Friday, October 5, 2012

Keyera Corp

I do not own this stock (TSX-KEY). 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). This was one of the stocks recommended by Jennifer Dowty from a column she wrote and I reviewed in February 2010 on Special Dividends paid. See Dividends and Special Dividends.

As with other utilities stock, this stock has a good dividend at 4.16%. The Dividend Payout Ratios are high with 5 year median DPR at 99.45% for earnings and 76.34% for cash flow. The DPR for earnings is expected to be over 100% in both 2012 and 2013. This company does have to get their DPR for earnings at a more reasonable rate, but they do have some tax pools which affect taxes they have to pay and also what is available for distributions.

The company obviously seems confident in its distribution rate as they raised the dividends by 6.3% at the end of 2011. However, they will have to get their DPRs in line in the near future. Dividend increases have been slowing down. The growth in dividends is 5.9% per year and 16.9% per year over the past 5 and 8 years.

Except for book value, the growth values on this company are very good. The outstanding shares have been increasing at the rate of 3.3% and 19.7% over the past 3 and 8 years, respectively. So far this year outstanding shares have increased by 7.5%. The majority of this was an equity issue. They had an acquisition. They also issued some shares because of their DRIP plan and also for some debenture conversion.

Revenue has grown at the rate of 13.4% and 104% per year over the past 5 and 8 years. The Revenue per share has grown at the rate of 9.8% and 70.4% per year over the past 5 and 8 years. The difference between these growth rates is, of course, because of issuance of new shares. However, the growth rate per share is a good one. (This company only went public in 2003.)

Earnings per Share have grown at the rate of 11.6% and 18% per year over the past 5 and 8 years. Cash Flow has grown at the rate of 15.9% and 18.2% per year over the past 5 and 8 years.

Book value per share has been declining recently with the decline over the past 5 years at 1.6% per year. There is a slight increase in book value per share over the past 8 years at 0.4% per year. (This company has over some of the past years made distributions that were higher than their income.)

Until 2008, the Return on Equity on this company was very low. The ROE for the financial year 2011 was very good at 20.2%. The company also has a 5 year median ROE of 20.2%. The ROE based on comprehensive income is the same as the net income and it was at 20.2% for the 2011 financial year.

This looks like a solid utilities stock with quite good growth. This company will need to get their Dividend Payout Ratio lower.

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.

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