Wednesday, November 16, 2016

Keyera Corp

Sound bite for Twitter and StockTwits is: Not cheap. I think that the stock price is on the high side and the stock ratios are too high for a utility stock. I would also prefer to see them get the dividends better in line with the EPS. The company has a lot of good features; it is just priced too high for my liking. When interest rates again raise dividend paying utilities may not be so sought after. See my spreadsheet on Keyera Corp.

I do not own this stock of Keyera Corp. (TSX-KEY, OTC-KEYUF). I started to review some of the stock recommended by Jennifer Dowty from a column she wrote and I reviewed in February 2010 on Dividends and Special Dividends. The title of the article in Investor's Digest was Dividend Stocks: Buy, Hold and Collect. Jennifer is now a Portfolio Manager for Manulife Asset Management Limited. Some of the stocks pointed out where good stocks, some not so much.

This used to be an Income Trust company. They did not cut the dividends in changing to a corporation; they just held the dividend steady for one year. However, as a result they are still payout out more in dividends than they earn. They are still judging their payouts by Distributable Cash (really AFFO). According to that the payout is 49.2%.

The Dividend Payout Ratio for 2015 for EPS is 117.4% with a 5 year median also of 117.4%. The DPR for CFPS for 2015 is 46.5% with a 5 year median of 49.5%. Over the past 5 years they have paid out 108% of the EPS in dividends.

The current Dividend Yield is good with moderate dividend growth. The current dividend yield is 4.25% based on a stock price of $37.41 and Dividends of $1.59. The 5 year median Dividend Yield is 3.96%. As an Income Trust, the Dividend Yields were higher in the past. The historical high is 12%. The historical median is 6.02%. Dividends have only been paid for 13 years. The company went public in 2003.

The dividends have grown at 9.2% and 8% per year over the past 5 and 10 years. The last dividend increase was for 6% and it occurred this year. If this company was bought 5 or 10 years ago, Dividend Yield on the original stock price if at a median price would be 7.3% and 15.2%. If this company was bought 5 or 10 years ago, Dividends would have paid 30% and 108% of the original stock price if a median price was paid for the stock.

The Liquidity Ratio is low at 0.87 in 2015. The 5 year median Liquidity Ratio is 1.36. If you add in cash flow after dividends the Liquidity Ratio would be 1.59. So the company is counting on cash flow to cover current liabilities. The problem with low Liquidity Ratios is that it can make the company vulnerable, especially in bad times. The Debt Ratio is also low at 1.48 in 2015. The 5 year median ratio is also 1.48. I prefer both these ratios to be 1.50 for safety's sake.

The 5 year low, median and high median Price/Earnings per Share Ratios are 22.83, 29.21 and 34.19. The corresponding 10 year values are 20.02, 24.08 and 28.14. The 13 year values are 18.04, 22.18 and 26.32. It would seem that stock price has been rising because of higher P/E Ratios. The current P/E Ratio is 25.45 based on a stock price of $37.41 and 2016 EPS estimate of $2.55. If you use the 10 year values, this stock price testing suggests that the stock price is relatively reasonable. However, I think that the P/E Ratios are rather high for a utility stock.

I get a Graham Price of $18.81. The 10 year low, median and high median Price/Graham Price Ratios are 1.75, 2.11 and 2.47. Here again I thing that the ratios are quite high for a utility stock. The current P/GP Ratio is 1.99 based on a stock price of $37.41. This stock price testing suggests that the stock price is relatively reasonable and below the median. On an absolute basis, a ratio of 1.99 is high, especially for a utility stock.

The 10 year median Price/Book Value per Share Ratio is 3.27. The current P/B Ratio is 3.50 a value some 7.1% higher. This current P/B Ratio is based on BVPS of $10.69 and a stock price of $37.41. Here again I think that the ratio is quite high. On a relative basis the stock price is reasonable but above the median.

The 10 year median P/S Ratio is 1.12. The current P/S Ratio is 2.61 based on 2016 Revenue estimates of $2461M, Revenue per share at $14.33 and a stock price of $37.41. The current P/S Ratio is some 132% above the 10 year median. This stock price testing suggests that the stock price is expensive.

The 10 year median Price/Cash Flow per Share Ratios is 12.48. The current P/CF Ratio is 12.90, a value some 3.5% higher. The current P/CF Ratio is based on 2016 CFPS estimate of $2.90 and a stock price of $37.41. This stock price testing suggests that the stock price is relatively reasonable but above the median.

When I look at analysts' recommendations, I find Strong Buy, Buy and Hold recommendations. Most of the recommendations are a Buy with Hold a close second. The consensus recommendations would be a Buy. The 12 months stock price is $44.43. This implies a total return of 23.025 with 18.77% from capital gains and 4.25% from dividends based on a current price of $37.41.

The Dividend Channel via Forbes talk about their approval of this stock and its good dividends. On November 8, 2016, Keyera put out a News Wire about their recent third quarter. Donnie Miller on Nov 15th, on Baseball News Source talked about Scotiabank reissued their sector perform rating. He also talked about other recommendations for this company. See what analysts are saying about this company on Stock Chase.

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 Dollarama Inc. (TSX-DOL, OTC-DLMAF)... learn more . The next stock I will write about will Cenovus Energy Inc. (TSX-CVE, NYSE-CVE)... learn more on Friday, November 18, 2016 around 5 pm.

Tomorrow on my other blog I will write about Money Show 2016 - Tom Sosnoff... learn more on November 17, 2016 around 5 pm. Also on this blog a will write about will Alimentation Couche-Tard Inc. Redone (TSX-ATD.B, OTC-ANCUF)... learn more on Friday, November 17, 2016 around 5 pm.

Keyera provides essential services and products to oil and gas producers in western Canada, and markets related natural gas liquids (NGLs) throughout North America. Its web site is here Keyera 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.

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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