Pembina Pipelines Corp. 2

Sound bite for Twitter and StockTwits is: This utility stock seems presently expensive. I still like this stock and have no intention of selling what I have. I still think that the price is expensive currently. See my spreadsheet at ppl.htm.

I own this stock of Pembina Pipelines Corp. (TSX-PPL, NYSE-PBA). In December 2001 I thought it would be a good time to purchase this stock as the market was relatively low. Pipeline stocks are conservative and the return on this one was good at 9.7%. When I purchased this stock it was an Income Trust company.

Last year outstanding shares were increased by some 792,000 shares or by 0.23% because of stock options. The book value of these shares was $25M and this number of shares was worth $33.5M at the end of 2014.

There is some insider ownership with the CFO owning shares worth around $9M, a Director with share worth around 19.7M and the Chairman owning share worth around $5.8M. Of course all this adds up to less than 1% of outstanding shares.

The 5 year low, median and high median Price/Earnings per Share Ratios are 25.51, 29.46 and 33.41. The 10 year corresponding ratios are a lot lower at 19.82, 22.79 and 25.76. These are rather high ratios for a utility. The current P/E Ratio is 37.04. This is based on a stock price of $42.60 and 2015 EPS estimate of $1.15. This stock price testing suggests that the stock is relatively expensive.

I get a Graham Price of $22.14. The 10 year low, median and high median Price/Graham Price Ratios are 1.39, 1.59 and 1.39. The current P/GP Ratio is 1.92. These ratios are rather high for a utility stock. This stock price testing suggests that the stock is relatively expensive.

I get a 10 year median Price/Book Value per Share ratio of 1.96. The current P/B Ratio is 2.25 a value some 15% higher. The current P/B Ratio is based on a stock price of $42.60 and BVPS of $18.95. This stock price testing suggests that the stock is relatively reasonable.

I cannot really do any historical dividend yield testing on for this stock as it was an income trust and income trust companies generally have dividend a lot higher than other companies. However, the 5 year median dividend yield at 5.73% is some 28% higher than the current dividend yield of 4.08%. This would suggest that the stock price is relatively expensive.

When I look at analysts' recommendations, I find Buy and Hold recommendations. The vast majority of the recommendations are Buy recommendations and the consensus would be a Buy. The 12 month consensus stock price is $48.30. This implies a total return of 17.46%, with 13.38% from capital gains and 4.08% from dividends.

Pembina announced a 5.2% dividend increase for the May 2015 dividend payment. Andrew Walker of the Motley Fool gives three reasons to buy this stock. An April article in The Legacy talks about US analysts ratings on this stock. Most are buys, but one analyst rated it as a Sell.

This is the second of two parts. The first part was posted on Wednesday, May 06, 2015 and is available here. The first part talks about the stock and the second part talks about the stock price.

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.

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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