Cenovus Energy Inc.

Sound bite for Twitter and StockTwits is: Stock cheap, risky. They cut the dividend this year. Might there be more dividends cuts in the future? Of course the time to buy is when stocks are cheap or on sale. See my spreadsheet on Cenovus Energy Inc.

I do not own this stock of Cenovus Energy Inc. (TSX-CVE, NYSE-CVE). This is another stock that was talked about at the 2010 Money Show in Toronto. There were those who liked oil companies and they mentioned both Suncor Energy Inc. (TSX-SU) and Cenovus Energy Inc. (TSX-CVE). This company was split off from EnCana (TSX-ECA) in 2009. This was the oil part of EnCana. My spreadsheet reflects this split. I was also following Alberta Energy Co. (TSX-AEC) into EnCana.

This oil and gas company has also just reduced their dividends by around 40%. It has a history of paying dividends, but as with a lot of resource stocks, its dividends have not only gone up, but they have also gone down. The 5 and 10 year dividend growth to 2014 was at 5.89% and 24.7% per year. However, after the most recent decrease this changes to 5 year dividend decline of 6.2% and 10 year dividend growth at 11%.

The dividend yield has been good on this stock since it was split off from EnCana. The 5 year median dividend yield is 2.8%. The current dividend, even after the recent decreases is even better at 3.1%. However, this dividend could be vulnerable to furthers cuts or suspension.

Last year, 2014, was a good year for this company. However, analysts expects drop in revenue, earnings and cash flow this year or next year.

Analysts expect a drop in Revenues of 32% in 2015. If you look at the 12 month period to the end of 2014 and the 12 month period to the end of the third quarter, Revenue is flat. Analysts expect cash flow to drop 52% in 2015. If you look at the 12 month period to the end of 2014 and the 12 month period to the end of the third quarter, Cash Flow is down by 43%.

Earnings are a bit different. Analysts expect a 9% increase EPS in 2015, but then a negative EPS in 2016. If you look at the 12 month period to the end of 2014 and the 12 month period to the end of the third quarter, EPS is down by 5%.

Debt ratios are fine. The Liquidity Ratio for 2014 was 1.42. I would rather see it at 1.50. The Debt Ratio is quite good at 1.70 for 2014. The Leverage Debt/Equity Ratios are 2.42 and 1.42 for 2014.

The stock price has been falling since its peak in 2010 of $33.28. It is down by almost 38% to 20.67. The 5 and 10 years total returns on this stock to date are a loss of 5.70% per year and a gain of 1.24% per year. The portion of this total return attributable to dividends is at 3.39% and 3.32% per year. The portion of this total return attributable to capital loss is at 9.09% and 2.08% per year.

I get a current Graham Price for this stock of $20.34. With a current stock price of $20.67, the Price/Graham Price Ratio is 1.02. The 10 year low, median and high P/GP Ratios are 1.17, 1.47 and 1.70. This testing would suggest that the stock price is relatively cheap.

I do not know how valid the historical dividend yields are because there have been so many changes in this company. However, the 5 year median dividend yield at 2.76% is some 12% lower than the current dividend yield of 3.10%. This at least suggests that the stock price is relatively reasonable.

The 10 year median Price/Book Value per Share Ratio is 2.22. The current P/B Ratio at 1.20 is some 64% lower. This stock price testing suggests that the stock price is relatively cheap.

The 10 year P/S Ratio is 1.69. The current P/S Ratio at 1.18 is 30% lower. This stock price testing suggests that the stock price is relatively cheap.

When I look at analysts' recommendations, I find Strong Buy, Buy, Hold and Underperform Recommendations. Most of the recommendations are a Buy or a Hold. The consensus recommendation is a Hold. The 12 month stock price consensus is $23.11. This implies a total return of 14.90% with 3.10% from dividends and 11.80% from capital gains. This is based on a current stock price of $20.67.

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.

Andrew Walker of Motley Fool asks if this company will survive the current oil rout. He believes it can as it has cash and cash flow. Some analysts are rating this stock a buy according to News Watch International. There is also an article on this stock in the Wall Street Journal.

Cenovus Energy Inc. is an integrated oil company. The Company's operations include enhanced oil recovery (EOR) properties and established crude oil and natural gas production in Alberta and Saskatchewan. It also has ownership interests in two refineries in Illinois and Texas, United States. Its web site is here Cenovus Energy Inc.

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.