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.
When I was updating my spreadsheet, I noticed is that the Liquidity Ratio took a dive in the third quarter to 0.97. This means that current assets cannot cover current liabilities. This is mostly due to a Trade and Other Payables increase. It often has low Liquidity Ratios and needs cash flow to cover current liabilities. It is not the only utility to depend on cash flow this way.
This used to be an income trust company. The yields were higher before it switched to a corporation in 2010. The yields are still quite high with the current dividend yield at 5.92%, the 5 year median at 3.96%, the yield since 2010 at 4.11% and the historical median at 4.75%.
Dividend growth is in the moderate range (8% to 14% ranges). The dividend growth over the past 5, 10 and 14 years is at 13.69%, 8.37% and 8.89% per year. The last dividend increase was lower in 2018 at 5.7%. This is a low growth rate.
As an income trust company, they could afford to payout more then EPS. However, that changed when they became a corporation. It was expected that income trusts would decrease dividend yields and start to cover dividends with the earnings. The Dividend Payout Ratio for 2017 was 107% with 5 year coverage at 111%. Analysts expect that in 2018 the EPS will cover dividends. The DPR for CFPS for 2017 was at 59% with 5 year coverage at 59%. It is expected to be around 56% in 2018. They need to get this lower at 40% or below.
The Debt Ratios are fine. The Long Term Debt/Market Cap Ratio for 2017 is good at 0.25. The Liquidity Ratio can be low. It was good at 1.56 for 2017 with a 5 year median at 1.15. The Liquidity Ratio for 2017, if you add in cash flow after dividend is 1.85. The company, as most utilities do, often depend on cash flow to cover current liabilities.
The Debt Ratio at 1.73 for 2017 is good. The 5 year median is also good at 1.52. The Leverage and Debt/Equity Ratios for 2017 are 2.37 and 1.37 respectively with 5 year median at 2.81 and 1.81 respectively. This are rather normal for utilities.
The Total Return per year is shown below for years of 5 to 15. 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 been earning a good return.
| Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|
| 5 | 9.89% | 12.37% | 7.55% | 4.82% |
| 10 | 8.37% | 20.54% | 13.65% | 6.89% |
| 15 | 13.69% | 21.67% | 13.94% | 7.73% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 26.36, 30.28 and 35.35. The Corresponding 10 year ratios are 22.41, 25.70 and 28.77. The historical ratios are 19.55, 22.98 and 26.42. The current P/E Ratio is 16.81 based on a stock price of $30.42 and 2018 EPS estimate of $1.81. This stock price testing suggests that the current stock price is relatively cheap.
I get a Graham Price of $22.47. The 10 year low, median, and high median Price/Graham Price Ratios are 1.77, 2.11 and 2.47. The current P/GP Ratio is 1.35 based on a stock price of $30.42. This stock price testing suggests that the current stock price is relatively cheap.
I get a 10 year median Price/Book Value per Share Ratio of 3.86. The current P/B Ratio is 2.45 based on Book Value of $2,588M, Book Value per Share of $12.40 and a stock price of $30.42. The current ratio is some 36% below the 10 year ratio. This stock price testing suggests that the current stock price is relatively cheap.
I get an historical median dividend yield of 4.75%. The current dividend yield is 5.92% based on dividends of $1.80 and a stock price of $30.42. The current dividend yield is some 25% higher than the historical one. This stock price testing suggests that the current stock price is relatively cheap.
The 10 year median Price/Sales (Revenue) Ratio is 1.27. The current P/S Ratio is 1.44 based on 2018 Revenue estimate of $4,421M, Revenue per Share of $21.18 and a stock price of $30.42. The current ratio is some 13% above the 10 year ratio. This stock price testing suggests that the current stock price is relatively reasonable but above the median.
It is interesting that the only test to start with a reasonable base, which is the P/S Ratio test, shows the stock to be above the median in price. The 10 year median P/S Ratio of 1.27 is reasonable. Most of the P/E Ratios are really high and certainly high for a Utility. I find the 10 year median P/B Ratio at 3.86 a really high ratio.
However, the current ratios are not that high. A current P/E Ratio of 16.81 is a bit high that is all. The P/GP Ratio of 1.35 is not bad. Also, the yield is quite high and so is pointing to a good current stock price. The stock price of this stock has been moving down since hitting a high of 2014. In 2017 both the Revenue and the earnings have moved up. They also moved up with the third quarterly report in 2018.
When I look at analysts’ recommendations, I find Strong Buy (1), Buy (10), and Hold (3). The consensus would be a Buy. The 12 month stock price consensus is $39.91. This implies a total return of $37.11% with 31.205 from capital gains and 5.92% from dividends.
The company talks about third quarter results on Newswire. Peter Morris on Simply Wall Street talks about this company’s P/E Ratio. Cole Patterson on Simply Wall Street talks about this stock dividend and high relative EPS payment, but misses history of the company being a income trust prior. Lakeland Staff Writer on Lakeland Observer say the company has a Value Composite score of 42 meaning it might be slightly undervalued. Andrew Walker on Motley Fool thinks this is a good high yield stock for your TFSA. See what analysts are saying on Stock Chase. Mostly think it is a long term hold.
Keyera Corp is a midstream energy company. It is engaged in gathering, processing, and fractionation of natural gas in western Canada; storage and transportation of crude oil and natural gas byproducts; and marketing of natural gas liquids. 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 Monday, November 12, 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