ARC Resources Ltd.

On my other blog I am today writing about Price/Earnings Ratios continue...

I do not own this stock of ARC Resources Ltd. (TSX-ARX, OTC-AETUF). When TFSA first came out, this stock was recommended for this account as it was an income trust at that point and most of the distributions were taxable. This stock is no longer an income trust and the distributions are now dividends and taxed as normal Canadian dividends.

This is a resource stock and the dividends have fluctuated over time. The dividends are quite good, with the current dividend yield at 4% and the 5 year median dividend yield 5.3%. What you can gain from these sorts of stocks is good dividend income over time.

The 5 and 10 year total returns are at 13.59% and 13.83% per year. The dividend portion of this return is at 5.20% and 8.56% per year. The capital gain portion of this return is at 8.59% and 5.27% per year.

The Dividend Payout Ratio for earnings for this stock has always been much too high for my liking and the 5 year median DPR for earnings 135% and the DPR for earnings for 2013 is 155%. The DPR for earnings is expected to be 126% for 2014 and be around 100% in 2016. A holdover from when the company was an income trust, the company says what their Distributable Cash Flow is. I am not keen on this measure.

The other DPR to look at is the DPR for Cash Flow per Share. Here the company is not doing badly with the 5 year median DPR for CFPS at51% and the DPR for CFPS at 45%. The DPR for CFPS is expected to be around 37% in 2014.

The outstanding shares have increased by 7.5% and 5.8% per year over the past 5 and 10 years. Whenever there is a big change in Outstanding Shares over time, it is necessary to look at total and per share values. For example, you should look at both Revenues and Revenues per Share. Shares have increased due to Stock Options, DRIP and Share Issues.

Revenue and Cash Flow are up over the past 10 years, but not over the past 5 years. There has only been a decline in Earnings. Revenue per Share, Earnings per Share and Cash per Share have declined over the past 5 and 10 years.

Revenue is up by 8.3% per year over the past 10 years, but is down by 1% per year over the past 5 years. Revenue per Share is up by 2.4% per year over the past 10 years, but is down by 7.9% per year over the past 5 years.

Earnings are down by 14.7% and 1.9% per year over the past 5 and 10 years. Earnings per share are down by 21% and 8.3% per year over the past 5 and 10 years. Both Earnings and EPS do fluctuate for this company.

Cash Flow is down by 1.8% per year over the past 5 years and up by 7.9% per year over the past 10 years. CFPS is down by 8.6% per year over the past 5 years and up by 2% per year over the past 10 years. Cash Flow also fluctuates for this company, but not quite as much as earnings fluctuate.

The Return on Equity has been close sometimes, but never has reach 10% in any year in the past 5 years. The 5 year median ROE is just 8.2%. The ROE for 2013 was lower at 7.1%. The ROE on comprehensive income for 2013 was also 7.1%.

The Liquidity Ratio is low at just 0.52 for 2013. This means that the current assets cannot cover the current liabilities. It does not improve much if you take off the current portion of the long term debt as it just reaches 0.58. If you include the cash flow after dividends, the Liquidity Ratio is 1.62. Since cash flow can fluctuate, you got to wonder if including cash flow is justified.

The Debt Ratio is good at 2.45 and this ratio has always been good. The 5 year median Debt Ratio is 2.52. The Leverage and Debt/Equity Ratios are good and have always been so. The current ratios are 1.69 and 0.69, respectively. The 5 year median ratios are also 1.69 and 0.69, respectively.

Via News Wire, the company confirms the March 2014 dividend at $0.10 per share and talks about their DRIP plan. See my spreadsheet at arx.htm.

This is the first of two parts. The second part will be posted on Friday, February 21, 2014 and will be available here.

ARC Resources Ltd. is one of Canada's leading conventional oil and gas companies. Its focus is on acquiring and developing long-life oil and gas properties across western Canada. Industry: Oil and Gas (Oil and Gas Producers) Its web site is here ARC Resources.

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. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

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