Husky Energy Inc.

Sound bite for Twitter and StockTwits is: Stock is cheap. You should buy stock when they are cheap. Yes, it is a risk, but seldom do good companies have stock sales. See my spreadsheet on Husky Energy Inc.

I own this stock of Husky Energy Inc. (TSX-HSE, OTC-HUSKF). When I sold some of my SNC-Lavalin in 2008, I was looking for something to buy. With this purchase, I only used a third of the money I got from my SNC sale, but got enough dividends on this to replace the dividends I will lose from my SNC sale. The stock was selling at a reasonable price. This company is into oil and natural gas and at that time they have been making money.

The dividends have gone up and down in the past but have held steady since 2010. The last dividend was paid in stocks and cash. Husky is saving its cash and at present will pay dividends in stocks with cash in place of partial shares. Most sites are treating this as a stock split, but I have not and I am treating it as dividend. I will decide what to do about odd shares I hold after dividends are restored.

They are correct in doing something about dividends. They currently cannot afford to pay them. Last year dividends equaled 100% of EPS. This year they had an earnings loss. I think that they should have suspended dividends, but this works also. UPDATE: Husky has suspended dividends. They were not paid in April 2016.

It is not surprise that revenue, earnings and cash flow growth is negative. Oil prices are currently very low and it is causing problems for oil companies. I have lost money on this stock. I bought in 2008 and 2010. I have a loss of 6.08% per year with a capital loss of 10.54% per year and dividends at 4.46% per year. My total loss in stock price is 54%.

The 5 year low, median and high median Price/Earnings per Share Ratios are 10.90, 12.52 and 14.14. The corresponding 10 year ratios are 10.27, 11.84 and 13.57. The corresponding historical ratios are 9.64, 11.50 and 14.15. (I have 26 years of data.) Since the 2015 EPS was negative and the 2016 EPS estimate is negative, you really cannot do any testing using P/E Ratios. However, this information may become handy in the future.

I get a Graham Price of $10.22. The 10 year low, median and high medina Price/Graham Price Ratios are 0.94, 1.12 and 1.33. The current P/GP Ratio is 1.46. This testing would suggest that the stock price is expensive. However, this is because of current problems. The Graham Price in 2014 was $23.45 and probably will be around $23.38 in 2018. I would seem that this is not a great test for the current stock price.

The current dividend yield is 8.06% based on dividends $1.20 which is being paid for in stock and cash. The historical high is lower by 18% at 6.81%. The historical median dividend yield is lower by 98% at 4.07%. From this point of view, the current stock price of $14.88.

The other good test for this stock is the Price/Book Value per Share Ratio test. The 10 year P/B Ratio is 1.55. The current P/B Ratio based on BVPS of $15.23 and a stock price of $14.88 is 0.96. The current P/B Ratio is some 38% lower than the 10 year ratio. This stock price testing suggests that the stock price is relatively cheap. On an absolute basis, the stock price is lower than the BVPS. This says that the stock is cheap.

When I look at analysts' recommendation, I find Buy, Hold and Underperform recommendations. Most of the recommendations are a Hold and the consensus recommendation is Hold. The 12 month stock price consensus is $18.63. This implies a total return of 33.27% with 25.20% from capital gains and 8.06% from dividends. However, since dividend could be in stock and cash, you may not get 8.06% from dividends.

Rebecca Penty in an article in the Financial Post talks about Husky getting $1.7B in relieve from Li Ka-Shing, Hong Kong's riches man and Husky's largest shareholder. Claudia Cattaneo write an article in the Financial Post in which she said that the CEO Asim Ghosh wants to see stability in the oil business before restoring investment and dividends. Ryan Vanzo of Motley Fool says that Husky is now positioned to not only weather the current downturn, but be very profitable when markets stabilize.

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.

Yesterday on my other blog I wrote about Dividend Yield Testing... learn more. The next stock I will write about will be McCoy Global Inc. (TSX-MCB, OTC-MCCRF)... learn more probably on Tuesday May 24, 2016 around 5 pm.

This company is one of Canada's largest energy and energy-related companies. The Company's operations include the exploration, development and production of crude oil and natural gas. Husky has operations in Western Canada, Eastern Canada, US, China, Indonesia and Greenland. This company is mostly foreign owned. Industry: Oil and Gas (Integrated Oils). It is listed under TSX Energy Index. Its web site is here Husky 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. 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.