Wednesday, April 19, 2017

Veresen Inc.

Sound bite for Twitter and StockTwits is: Buy for good yield. This stock is not cheap, but it still have a very good yield of 6.54%. The dividend seems to be safe. See my spreadsheet on Veresen Inc.

I own this stock of Veresen Inc. (TSX-VSN, OTC-FCGYF). I bought this stock in 2008 as Fort Chicago Energy Partnership. At that time it was a publicly traded limited partnership with increasing and high dividends. In 2010 the company changed to a corporation.

What has happened to the dividends is that they have stayed level since 2008. They cannot afford the dividends according to the Dividend Payout Ratios for EPS or Adjusted EPS. The EPS is negative for 2016 so this will not cover the dividend. The DPR for Adjusted EPS is 526%. Analysts expect both the DPR for EPS or for Adjusted EPS to be closer to 100% by 2019.

Analysts are still looking at the Distributable Cash to calculated DPR. In 2016 the DPR for DC is 87%. The 5 year median is 90%. Analysts expect the DPR for DC to be around 91% in 2017. The company says that they can and are funding the dividends from their Take-or-Pay/ Fixed fee structure. So they see no problem funding the dividends. No word on any increase though.

I have done very well with this stock as I bought it cheap in 2008 and 2009. My ACB is just $7.08. My total return is 21.37% per year with 9.38% from capital gains and 11.99% from dividends. The return on this stock has been mostly in dividends. To date, the dividends I have received have paid for 115% of the cost of my stock over the 8 years I have owned this stock. I would image that the heavy return in dividends compared to capital gains will continue.

The 5 year low, median and high median Price/Earnings per Share Ratios are 42.93, 65.26 and 78.10. The 10 year values are not better at 30.51, 35.86 and 41.20. These are due to the low recent EPS. The historical values are 17.36, 20.83 and 24.72. These are more in line with a utility stock, but still rather high. The current P/E Ratio is 36.40 based on a stock price of $15.29 and EPS estimate for 2017 of $0.42. One has to wonder how good the P/E Ratio is for testing stock price for this stock.

The Price/Distributable Cash Ratio might be better. The 5 year low median and high median P/DC Ratios are 10.17, 12.40 and 14.33. The corresponding 10 year values are 7.85, 10.23 and 12.18. The current P/DC Ratio is 14.70 based on a stock price of $15.29 and 2017 Distributable Cash estimate of $1.04. This stock price testing suggests that the stock price is relatively expensive.

I get a Graham Price of $13.09. The 10 year low, median and high median Price/Graham Price Ratios are 0.86, 1.02 and 1.24. The current P/GP Ratio is 1.17 based on a stock price of $15.29. This stock price testing suggests that the stock price is relatively reasonable but above the median.

I get a 10 year median Price/Book Value per Share Ratio of 2.00. The current P/B Ratio is 2.09 a values some 4.4% higher than the 10 year median P/B Ratio. The P/B Ratio is based on BVPS of $7.32 and a stock price of $15.29. This stock price testing suggests that the stock price is relatively reasonable but above the median.

The dividend yield test is not especially a good one for old Income Trust stocks. Part of the reason is that the dividend yields probably would never reach the height they reached with the stock was an income trust. Another word of caution for this stock is that the dividends have been flat. This is a better test for increasing dividend stocks. However, you should be able to use the 5 year median dividend yield. In this case the 5 year median dividend yield is 7.40% (which really is not that far off the historical median dividend yield of 7.95%). The current dividend yield of 6.54% is based on dividends of $1.00 and a stock price of $15.29. The current dividend is some 11.6% lower than the 5 year median dividend yield. This stock price testing suggests that the stock price is relatively reasonable but above the median.

The 10 year median P/S Ratio is 4.45. The current P/S Ratio is 13.01 based on Revenue estimate of $368.6M for 2017 or $1.18 per share. The current P/S Ratio is some 192% higher than the 10 year median ratio. This stock price testing suggests that the stock is relatively expensive.

When I look at analysts' recommendations, I find Strong Buy, Buy, Hold and Underperform. Most of the recommendations are a Buy and the consensus recommendation would be a Buy. The 12 month stock price consensus is $15.46. This implies a total return of 7.65% with 1.11% from capital gains and 6.54% from dividends.

David Glaser on Sports Perspectives talks about this company getting an average recommendation of Buys. A TCT contributor on Twin City Telegraph does some technical analysis of this stock. It seems to be neither good nor bad. See what analysts think of this stock on Stock Chase. They mostly like it and feel it has a good future.

Veresen is a leading diversified energy infrastructure company that owns and operates energy infrastructure assets across North America. They are engaged in three principal business lines of Pipelines, Midstream and Power (gas-fired and renewable facilities). Its web site is here Veresen Inc.

The last stock I wrote about was about was Canadian Natural Resources (TSX-CNQ, NYSE-CNQ)... learn more . The next stock I will write about will be SNC-Lavalin Group Inc. (TSX-SNC, OTC-SNCAF)... learn more on Friday, April 21, 2017 around 5 pm. Tomorrow on my other blog I will write about Dividend Changes 2... learn more on Thursday, April 20, 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.

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