Wednesday, October 10, 2018

Teck Resources Ltd

Sound bite for Twitter and StockTwits is: Dividend Paying Materials. The current price is quite low and this entry point looks good. However, it certainly has been at better entry points in the past. This is a material stock and I personally do not hold such stocks for the long term. For these stocks buy low and sell high. See my spreadsheet on Teck Resources Ltd.

I do not own this stock of Teck Resources Ltd. (TSX-TECK.B, NYSE-TECK) but did for a short period. In 2008, I wanted to cover some resource stocks and this is one that I decided to take a look at. The time to buy this stock is when it cuts its dividend. For example, I bought this stock in 2008 and sold in 2009. I bought this stock because the company purchased Fording Canadian Coal Trust at exactly the wrong time and got into financial difficulties and the stock price dropped off a cliff as they had to cut dividends. When the stock recovered somewhat in 2009, I sold for a profit.

When I was updating my spreadsheet, I noticed that they were not doing so well until recently and then things started to look up. The dividends, which had been declining, were increased by 100% in 2017.

This stock is not a good dividend payer nor is it good at dividend growth. The current dividend yield is very low at 0.64%. Dividend yields have jumped all over the place with a high around 11.44% and low around 0.30%. The 5, 10 and historical median dividend yields are 3.05%, 1.79 and 1.58%.

Dividend growth is negative over the past 5 and 10 years and for longer periods there is a modest increase. However, but this mask big changes in the dividends. The lowest dividend increase was in 2013 at 12.5% and the highest increase was in 2011 at 200%. See growth rates in the table below under Dividend Growth (Div. Gth.)

They mostly can afford their dividends. Last year the Dividend Payout Ratio for EPS was 4.67% with a 5 year coverage of 2.26%. Last year the DPR for EPS was 5.62% with 5 year coverage at 284%. This is because of a big earnings loss in 2015. The DPR for CFPS is better with the one for 2017 at 2.31% with 5 year coverage at 12.07%. The DPR for CFPS has always been quite low.

The debt ratios for this stock are good. The Long Term Debt/Market Cap Ratio for 2017 is 0.34. The Liquidity Ratio has mostly been good and the one for 2017 is 1.81 with 5 year median at 2.16. The Debt Ratio is good at 2.11 for 2017 with 5 year median at 2.05. The Leverage and Debt/Equity Ratios are also good with the ones for 2017 at 1.90 and 0.90 respectively and the 5 year medians being 1.94 and 0.94 respectively.

The Total Return per year is shown below for years of 5 to 24. 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.

This stock reached a peak in 2011 that it has not yet come close to since. The long term Total Return is not bad, but shareholders have not made much on this stock lately.

Years Div. Gth. Tot Ret Cap Gain Div.
5 -24.21% -0.10% -1.88% 1.78%
10 -14.87% 1.05% -0.63% 1.67%
15 4.73% 16.85% 12.21% 4.64%
20 3.53% 8.10% 5.94% 2.17%
24 2.93% 6.20% 4.50% 1.70%

The 5 year low, median, and high median Price/Earnings per Share Ratios are 4.61, 10.93 and 19.67. the corresponding 10 year ratios are 5.49, 12.79 and 19.68. The Historical ratios are 9.41, 11.72 and 19.67. The current P/E Ratio is 6.36 based on a stock price of $31.10 and 2018 EPS estimate of $4.89. This stock price testing suggests that the stock price is relatively cheap.

I get a Graham Price of $63.78. The 10 year low, median, and high median Price/Graham Price Ratios are 0.43, 0.85 ad 1.13. The current P/GP Ratio is 0.49. 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 Ratio of 0.90. The current P/B Ratio is 0.84 based on a stock price of $31.10 and Book Value of $21,245M and Book Value per share of $36.97. The current P/B Ratio is some 6% below the 10 year median 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 1.58%. The current dividend yield is 0.64% based on dividends of $0.20 and a stock price of $31.10. The current yield is some 59% below the historical yield. This stock price testing suggests that the stock price is relatively expensive.

The 10 year median Price/Sales (Revenue) Ratio is 1.74. The current P/S Ratio is 1.44 based on 2018 Revenue of $12,372, Revenue per Share of $21.53 and a stock price of $31.10. The current ratio is some 17% below the 10 year ratios. This stock price testing suggests that the stock price is relatively reasonable and below the median.

The low P/E Ratios are very low because the stock has a lot of volatility and the stock has hit some really low lows in the past. A P/E of 6.36 is a low P/E Ratio. You wonder how much faith to put into the dividend yield test because of the past fluctuations in dividends and therefore dividend yield. The P/S Ratio test is often a good one because it is revenue that ultimately drives earnings, cash flow and dividends. It would seem that the stock is on the cheap side, although it has been cheaper in the past and it may be half way to its top.

When I look at analysts’ recommendations I find Strong Buy, (6), Buy (12), Hold (2) and Underperform (1). The consensus would be a Buy. The 12 month stock price is 41.13. This implies a total return of 32.89% with 0.64% frim dividends and 32.25% from capital gains based on a current price of $31.10.

Dan Healing on the Financial Post talks about Teck’s involvement with Frontier oilsands. Jason Phillips on Motley Fool thinks this stock is trading at a favorable valuation.. See what the analysts are saying about this company on Stock chase. Some think that now is a good time to buy or to start to buy.

Teck Resources Ltd is a mining company whose activities include exploration, development, processing, smelting, refining, and reclamation. It has operations in Canada, United States, Chile, and Peru. The company's products are coal, copper, zinc, and lead. Its web site is here Teck Resources Ltd.

The last stock I wrote about was about was Linamar Corporation (TSX-LNR, OTC-LIMAF) ... learn more. The next stock I will write about will be Logistec Corp (TSX-LGT.B, OTC-LTKBF) ... learn more on Friday, October 12, 2018 around 5 pm. Tomorrow on my other blog I will write about Money Show 2018 – Deborah Fuhr.... learn more on Thursday, October 11, 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.

1 comment:

  1. Teck paid a special dividend of 40 cents last year to go along with 5 cent per quarter for a total dividend of 60 cents. They also just announced a 40 million share buyback