Encana Corp.

On my other blog I am today writing about Money Show 2015 and the Motley Fool learn more...

Sound bite for Twitter and StockTwits is: Dividend paying oil and gas company. This company is not expected to do well in 2015, but it should start to pick up again in 2016 or 2017. See my spreadsheet on Encana Corp.

I do not own this stock of Encana Corp. (TSX-ECA, NYSE-ECA) but I used to. I had held this stock previously as Alberta Energy Company from April 2000 until August 2002 and made some 18% total returns per year. I had EnCana Corp from February 2006 to November 2009 and made a 9.54% per year total return. I sold this stock in 2009 because I only had 100 shares and the stock was going to split into two companies. I would have ended up with small investment in two companies.

Dividends on this stock are paid in US$. The problem for Canadian Investors is that they will not know how much in dividends they will actually get each quarter because of currency exchange fluctuations. The earnings were not good from 2011 to 2013 inclusive. Earnings are expected to be negative in 2015 and low in 2016. Dividends were cut in 2014 by some 65% in US$.

Dividend growth over the past 5 and 10 years is a decline of 18.9% per year over the past 5 years and an increase of 10.5% per year over the past 10 years, in US$. In CDN$, dividends are down by 17.3% per year over the past 5 years and an increase of 10.1% per year over the past 10 years. This company is into oil and gas so the dividends have gone both up and down over the years.

Another measure of dividends is how much of a shareholders stock has been paid off in dividends over the years and what sort of yield a shareholder is getting on this stock bought in the past. If you had bought this stock 5, 10 or 15 years ago and paid a median price, the dividends would have covered 9.4%, 24% and 73% of your stock's price. If you had bought this stock 5, 10 or 15 years ago, you would be earnings a yield of 1.2%, 1.4% or 3.9%. These are in CDN$.

The current dividend yield is moderate at 3.3% based on dividends of $0.37 CDN$ ($0.28 US$) and a stock price of $11.24 CDN$ ($8.42 US).

The outstanding shares have decreased by 0.3% and 1.9% per year over the past 5 and 10 years. Shares have increased due to Share Issues, Stock Options and DRIP. Shares have decreased due to Buy Backs. Since this stock is reporting in US$, all my growth figures will be in US$ terms. All resource stocks are having a difficult time currently.

Revenue growth is non-existent to moderate. Earnings growth is good. Cash Flow growth is non-existent to good. 2014 was a good year for this company with Revenue growing 36.7%, Earnings growing 1331% and Cash Flow growing 6.7%.

Revenue was down by 6.3% per year over the past 5 years and up by 4.3% per year over the past 10 years. Revenue per Share was down by 6.1% per year over the past 5 years and up by 6.3% per year over the past 10 years. Analysts expect Revenue to drop by 42% 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 down by 30%.

EPS is up by 13% and 9% per year over the past 5 and 10 years. Analysts expect EPS to be negative in 2014. For the 12 month period to the end of the third quarter, there is an earnings loss of $5.32.

Cash flow is down by 19% per year over the past 5 years and up by 5.1% per year over the past 10 years. Cash Flow per Share is down by 18.9% per year over the past 5 years and up by 7.2% per year over the past 10 years. Analysts expect Cash Flow to be down by 50% 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 down by 44%.

The year 2014 is the first year in the past 5 years that ROE was above 10%. The ROE for 2014 was 35%. However, the 5 year median is just 4.6%. The ROE on comprehensive income was 35.1% and its 5 year median is 4.9%. The closeness of these ROEs suggests that the earnings are of good quality.

The debt ratios are fine. The Liquidity Ratio for 2014 was 1.19 which is lower than it has been for a while. The Liquidity Ratio for the end of the third quarter is lower at 1.17. This low ratio is better if you add in cash flow after dividends as it is then 1.88. The Debt Ratio is fine at 1.65 in 2014. The Leverage and Debt/Equity Ratios are fine if a little high at 2.54 and 1.54 in 2014.

This is the first of two parts. The second part will be posted on Thursday, November 19, 2015 and will be available here. The first part talks about the stock and the second part talks about the stock price.

Encana is a leading North American energy producer that is focused on growing its strong portfolio of diverse resource plays producing natural gas, oil and natural gas liquids. Its web site is here Encana Corp.

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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