Pembina Pipelines Corp 2

It was 5 years ago today that I started this blog.

On my other blog I am today writing about Who will pay for the Boomers?...continue...

I own this stock of Pembina Pipelines Corp. (TSX-PPL, NYSE-PBA). I first bought this company in 2001 and bought some more in 2009. I have a total return of 18.67%, with 10.59% from capital gains and 8.08%. This is the second part of a two parts entry. First part was Friday and is shown here

When I look at insider trading, I find insider buying at $0.36M and net insider buying at $0.3M with very minor insider selling. These are very small amounts and tell us nothing. Insiders have options and rights and some have convertible debentures.

The CEO has shares worth $16.4M and has rights are worth $7.9M. The CFO has shares worth $7.9M and has rights worth $3.8M. An officer has some shares and has rights worth $0.5M. A director has shares worth $1.7M and has rights worth $0.3M. This is just to give you an idea on insider share ownership and option values.

The 5 year low, median and high median Price/Earnings Ratios are 14.65, 17.14 and 19.64. Earnings have not been good lately and the P/E Ratios has been climbing over the past two years. However, the current P/E at 33.80 is rather high, especially for a utility stock.

I get a Graham Price of $19.16. The 10 year low, median and high median Price/Graham Price Ratios are 1.24, 1.45 and 1.66. The current P/GP Ratio at 1.82 shows also a rather high current stock price.

The 10 year median Price/Book Value per Share Ratio is 2.38 and the current ratio is 2.20. The current ratio is some 92% of the 10 year ratio. This shows a current rather reasonable stock price.

I cannot really use the dividend yield test as the dividend yield has been falling since this company changed from an income trust to a corporation. This is to be expected and it was felt that dividend yields would go to a 4 to 5% dividend yield range for old income trusts companies. This is what has happened on this stock as the current dividend yield is 4.64%.

I can look at the Price/Cash Flow per Share Ratios. The 10 year median P/CF Ratio is 12.56 and the current ratio is 16.70. The current ratio is some 32% higher than the 10 year median ratio and would suggest a rather high current stock price.

When I look at analysts' recommendations, I find Strong Buy, Buy and Hold recommendations. The consensus recommendation would be a buy. This is the most common analysts' recommendation configuration there is, so there is no surprise here. However, the consensus stock price at $35.40 over the next 12 months shows only a total return of 6.07% with 4.64% from dividends and just 1.43% from capital gains. And this expected total return is after the revision for the good first quarter of 2013.

The Daily Buy and Sell advisor recommends this stock at $30 or below. Even at that price, the P/E would still be rather high at 29.13. Pat McKeough also likes this company. See his comments. He thinks that Provident is a good fit with Pembina. Most analysts seem to feel that the purchase of Provident was a good move for Pembina.

I generally do not sell stocks because they are overpriced, unless they are wildly overpriced. I think that the price on this stock is too high for a buy, but I do not feel that it is wildly overpriced. I am comfortable at present with this stock and will be holding on to what I have. I will not be buying more as I have enough in my portfolio.

I think that my total return on this stock will moderate in the future from what I earned. The easy money has been made and it was made as this stock changed from an income trust to a corporation. Dividend paying stocks tend, over the longer term to have capital gains equal to the dividend increases. The company has said they expect to increase dividends by 3 to 5% in the future. That would see future total returns at around 7.6% to 9.6%. However, since the stock is rather overpriced, the next few years will see lower total returns. See my spreadsheet at ppl.htm.

Pembina transports crude oil and natural gas liquids produced in Western Canada. It owns and operates oil sands pipelines and has a growing presence in midstream and natural gas services sectors. Pembina holds a 50% interest in the Fort Saskatchewan Ethylene Storage Facility. Its web site is here Pembina Pipelines.

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.