Veresen Inc.

Sound bite for Twitter and StockTwits is: High dividend yield and risks. This used to be a dividend growth company, but it is currently not that. However, the dividend is still quite high at 5.42%. I will be keeping this stock, but I do not also have a lot invested in it. See my spreadsheet at vsn.htm.

I own this stock of Veresen Inc. (TSX-VSN, OTC- FCGYF). I bought this stock in 2008 as Fort Chicago Energy Partnership. At that time it was a publicly traded limited partnership with increasing and high dividends. In 2010 the company changed to a corporation.

Although I have made good money on this stock and the dividend yield is still quite good, I do wonder how well it will do in the future. I think that the stock is riskier than when I initially bought it. I have had this stock for just over 6 years. My total return is 27.76% with 16.55% from capital gains and 11.21% from dividends.

The other thing is that I have collected some $6.24 per share in dividends and this equals some 88% of the price I paid for this stock of $7.08 per share. The current dividend is 5.42%. In the future the portion of the total return attributable to dividends will be lower. Also, this stock has already has had the run up in share price from converting to a corporation, so the capital gain portion of the total return in the future will also be lower.

A problem with this stock is that the dividend has been level since 2008. I do not see this changing anytime soon. The Dividend Payout Ratio for 2014 is 416% for EPS and 94.19% for CFPS. The company also puts out a distributable cash value and the company is paying out 91.7% of this value in 2012. No one thinks that they will lower the dividend, but then no one thinks that it will rise anytime soon.

The 5 and 10 year total return on this stock is 16.39% and 11.35% per year. The portion attributable to dividends is 7.19% and 6.95% per year over these periods. The portion attributable to capital gains is 9.19% and 4.40% per year over these periods.

The outstanding shares have increased by 7.6% and 6.3% per year over the past 5 and 10 years. As a shareholder, I am going to be more interested in the per share value to tell me how well the company is growing. With the company, the only growth is over the past 10 years in cash flow. Otherwise there is no real growth.

With Revenue, there is a problem in judging whether or not there is growth. They have been investing in other projects and companies and they now have dividend and equity income rather than "revenue". These are not really the same thing. However, over the past 3 years Operating Revenue and Other Income has been increasing, so this is good.

They give out a Distributable Cash value and this has been increasing, but only at a low level with the 5 and 10 year growth at 0% and 2.4% per year. EPS is down by 3% and 10.5% per year over the past 5 and 10 years. In EPS, there has been some gain over the past 3 years.

Cash Flow is down by 1.4% and up by 2.3% per year over the past 5 and 10 years. CFPS is down by 8.4% and 3.8% per year over the past 5 and 10 years. Both Cash Flow and CFPS has been level over the past 3 years. This is not a great showing.

The only bright spot in growth is in Book Value. BVPS is up by 17% and 6.3% per year over the past 5 and 10 years.

With lousy earnings, we also have lousy Return on Equity. The ROE was 2.1% in 2014 and the 5 year median value was 4.5%. The ROE on comprehensive income was better at 5.3% with a 5 year median value of 8.3%. This suggests that Earnings might be a bit better than they appear.

Until recently, the Liquidity Ratio was low. The 5 year median value until this year was 0.85. The Liquidity Ratio for 2014 was very good at 2.18. The Debt Ratio has often been low (under 1.50). However, the one for 2014 is 2.15. Leverage and Debt/Equity Ratios used to be rather high. The current ones at 1.87 and 0.87 are good. Debt ratios have much improved over the past few years.

This is the first of two parts. The second part will be posted on Wednesday, May 13, 2015 and will be available here. The first part talks about the stock and the second part talks about the stock price.

Veresen is a leading diversified energy infrastructure company that owns and operates energy infrastructure assets across North America. We are engaged in three principal business lines of Pipelines, Midstream and Power (gas-fired and renewable facilities). Its web site is here Veresen.

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.