Tuesday, May 6, 2014

Canadian Natural Resources

I own this stock of Canadian Natural Resources (TSX-CNQ, NYSE-CNQ). I started to follow this stock in 2008 because it was on the dividend growth lists that I followed. I first bought CNQ in September 2012 because the dividend yield was relatively high. The 5 and 10 year median dividend yields were 0.73% and 0.75%. I got it with a yield of 1.32%. In April 2013 I bought more shares of this stock because the yield was at 1.54%.

This stock has been on dividend growth lists for a long time. I never bought this stock before because the yield was very low with a median around 0.7%. The reason why I track this stock is because of the good growth in dividends. The 5 and 10 year growth in dividend is at 20% and 21% per year.

Recently the company has also been ramming up the dividends. The total dividend increase for 2014 so far has been 82%. The company thinks that it is strong enough to do this. Both the Dividend Payout Ratios for earnings and cash flow are increasing. However, the DPR for EPS for 2013 was 23% and for CFPS was 7.2%. The DPR for EPS and CFPS is expected to be 26% and 9.7%. These are very low payout ratios.

The dividend yield currently at 2.01% is higher than it has ever been. The 5 year median dividend yield is just 0.88% and it used to be lower.

I have not invested much in this stock, as I do not have much free money to invest. My return has been great with a total return of 25.99% per year with 1.51% from dividends and 24.48% from capital gains. The 5 and 10 year total return on this stock was ok with total return at 4.58% and 14.59% per year over these periods. The portion of this return attributable to dividends was 1.15% and 1.21% and the portion of this return attributable to capital gains is 3.43% and 13.38% over these periods.

The outstanding shares have not grown over the past 5 and 10 years. Shares have increased due to Stock Options and Share Issues. They have decreased due to Buy Backs. Growth in revenue, earnings and cash flow is better over the past 10 years than over the past 5 years. Part of this is because exactly 5 years ago was a good year. That is why the 5 year running averages over the past 5 years is better than the 5 year growth.

Revenues have grown at 2.1% and 11.3% per year over the past 5 and 10 years. Revenue per Share has grown at 2% and 11% per year over the past 5 and 10 years. The Revenue per Share has grown at the rate of 4.7% and 14.3% per year if you use 5 year running averages over the past 5 and 10 years. Revenues, earnings and cash flow declined in 2009 and has mostly been growing since then.

Net Income is down by 14.6% per year over the past 5 years and it is up by 4.9% per year over the past 10 years. Earnings per Share are down by 14.7% over the past 5 years but it is up by 5.1% per year over the past 10 years. Using the 5 year running averages, EPS is down by 4.6% per year over the past 5 years and it is up by 10% per year over the past 10 years.

Cash Flow is up by 0.8% and 8.8% per year over the past 5 and 10 years. CFPS is up by 0.7% and 8.6% per year over the past 5 and 10 years. If you use 5 year running averages, CFPS is up by 3.2% and 11.7% per year over the past 5 and 10 years.

Over the past 10 years, the Return on Equity has been below 10% in 4 years, and most of those years are recent. The ROE for 2013 was 8.8% and the 5 year median ROE was 8.1%. The ROE on comprehensive income is similar with an ROE for 2013 of 8.7% and a 5 year median at 7.9%.

The Liquidity Ratio for 2014 is at 0.42. Even adding in the current portion of the long term debt, the Liquidity Ratio is still very low at 0.63. This means that current assets cannot cover current liabilities. If you add in cash flow after dividends the ratio is at 1.70. This is a very good one. This company depends on cash flow to pay for current liabilities.

The Debt Ratio is very good and the ratio for 2013 is 1.99. The 5 year median ratio is 1.97. The Leverage and Debt/Equity Ratios are fine at 2.01 and 1.01.

I have tracked this stock and liked it for some time. I just thought that the dividend yield was too low. When I saw that the dividend yield has jumped up, I just went for it. It sometimes pays to take advance of unique situations. However, there can be a big risk in doing this. These unique situations generally occur because a company is having some current problem. See my spreadsheet at cnq.htm.

This is the first of two parts. The second part will be posted on Wednesday, May 7, 2014 and will be available here. The first part talks about the stock and the second part talks about the stock price.

Canadian Natural Resources Ltd. is a senior oil and natural gas exploration, development and production company. The Company's operations are focused in Western Canada, in the U.K. sector of the North Sea and in offshore West Africa. Its web site is here Canadian Natural 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. See my website for stocks followed and investment notes. Follow me on Twitter or StockTwits.

No comments:

Post a Comment