ARC Resources Ltd

Sound bite for Twitter and StockTwits is: Buy for diversification. Current price of $20.74 could be reasonable. You should make both capital gains and dividends over the longer term, but expect a lot of volatility. See my spreadsheet on ARC Resources Ltd.

I do not own this stock of ARC Resources Ltd. (TSX-ARX, OTC-AETUF). When TFSA first came out, this stock was recommended for this account as it was an income trust at that point and most of the distributions were taxable. This stock is no longer an income trust and the distributions are now dividends and taxed as normal Canadian dividends.

It continues to be a sad tale for dividends. After the cuts in 2009, dividends were flat until 2016 when they were decreased again. The problem is that they cannot afford the dividends were they paying. For 2016 they paid out 123% more in dividends than earnings. For the past 5 years that figures is 275%. Analysts generally expect that within the next couple of years, they will be able to cover their dividends with earnings.

The bad news is that revenues, earnings, funds from operations and cash flow have all declining. Analysts expect that all these items will start to increase in 2017.

The good news is that they have great debt ratios. The Liquidity Ratio for 2016 is 2.58. The Debt Ratio for 2016 is 2.39. The Leverage and Debt/Equity Ratios are 1.72 and 0.72 respectively. These great ratios should help see the company through the bad times.

I get 5 year low, median and high median Price/Earnings per Share Ratios of 26.39, 34.47 and 39.69. The 10 year corresponding values are 19.80, 23.40 and 27.00. The historical ones are 11.14, 12.37 and 14.47. The ratios have been going higher as EPS has come down. The current P/E Ratio is 39.88 based on a stock price of $20.74 and 2017 EPS estimate of $0.52. This stock price testing suggests that the stock price is relatively expensive. However, this may not be the best test for this sort of company.

I get a Graham Price of $10.74. The 10 year low, median and high median Price/Graham Price Ratios are 1.32, 1.62 and 1.87. The current P/GP Ratio is 1.93 based on a stock price of $20.74. This stock price testing suggests that the stock price is relatively expensive.

The 10 year Price/Book Value per Share Ratio is 2.25. The current P/B Ratio is 2.10 based on BVPS of $9.86 and a stock price of $20.74. The current P/B Ratio is some 6.42% lower than the 10 year ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median. This may be the best test for this company.

The Dividend Yield testing for this stock pay might not be valid because the company used to be an income trust and as such had high yields. The 5 year dividend yield is 4.52%. The current yield at 2.89% is some 36% lower. The current dividend yield is based on dividends of $0.60 and a stock price of $20.74. This stock price testing suggests that the stock price is relatively expensive.

The 10 year median P/S Ratio is 4.84. The current one is 5.20 based on 2017 Revenue estimate of $1408M or $3.99 per Share and a stock price of $20.74. This current ratio is 7.5% above the 10 year median ratio. This suggests the stock price is reasonable but above the median.

I get a 10 year Price/Funds from Operations Rati of 9.62. The current P/FFO Ratio is 9.14 based on 2017 FFO estimate of $2.27 and a stock price of $20.74. The current ratio is 5% lower than the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.

When I look at analysts' recommendations, I find Buy and Hold recommendations. Most are a Buy and the consensus recommendation is a Buy. The 12 month stock price consensus is $27.06. This implies a total return of 33.37% with 30.47% from capital gains and 2.89% from dividends based on a current price of $20.74.

This news item on RTT News gives a quick overview of this company's fourth quarterly results. Renee Jackson on The Cerbat Gem talks about the Royal Bank of Canada lowering its price objective for this company. Rives staff says on the Rives Journal that this company has an RSI at 47.81 which suggests that it is neither overbought nor oversold. See what analysts are saying about this stock on Stock Chase. They mostly like this company.

ARC Resources Ltd. is one of Canada's leading conventional oil and gas companies. Its focus is on acquiring and developing long-life oil and gas properties across western Canada. Industry: Oil and Gas (Oil and Gas Producers) Its web site is here ARC Resources Ltd.

The last stock I wrote about was about was Absolute Software Corporation (TSX-ABT, OTC-ALSWF)... learn more . The next stock I will write about will be Home Capital Group (TSX-HCG, OTC- HMCBF)... learn more on Friday, February 17, 2017 around 5 pm. Tomorrow on my other blog I will write about Taking your Time... learn more on Thursday, February 16, 2017 around 5 pm.

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.