Monday, April 25, 2016

Canadian Natural Resources

Sound bite for Twitter and StockTwits is: Price relatively cheap. The stock hit a high of $49.70 in 2011 and it is still some 22% below this. I think the dividend is currently safe and I expect to profit in the longer term. Too bad I have not extra money to buy more shares. See my spreadsheet on Canadian Natural Resources.

I own this stock of Canadian Natural Resources (TSX-CNQ, NYSE-CNQ). I started to follow this stock in 2008 because it was on the dividend growth lists that I followed. I first bought CNQ in September 2012 because the dividend yield was relatively high. The 5 and 10 year median dividend yields were 0.73% and 0.75%. I got it with a yield of 1.32%. In April 2013 I bought more shares of this stock because the yield is now at 1.54%.

This stock has usually paid out a small amount of its earnings and has had a very low dividend yield. The historical high dividend yield is 3.1% and the historical low is 0.4%. Until recently, the Dividend Payout Ratio for EPS was below 15% and often running below 7%. This has changed recently.

The DPR for 2015 was a negative 158% because the company had an earnings loss. However, if you compare the last 5 years of EPS to the last 5 years of dividends, the DPR is 33%. Analysts expect the company to have an earnings loss again this year and that could rise the 5 year DPR to 70%. However, analysts seem to be consistently wrong on EPS estimates for this company.

Even though the dividend yields are low the dividend growth has been good. The dividend growth over the past 5 and 10 years is at 27% and 23% per year. However, the last increase was this year and the increase was only 2.2%. They have increased the dividend every year since they started dividends in 2001.

Even with should good growth, I do not buy dividend growth stocks with dividend yields below 1%. That is why when this stock's dividend yield got above 1%, I bought. I expect to do better in the future when oil prices pick up. So far I have a total return of 4.95% with 2.70% from capital gains and 2.25% from dividends. I have dividends per share at $2.39 against a stock price of $32.21. So dividends have paid 7.4% of the cost of my stock.

I cannot valuate this stock price based on Price/Earnings per Share Ratios. This is because the EPS estimate for 2016 is negative. Also, the EPS estimate for 2017 is very low. However, I will say that the 5 year low, median and high median P/E Ratios are 12.04, 15.55 and 17.28. The 10 years values are a bit lower at 14.46, 14.35 and 16.76. This historical P/E Ratios are 10.88, 14.13 and 17.28. The Price/Graham Price Ratio would not get a proper test for the same reasons as the P/E Ratio will not.

Let's look at Dividend Yield. The current dividend yield is 2.38% based on a stock price of $38.68 and dividends of $0.92. The 5 year median dividend yield is 1.48% and the current one of 2.38 is some 60% higher. The historical dividend yield is even lower at just 0.86% and the current one is some 177% higher. By dividend yield measure, the stock price looks relatively cheap. It is not to the historical high 3.07%, but it is still relatively quite high.

The next test I want to look at is the Price/Book Value per Share Ratio test. The 10 year median P/B Ratio is 1.74 and the current P/B Ratio is 1.55 based on a stock price of $38.68 and BVPS of $24.93. This test suggests that this stock is relatively reasonable and below the median.

This company is having problems with the low price of oil and it is affecting earnings, revenue and cash flow. Testing using ratios from these would not show the price is cheap. However, since the company is having problems with the low price of oil, this can be expected.

When I look at analysts' recommendations I find Strong Buy, Buy and Hold recommendations. The most recommendations are a buy and the consensus recommendation is a buy. The 12 months stock price is $39.05. This implies a total return of 3.34% with 2.38% from dividends and 0.96% from capital gains. I am playing a longer game and expect to make good money from this stock in the longer, but not shorter, term.

Ryan Vanzo of Motley Fool asks if investors should be worried about a dividend cut. He thinks that the dividends are currently safe. Finding Value at Seeking Alpha does an analysis of this company and thinks it is solid. Some recent analysts' recommendations is shared by Jorge Valdez on Market News and Analysis.

I will have only one entry for this stock this year. However, I did a more complete report on this company in 2015 and you can see those reports here and here.

The last stock I wrote about was about was Pembina Pipelines Corp. (TSX-PPL, NYSE-PBA)... learn more . The next stock I will write about will be Veresen Inc. (TSX-VSN, OTC-FCGYF)... learn more on Wednesday, April 27, 2016 around 5 pm.

Canadian Natural Resources Ltd. is a senior oil and natural gas exploration, development and production company. The Company's operations are focused in Western Canada, in the U.K. sector of the North Sea and in offshore West Africa. Its web site is here Canadian Natural Resources.

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. I have three blogs. The first talks only about specific stocks and is called Investment Talk . The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter or StockTwits.

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