overpriced.

Keyera provides essential services and products to oil and gas producers in western Canada, and markets related natural gas liquids (NGLs) throughout North America. Its web site is here Keyera. See my spreadsheet at key.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.