I do not own this stock of Inter Pipeline Ltd (TSX-IPL, OTC-IPPLF). In 2008, a friend had asked me about this pipeline and I had no information on it, so I investigated it. It is a utility and I follow lots of utility stocks. They used to be a Limited Partnership and they changed to a corporation in 2013.
What I noticed on the spreadsheet was their very low Liquidity Ratio. The one for 2017 was 0.16. when this ratio is less than 1.00, it means that current assets cannot cover current liability. Even including cash flow after to dividends you only get to 0.37. To get above 1.00 you have to add back in the current portion of the long term debt and you get 1.62. If they cannot roll over debt they will have problems.
Whether or not this will happen is anyone guess. It may not be likely, but it is a vulnerability. It is a continuing problem. The 5 and 10 year median Liquidity Ratio are about the same at 0.15.
They started to pay dividends in 1996 and have increased them every year but for three years. They have increase the dividend every year for the past 8 years. The dividend yields have been quite high and with a low dividend growth until recently.
The current dividend yield is 6.64%. The 5, 10 and historical median dividend yields are 5.28%, 6.00% and 8.70%. The dividends have grown by 9.13% per year over the past 5 years. Before that the dividend growth was below 7% per year. The last dividend increase was this year and it was for 3.7%.
They cannot afford their dividends in testing it the normal way against EPS. The Dividend Payout Ratio for 2017 is 115% with 5 year coverage at 148%. The DPR Ratio for CFPS for 2017 was 62% with 5 year coverage at 38%. It is preferable that dividends that this ratio be 40% for less.
On the other hand, this stock has a dividend reinvestment plan, so that they do not pay all the dividends in cash but pay a portion with new shares. In 2017 they paid out 57% of Net Income in Dividends with 5 year coverage at 85%. The dividend reinvestment plan also causes a constant increase in the number of shares outstanding.
As pointed out above, I do not like the Liquidity Ratios on this stock, but the other debt ratios are fair to good. The Long Term Debt/Market Cap Ratio is at 0.40. The Debt Ratio for 2017 is 1.50 with a 5 year median at 1.50 also. The Leverage and Debt/Equity Ratios are 2.99 and 1.99 respectively for 2017. The 5 year median ratios are 3.29 and 2.29 respectively.
The Total Return per year is show below for years of 5 to 20. 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.
Until recently, the Total Return for shareholders was quite nice. The 5 year Total Return is 7.8% per year, just under the 8% I like to see.
| Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|
| 5 | 9.13% | 7.83% | 2.07% | 5.76% |
| 10 | 6.82% | 18.32% | 10.62% | 7.70% |
| 15 | 5.98% | 18.84% | 10.04% | 8.80% |
| 20 | 4.01% | 10.73% | 4.90% | 5.84% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 15.85, 18.72 and 22.78. The corresponding 10 year ratios are 14.90, 17.86 and 20.50. The corresponding historical P/E Ratios are 15.13, 18.51 and 21.08. The current P/E Ratio is 16.75 based on a stock price of $25.29 and 2018 EPS estimate of $1.51. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a Graham Price of $17.81. The 10 year low, median, and high median Price/Graham Price Ratios are 1.31, 1.55 and 1.82. The current P/GP Ratio is 1.42 based on a stock price of $25.29. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 10 year median Price/Book Value per Share of 2.98. The current P/B Ratio is 2.71 based on a stock price of $25.29 and Book Value of $3,576M and Book Value per Share of $9.33. The current P/B Ratio is some 9% below 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 8.70%. The 5 and 10 year median yields are lower at 5.28% and 6.00%. The current dividend yield is 6.64% based on dividends of $1.68 and a stock price of $25.29. The current dividend is some 24% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively expensive.
This company used to be a Limited Partnership prior to 2013. As a Limited Partnership, dividend yields would have been high. If we compare the current yield of 6.64% to the 10 year median of 6.00%, the current yield is 10% higher. This stock price testing suggests that the stock price is relatively reasonable and below the median.
The 10 year median Price/Sales (Revenue) Ratio is 4.59. the current P/S Ratio is 4.07 based on 2018 Revenue estimate of $2382M, Revenue per Share of $6.22 and a stock price of $25.29. The current P/S Ratio is some 11% 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 Strong Buy (2), Buy (6), Hold (6) and Underperform (1). The consensus would be a Buy. The 12 month stock price $28.93. This implies a total return of 21.04% with 14.39% from capital gains and 6.64% from Dividends.
Gemma Cottrell on Fairfield Current talks about recent analysts recommendations. Matt Smith on Motley Fool says that buying this stock will give you a juicy dividend while you wait for the stock price to recover. Michael Z. Yu has a positive report on this stock on Seeking Alpha. See what analysts are saying about this stock on Stock Chase .
Inter Pipeline Ltd is a petroleum transportation, storage and natural gas liquids extraction company based in Calgary, Alberta, Canada. It owns and operates a diversified combination of energy infrastructure assets in western Canada and Europe. Its web site is here Inter Pipeline Ltd.
The last stock I wrote about was about was Morneau Shepell Inc. (TSX-MSI, OTC-MSIXF) ... learn more. The next stock I will write about will be TMX Group Ltd (TSX-X, OTC-TMXXF) ... learn more on Monday July 16, 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.
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. I am on Instagram. Or you can just Google #walktoronto spbrunner8166 to see my pictures.
No comments:
Post a Comment