Keyera Corp 2

On my other blog I am today writing about the Dividend Growth Index, of which I am a member ... continue...

I do not own this stock (TSX-Key). This stock is also an x-income trust stock. The stock started out as KeySpan Facilities Income Fund (TSX-KEY.UN). Then name was changed in 2004 to Keyera Facilities Income Fund (TSX-KEY.UN). In 2010 it converted to a corporation and changed its name to Keyera Corp (TSX-KEY).

The Insider Trading report shows no insider buying and some insider selling at $0.5M. I do not see any options, but there are option like vehicles, like Rights Performance Share Awards, Rights Restricted Share Awards and Rights Share Awards. Lots of insiders have more of these option-like vehicles than shares, including CFO and officers. Directors only seem to have common shares.

The information on institutional investors seems inconsistent. However, institutions seem to be increasing their investment in this company. This is a positive. However, you might want to discount this because of inconsistencies in reporting.

I get 5 year low median and high median Price/Earnings Ratios of 13.14, 16.52 and 19.90. I get a current P/E Ratio of 27.42. This is based on EPS for 2012 at $1.79 and a stock price of $49.08. This test suggests that the current stock price is relatively high. The 10 year high median P/E Ratio is higher than the 5 year at 24.26. Even at this, the current stock price seems to be on the high side.

I get a Graham Number of $21.37. The low, median and high median Price/Graham Price Ratios are 1.03, 1.26 and 1.52. Using a current stock price of $49.08, I get a current P/GP Ratio of 2.30. This high ratio suggests that the stock price is relatively high.

I get a 10 year median Price/Book Value per Share Ratio of 2.08. The current P/B Ratio is 4.33. The current P/B Ratio is more than twice higher than the current one and also suggests that the current stock price is relatively high. Mitigating circumstances is the book value per shares has been falling partly due to new accounting rules and partly due to the change from an income fund to a corporation.

The last test is the dividend yield test and the 5 year dividend yield at 8.29% is some 50% higher than the current dividend yield of 4.16%. However, this was an income trust and most income trusts were expected to have their dividend reduced to a 4 to 5% range. This is what has occurred here.

However, there is no measure I can see that will say that the current price is not relatively high. This includes the Price/Cash Flow Ratio and Price/Sales ratios also. Also, I note that the current stock price is not quite up to the highest ever, but is it is very close. This stock hit its highest level ever in January 2012.

When I look at the analysts' recommendations, I find Buy and Hold recommendations. Because there are more Buy recommendations than Hold recommendations, the consensus recommendation is a Buy. Analysts' recommendations also depend where you look. At least one site shows some Strong Buy recommendations. However, the consensus is the same at a Buy recommendation. The 12 month consensus stock price is $50.90. This implies a total return of 7.87% with 4.16% from dividends and 3.71% from capital gains.

One analyst with a Hold recommendation has a 12 months stock price at $48.00, which is a bit lower than the current stock price. Davis Rea's John O'Connell says on September 12, 2012, that this stock is one of his top picks.

One analyst with a Buy recommendation thought it is a well-run company. Another thought the company was a long term buy. Another thought it had a good record for dividend increases and a number of analysts remarked on the good 4% dividend.

I am a long term investor. What I have found is that to pay more than a reasonable price for a stock greatly affects your long term return on a stock. Part of the problem is that this year is not turning out to be a great one for this company. However, the main reason that the stock price is relatively high is that the stock has had a great run recently and the stock price is up 178% since 2008.

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 or StockTwits.