Keyera Corp

Sound bite for Twitter and StockTwits is: Dividend Growth Utility. The stock price seems to be relatively reasonable this year where I found it relatively expensive last year. I still think that the ratios are relatively high for a utility stock. I would like to see them get their Dividend Payout Ratios in line with EPS which they are going to have to do in the future. 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.

Because the growth of outstanding shares, you need to look at per share growth to determine growth for this company. The outstanding shares have grown at 5.3% and 4.3% per year over the past 5 and 10 years. This can make a difference. The growth in Revenue for the last 5 and 10 years is a decline of 0.5% per year and growth of 6.25% per year. The Revenue per Shares has declined by 5.5% over the past 5 years and increase by 1.9% per year over the past 10 years.

Revenue growth is interesting because the 5 year running averages is much better than shown in other growth. For example, the Revenue growth using 5 year running averages is 8.9% and 10% per year over the past 5 and 8 years. For Revenue per share it is 4.1% and 5.7% over the past 5 and 8 years using 5 year running averages. In this case the 5 year running averages are higher because revenue has decline the past 2 years.

Dividends are paid month and the yield is good at 4.60% based on dividends of $1.68 and a stock price of $36.55. The dividends have grown by 10% and 7.9% per year over the past 5 and 10 years. So dividend increases are moderate. The last dividend increase was for 5.7% and it occurred in this calendar year.

The company used to be an income trust and as such used Distributable Cash to determine what dividends to pay. They became a corporation in 2010. The have continued to increase their dividends as a corporation and see the current dividends as sustainable. Analysts see further increases in dividends.

Using EPS, the payout ratios are too high, with the Dividend Payout Ratio for 2016 at 129% and 5 year coverage of 114%. They are also too high when viewed from the standpoint of CFPS. Here the DPR is 47% with 5 year coverage at 50%. (Generally, it is felt that DPR for CFPS should be no higher than 40%.) If you look at Distributable Cash (DC), the payout is 60% for 2016 with 5 year coverage at 58%. This is a good ratio for DPR for DC.

The Liquidity for this stock is low with a ratio for 2016 of 1.09 and a 5 year median of 1.15. If you add in cash flow after dividends it rises to 1.33. I would prefer to see this at 1.50. The other debt ratios are fine. The Leverage and Debt/Equity Ratios for 2016 are 2.69 and 1.69 with 5 year medians at 2.81 and 1.81. Utilities tend to have heavy debt loads.

The Return on Equity has been above 10% each year of the past 10 years. The ROE for 2016 is 11.8% with a 5 year median of 14.7%. The ROE on comprehensive income is the same as for net income. This is good.

The 5 year low, median and high median Price/Earnings per Share Ratios are 26.36, 30.28 and 35.59. The 10 year values are 22.41, 27.59 and 32.07. The historical ones are 18.79, 22.58 and 26.37. The rise in stock price has been accompanied by a rise in the P/E Ratios. The current P/E Ratio is 25.03 based on a stock price of $36.55 and 2017 EPS estimate of $1.46. This stock price testing suggests that the stock price is relatively reasonable and around the median. I find the P/E Ratios rather high for a utility stock.

I get a Graham Price of $18.57. The 10 year low, median and high median Price/Graham Price Ratios are 1.91, 2.23 and 2.56. The current P/GP Ratio is 1.97 based on a stock price of $36.55. This stock price testing suggests that the stock price is relatively reasonable and below the median. I find the P/GP Ratios rather high for a utility stock.

The 10 year median Price/Book Value per Share Ratio is 3.86. The current P/B Ratio is 3.48 based on a stock price of $36.55, Book Value of $1,949M and Book Value per Share of $10.49. The current P/B Ratio is some 9.9% lower than the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median. Here again I think that the P/B Ratios are high for a utility stock.

The historical median dividend yield is 5.39%. However, income trust stocks tend to have much higher dividend yields than corporations. The median dividend yield since 2010 is 4% and this is some 14.9% lower than the current dividend yield of 4.60%. The current dividend yield is based on dividends of $1.68 and a stock price of $36.55. This stock price testing would suggest that the stock price is relatively reasonable and below the median.

When I look at analysts' recommendations I find Strong Buy, Buy and Hold. The vast majority is a Buy and the consensus would be a Buy recommendation. The 12 month consensus stock price is $43.64. This implies a total return of 23.99% with 4.60% from dividends and 19.40% from capital gains. Last year analysts' expected strong growth in stock price also, but the 2016 stock price was similar to that of 2014 and 2015 and so far this year the stock price has declined around 9.7%.

The company has announced their third quarterly results on Cision. Casey Hall on Simply Wall Street says that this stock is trading at a discount to its intrinsic value. He discounts future cash flows to come to this conclusion. In the math he uses analysts' estimates going 5 years out. One problem I see is that analyst estimates tend to be historically off the mark and the further out, the more wrong they tend to be. It is an interesting exercise. Nicole Wilson on the Ledger Gazette talks about some recent slight decreases in analysts' target prices. See what analysts are saying about this stock on Stock Chase. Their views vary.

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.

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 be Cenovus Energy Inc. (TSX-CVE, NYSE-CVE)... learn more on Friday, November 17, 2017 around 5 pm. Tomorrow on my other blog I will write about Money Show 2017 - Gordon Pape... learn more on Thursday, November 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.

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