Friday, July 20, 2012

Teck Resources Ltd

I do not own this stock (TSX-TCK.B). I follow a few resource stocks, but generally do not own much. TSX is heavy with resource stocks, so I just like to know what is going on with them. When I reviewed this stock in November 2008, I realized that it was grossly oversold so I bought 100 shares. By May the following year I have made some $1500 so I sold. I guess that I should have held on until it more fully recovered, but I had made some money and I moved on.

In 2008 they had just bought Fording Canadian Coal Trust when the recession hit and had some cash flow problems. They shares got slammed. I thought they would overcome their problems and that is why I bought some shares. Their purchase of Fording just came at the wrong time.

In 2009 they cut their dividends, but in 2010 they reinstated the dividends but the dividends were a lot less. There has been dividend increases, the latest being for 2012 of 33.3%. However, dividends are still some 20% lower than in 2008. Over the past 5 years, dividends are down 9.7% per year. Over the past 10 years, dividends are up 19.6% per year. That said there were many past years when dividends were level. They only started to really go up in 2004.

Dividends have generally been quite low on this stock, which has a 10 year median dividend yield of just 1.44%. The Dividend Payout Ratios have also been quite low, with 10 year median DPR for earnings at 15% and for cash flow at 10.5%. However, these rates hide a lot of volatility that has occurred in DPRs. (I am using 10 year figures rather than 5 year figures because there were no dividends for one and one half years.)

Total return over the past 5 years is negative at 2.38% per year. Dividends came in at 1.37% and capital gain at a negative 3.75%. There is happier news for total return over the past 10 years, with total return at 21.93%. Dividend portion of this is 3.1% and capital gain is 18.82%. Dividends made up some 14% of the total return over the past 10 years.

Outstanding shares have grown, with growth over the past 5 and 10 years at 6.3% and 5% per year. Because of this, things like revenue have grown faster than revenue per share. Revenues over the past 5 and 10 years have grown at the rate of 12% and 17% per year. Revenue per share has grown over the past 5 and 10 years at the rate of 5.3% and 11.6% per year.

Earnings per Share has declined over the past 5 by 4.3% per year. EPS has grown over the past 11 years by 25.5%. (I am using an 11 year figure as 10 years ago, the company lost money and so had a negative EPS figure.)

Cash Flow per shares over the past 5 and 10 years has grown at the rate of 5.5% per year and 24.2% per year, respectively. Book Value per share is up nicely over the past 5 and 10 years with growth at 15% and 16% per year, respectively.

Return on Equity for the financial year ending 2011 was quite good at 15.26%. The 5 year median ROE is good at 12.6%. The ROE on comprehensive income is also quite good at 14.7% with a 5 year median of 13.5%. This ROE confirms the good ROE on net income or earnings.

The Liquidity ratio has varied quite a bit, but it is generally quite good. The current one is rather high 4.15. The 5 year median Liquidity Ratio is lower at 1.90. The Debt Ratio is much less volatile, but still quite good at 2.18, with a 5 year median value of 2.10. (With these ratios, higher is better and you want them at or better than 1.50.)

The Leverage and Debt/Equity Ratios have generally been good and the current ratios are 1.87 and 0.86. The 10 year median values for these ratios are 1.95 and 0.74, respectively. (Here the lower the ratio, the better the ratio.)

I am partial to dividend growth stocks, and I do not consider this to be one of these. If you look what shareholders are getting on their original purchase price after 10, 15 or 10 years, you are lucky to get more than 10% dividend yield. Dividend yield might have grown a lot over the past 10 years, but they grew hardly at all before that.

I will continue to follow this stock as it is a good resource stock to follow, but I would not buy it as a long term investment. Dividends are currently good at 2.6%, but I just do not see shareholders making a good income from this stock.

Teck is a diversified resource company involved in mining and mineral development with major business units focused on copper, metallurgical coal, zinc, gold and energy. This company has interests in several oil sands developments. The company explores for resources in the Americas, the Asia Pacific Region, Europe and Africa. Its web site is here Teck. See my spreadsheet at tck.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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