Sound bite for Twitter and StockTwits is: Dividend Growth Industrial. On Most tests this stock is coming up as relatively expensive. The debt ratios are not good also as noted below. This is the sane complaint from one analyst about leverage. There are some economists that feel that highly leveraged stocks will do poorly in the next bear market. See my spreadsheet on Parkland Fuel Corp.
I do not own this stock of Parkland Fuel Corp (TSX-PKI, OTC-PKIUF). I decided to do a spreadsheet on this stock as it was a stock recommended by Roger Conrad in Money Show 2013.
Their revenue is growing, but they are having a harder time growing earnings and cash flow. The problem with cash flow is that the outstanding shares are increasing rapidly. Outstanding shares have increased by 14% and 10% per year over the past 5 and 10 years. For earnings the main problem is that the expenses are increasing faster than revenue, especially the Operating Costs.
Dividends yields are moderate to good. The current dividend is 3.52% with 5, 10 and historical dividend yields at 4.57%, 6.06% and 8.19%. This company used to be an income trust. They decreased their dividends by around 19% when they became a corporation. Dividend growth is low with growth at 2.4% and 2.7% per year over the past 5 and 10 years. See chart below on Dividend Growth.
They cannot afford their dividends. They could shortly after becoming a corporation, but then Dividend Payout Ratios soared. The Dividend Payout Ratio for 2017 is 167% with 5 year coverage at 153%. This is, of course, far too high. Analysts expect the DPR to be below 100% by 2019, but estimates are often wrong. So the Cash Flow coverage is good, but the Earnings coverage is still too high.
Another way to look at dividend payout is to compare the dividends paid in cash compared to Net Income and cash flow. Because the company has a dividend reinvestment plan, they pay out less than the dividend amount in actual cash. For 2017 cash dividends was 118% of Net Income and 44% of Cash Flow. For the past 12 months cash dividends is 128% of Net Income and 38% of Cash Flow.
The only debt ratios not to worry about are the Long Term Debt/Market Cap Ratio as it is only 0.57 with 5 year median at 0.28. The Liquidity Ratio is for 2017 is 0.91 with 5 year median at 1.26. If you add in cash flow after dividends and current portion of the long term debt it is only 1.00 with a 5 year median at 1.57. That is current assets equal current liabilities. The Debt Ratio is also low at 1.44 with 5 year median at 1.57. Both the Liquidity and Debt Ratios are better at 1.50 giving some margin of safety.
The Leverage and Debt/Equity Ratios are a bit high at 3.29 and 2.29 respectively. The 5 year median ones are better at 2.79 and 1.79.
The Total Return per year is show below for years of 5 to 21. 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.
Shareholders have done well as far as total return is concerned over the past 20 years. I think that the stock is overpriced at the moment, but this will not always be the case.
|Years||Div. Gth||Tot Ret||Cap Gain||Div.|
The 5 year low, median and high median Price/Earnings per Share Ratios are 31.28, 40.43 and 46.59. The corresponding 10 ratios are 14.94, 17.38 and 20.54. The corresponding historical ratios are 12.01, 16.21 and 21.27. The current P/E Ratio is 30.38 based on a stock price of $32.81 and 2018 EPS estimate of 1.08. I think that this stock price testing suggests that the stock price is relatively expensive.
The stock price has taken off when the EPS has tanked. That is why the P/E Ratios are so high. Obviously, investors are not worried about the lack of earnings. But are they right to not worry about this? The latest P/E Ratios are very high for this sort of stock. On the other hand, using the P/E Ratio to value this stock may not be the best one to use.
I get a Graham Price of $17.40. The 10 year low, median and high median Price/Graham Price Ratios are 1.33, 1.54 and 1.88. The current P/GP Ratio is 1.89 based on a stock price of $32.81. This stock price testing suggests that the stock price is relatively expensive.
I get a 10 year median Price/Book Value per Share of 2.85. The current P/B Ratio is 2.63 based on a stock price of $32.81, Book Value of $1,642M and Book Value per Share of $12.46. The current ratio is some 7.5% lower than the 10 year ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get an historical median dividend yield of 8.19%. The current dividend yield is 3.52% based on dividends of $1.15 and a stock price of $32.81. The 5 year and 10 dividend yield is 4.57% and 6.06%. The current dividend is lower than all these at 57%, 23% and 42%. This stock price testing suggests that the stock price is relatively expensive.
The 10 year median Price/Sales (Revenue) Ratio is 0.24. The current P/S Ratio is 0.32 based on 2018 Revenue estimate of $13,583M, Revenue per Share of $103.11 and a stock price of $32.81. This stock price testing suggests that the stock price is relatively expensive.
When I look at analysts’ recommendations I find Strong Buy (2), Buy (4) and Hold (1) recommendations. The consensus would be a Buy. The 12 month stock price consensus is $36.86. This implies a total return of 15.86% with 12.34 from capital gains and 3.52% from dividends.
Matt Smith on Motley Fool says this is a good growth stock that is in the process of unlocking considerable value from its latest acquisitions. A DR Contributor on Danvers Record says that this company has a Value Composite Score of 48 which says that the stock is neither under or overvalued. See what analysts are saying about this stock on Stock Chase. One analyst thought it was too leveraged.
Parkland Fuel Corp is a marketer and distributor of crude oil, refined fuels and other related products. The company manages a network of sales channels for retail, commercial, wholesale and home heating fuel customers. Its web site is here Parkland Fuel Corp.
The last stock I wrote about was about was Computer Modelling Group Ltd. (TSX-CMG, OTC-CMDXF)... learn more. The next stock I will write about will be Saputo Inc. (TSX-SAP, OTC-SAPIF)... learn more on Wednesday, June 27, 2018 around 5 pm. Tomorrow on my other blog I will write about Investing Without People.... learn more on Tuesday, June 26, 2018 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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