I own this stock of Pembina Pipelines Corp (TSX-PPL, NYSE-PBA). In December 2001 I thought it would be a good time to purchase this stock as the market was relatively low. Pipeline stocks are conservative and the return on this one was good at 9.7%. When I purchased this stock it was an Income Trust company.
I bought this stock in 2001 and again in 2009. I have done well with total return at 16.95% with 9.23% from capital gains and 7.72% from dividends. On the stock I bought in 2001, I am earnings over 19% on my original investment after some 16 years. Dividends have paid 202% of the cost of my purchases.
The long term debt is increasing rapidly. The median annual increase in long term debt is 29% per year over the past 5 years. The Long Term Debt/Market Cap Ratio is still low at .32. The other low debt ratio is the Liquidity Ratio at 0.89. This means that current assets cannot cover current liabilities. The 5 year median for this ratio is 0.89. For 2017 you have to add back in the current portion of long term debt and cash flow after dividends to get an acceptable ratio at 1.55.
The other debt ratios are good. The Debt Ratio is 2.18. What you want is a ratio of 1.50 and above so this is a very good ratio. This one looks at Assets and Liabilities. The other debt ratios are fine which are the Leverage and Debt/Equity Ratios. These are good at 1.85 and 0.85 respectively.
Dividends are good with low dividend growth. The current dividend yield is 5.41% with 5, 10 and historical median dividends of 4.97%, 4.08% and 8.14%. Dividends yields were quite high while this stock was an Income Trust. Old Income Trust companies are never going to have the high yields they did as Income Trust. This company's median dividend yield after converting to a corporation is 5.21%. Dividend growth is shown in the table below.
Income Trusts could pay higher dividends than corporation because of the trust structure. For a couple of years after becoming a corporation this company kept the dividends flat and then started to increase them again. This company is still using Funds from Operations and Adjusted Funds from Operations to measure their dividend payouts against.
The company is in the process of bringing the dividend within the EPS and CFPS limits. The Dividend Payout Ratio for 2017 was 107% and is expected to be 98.6% in 2018. The Dividend payout Ratio for Cash Flow per Share is also high at 62% with 5 year coverage at 62%. This is better to be at 40% or lower.
The DPR for FFO for 2017 is 56.9% with 5 year coverage at 69%. The DPR for AFFO for 2017 is 62% with 5 year coverage at 69%.
The Total Return is show below for years of 5 to 20. This company has done very well for its shareholders with Total Return above 15% for all durations. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See charts below.
| Years | Div Gth | Tot Ret | Cap Gain | Div |
|---|---|---|---|---|
| 5 | 4.64% | 15.12% | 9.83% | 5.29% |
| 10 | 3.88% | 16.59% | 10.00% | 6.59% |
| 15 | 4.46% | 17.51% | 9.99% | 7.52% |
| 20 | 6.62% | 21.38% | 10.70% | 10.67% |
The 5 year low, median and high median Price/Earnings per Share Ratios are 26.93, 35.56 and 42.20. The 10 year corresponding P/E Ratios are 23.47, 27.90 and 32.33. The corresponding historical P/E Ratios are 20.16, 23.04 and 26.15. I must say I find them rather high for a utility company. The current P/E Ratio is 18.24 based on a stock price of 39.94 and 2018 EPS estimate of $2.19. This stock price testing suggests that the stock price is relatively cheap.
I get a Graham Price of $36.8. The 10 year low, median and high median Price/Graham Price Ratios are 1.29, 1.61 and 1.83. I find these ratios also high for a utility company. The current P/GP Ratio is 1.08 based on a stock price of $39.94. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median Price/Book Value per Share of 1.78. The current P/B Ratio is 1.45 based on Book Value of $11,365M, Book Value per Share of $27.33 and a stock price of $39.94. The current P/B Ratio is rather low at 1.45 as generally a P/B Ratio is 1.50 is considered a low one. The current P/B Ratio is some 18.6% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median. If the current ratio was 20% below the 10 year median, the stock price would be relatively cheap. So it is close to cheap.
I get an historical median dividend yield of 8.14% and a historical median dividend yield of 5.21% since the company became a corporation. The current dividend yield is 5.41% based on dividends of $2.16 and a stock price of $39.94. The current yield is some 33.6% below the historical median dividend yield but some 3.8% above the one since being a corporation. The second one may count more and suggest that the stock price is relatively reasonable and below the median.
The 10 year median Price/Sales (Revenue) Ratio is 2.74. The current P/S Ratio is 2.58 based on 2018 Revenue estimate of $7,772M, Revenue per Share of $15.45 and a stock price of $39.94. The current ratio is some 7.8% below 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 Strong Buy (2), Buy (12) and Hold (1). The consensus is a Buy. The 12 month stock price is $52.06. This implies a total return of 32.75% with 30.35% from capital gains and 5.41% from Dividends. This is based on a current stock price of $39.94.
Luis Baughman on Simply Wall Street likes this company but says it is no cheap. Adrian McCoy on Pembina Pipelines Corp. Ian Bicki of The Canadian Press talks about the takeover of Veresen on CTV News Site. MPL Communications also talk about this stock on their Buy Sell Adviser Report. See what analysts are saying about this stock on Stock Chase. Most like it, but some have different views.
Pembina Pipeline Corp caters to the oil & gas industry. Its services include transportation of oil & gas through its pipelines. Its web site is here Pembina Pipelines Corp.
The last stock I wrote about was about was Barrick Gold Corp (TSX-ABX, NYSE-ABX)... learn more. The next stock I will write about will be Canadian Natural Resources (TSX-CNQ, NYSE-CNQ)... learn more on Monday, April 16, 2018 around 5 pm.
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Great analysis thank you. I only own ENB and TRP as energy infrastructure plays. This co. I have thought about, will add to watchlist:)
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