Tuesday, October 14, 2014

Teck Resources Ltd.

On my other blog I am today writing why the stock market might be treading lower. continue...

I do not own this stock of Teck Resources Ltd. (TSX-TCK.B, NYSE-TCK). I bought this stock in 2008 and sold in 2009. I bought this stock because the company purchased Fording Canadian Coal Trust at exactly the wrong time and got into financial difficulties and the stock price dropped off a cliff as they had to cut dividends. When the stock recovered somewhat in 2009, I sold for a profit.

This stock is currently paying a dividend and has a yield of 5% and a 5 year median dividend yield of 2.29%. It is probably needless for me to say that the stock price has been dropping lately. The 5 and 10 year dividends have fallen 2.1% per year over the past 5 years and have grown at 24.6% per year over the past 10 years.

This company has had different dividend policies over its life, so it is hard to say what they will do in the future. For example, dividends were flat for a long time before they started to increase in 2004. They paid no dividends in 2009 and then restarted them in 2010.

This stock is down some 72% from its high in 2011. For 2014 it is down some 35% so far this year. Their problem really stems from their buying of Fording Coal in 2008. I had bought this stock at the end of 2008 when they last cut their dividend. I held it until mid-2009 and sold for a 240% profit. Of course it went much higher over the next few years, but I had made a profit so that was nice.

The last 2 years have not been very good for this company. Revenue, earnings and cash flow have very little growth over the past 5 years because of this and analysts expect the same for 2014. The 5 year growth for Revenue per Share is 2.8% per year, for EPS is 2.8% per year. For Cash Flow per Share there is a decrease of 9.6% per year.

The Total Return over the past 5 and 10 years is low because of what has happened recently to the stock price. The Total return over the past 5 years is a loss of 10.70% per year and over the past 10 years is an increase at 3.46% per year. The capital losses over the 5 and 10 years are at 13.33% per year and 0.25% per year. The Dividend portion of the total return over the past 5 and 10 years is at 2.62% and 3.71% per year.

The debt ratios are good for this company. However, the Return on Equity has been quite low for the past two years and is expected to be quite low for 2014. The ROE for 2013 was at 5.2%. The ROE on comprehensive income for 2013 was better at 7.1%.

When I look at analysts' recommendations I find Strong Buy, Buy, Hold and Underperform recommendations. The consensus recommendation is a Hold as are most of the recommendations. The 12 month stock price is $27.30. This suggests that analysts expect a strong recovery in this stock as the 12 month stock price would give a total return of 56.58% from today's price of 18.01. The dividend portion of this return would be 5% and the capital gains would be 51.58%.

If you look just at Price/Earnings per Share Ratio, the current ratio is rather high for this stock at 20.94 as the company is not expected to earn much this year. The 2014 EPS estimate is just $0.86 a decrease of 48% from 2013's earnings. The second quarterly financials shows EPS declining.

However, other measures say a very different thing. Take the Graham price, which is at $24.94. The 10 year Price/Graham price Ratios are 0.64, 0.88 and 1.15. The current P/GP Ratio is 0.72. This stock price test suggests that the stock price is reasonable.

The historical high dividend yield is 3.10% and the current dividend yield at 5% is some 61% higher. This stock price test suggests that the stock price is cheap. The Price/Book Value per Share suggests the same thing as the 10 year P/B Ratio is 1.62 and the current P/B Ratio is 0.56 a value some 65% lower.

There is a recent MPL Communications Daily Advice email on this company. It talks about Teck's coal mines being cash-flow positive despite world-wide glut of coal. The Motley Fool thinks it is not worthwhile betting on Teck at this point.

Sound bit for Twitter and StockTwits is: Stock is relatively cheap. This is a volatile resource stock and I believe money can be made in the ups and down of the stock price. However, I do not see this stock as a long term buy. See my spreadsheet at tck.htm.

I will have only one entry for this stock as I must do on some stock because I cover too many stocks to do double entries on all that I follow.

Teck is a diversified resource company involved in mining and mineral development with major business units focused on copper, metallurgical coal, zinc, gold and energy. This company has interests in several oil sands developments. The company explores for resources in the Americas, the Asia Pacific Region, Europe and Africa. Its web site is here Teck.

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.

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