I do not own this stock of Valener Inc (TSX-VNR, OTC-VNRCF). I was looking for another utility to invest in, in 2009 and I was looking possibly at another pipeline stock. This company has natural gas pipelines in Quebec. I also recognized the name of this company. In 2010 it reorganized and made a public utility stock out of 29% of what was Gas Metro. This makes the valuation of this stock very complex.
When I was updating my spreadsheet, I noticed that Gas Metro has changed its name to Énergir, L.P. This utility has again increase dividends in 2018 as they had from 2015. Prior to 2015 dividends were flat or decreasing. What I do not like is that the company has bought into other companies. The financial health of Valener Inc would be tied into these other companies and we may not easily find out their financial health.
Dividend yields have been in the good range (5% and 6% ranges). The current dividend yield is 5.80%, with 5, 10 and historical median dividend yields at 5.50%, 6.32% and 6.99%. As you can see in the chart below, the dividend has mostly gone down slightly except for the past 5 years. They started to do increases in 2015.
According to the Dividend Payout Ratio for EPS, the payout ratio is current quite high at 97.5% with 5 year coverage at 85.6%. The DPR for CFPS is also rather high at 42.2% with 5 year coverage at 74%. However, what really counts is the money they get from Énergir, L.P. (old Gaz Metro) and the other companies they have invested in. So I cannot really tell if they are paying out appropriately or not.
I did not think that the debt ratios of Valener count that much. It is the debt ratios of the companies they have bought into that really count. The Liquidity Ratio for Valener is low at 1.23 but add in cash flow after dividends it becomes 2.49. However, Énergir, L.P. ‘s Liquidity Ratio is lower at 1.09. The Debt Ratio for Valener is very good at 6.19 but Énergir, L.P.’s is still very good but much lower at 2.12. I do not feel that I can get a real grip on debt ratios for Valener.
The Total Return per year is shown below for years of 5 to 25 to the end of 2018. 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.
The total return as sometimes been low and most of the total return is from dividends. They have paid good dividends over time, but I prefer dividends that grow.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2013 | 5 | 3.01% | 11.29% | 4.89% | 6.40% |
| 2008 | 10 | -0.66% | 11.12% | 3.93% | 7.18% |
| 2003 | 15 | -0.96% | 4.70% | -0.92% | 5.61% |
| 1998 | 20 | -0.53% | 6.84% | 0.29% | 6.55% |
| 1993 | 25 | 0.03% | 10.07% | 1.56% | 8.51% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 13.75, 15.27, 16.63. The corresponding 10 year ratios are 14.70, 15.69 and 16.60. The corresponding historical ratios are 13.04, 14.09 and 15.89. The current P/E Ratio is 15.10 based on a stock price of $20.69 and 2019 EPS estimate of $1.37. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a Graham Price of $23.14. The 10 year low, median, and high median Price/Graham Price Ratios are 0.82, 0.90 and 1.02. The current P/GP Ratio is 0.89 based on a stock price of $20.69. 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 1.11. The current P/B Ratio is 1.19 based on a Book Value of $680M, Book Value per Share of $17.37 and a stock price of 20.69. The current ratio is some 7.5% above the 10 year ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get an historical median dividend yield of 6.99%. The current dividend ratio is 5.80% based on dividends of $1.20 and a stock price of $20.69. The current dividend yield is 17% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I cannot do a Price/Sales (Revenue) Ratio test because there is no revenue as such for this company.
Results of stock price testing is that the best tests, being the P/B Ratio test and the Dividend yield test shows that the stock price is relatively reasonable but above the median. I regret that no P/S Ratio test is possible because this is a great test of utilities.
When I look at analysts’ recommendations, I find Buy (1) and Hold (5) recommendations. The consensus would be a Hold. The 12 month stock price consensus is $21.67. This implies a total return of 10.54% with 4.74% from capital gains and 5.80% from dividends based on a current stock price of $20.69.
See what analysts are saying about this stock on Stock Chase. They mainly talk about the company’s dependence on Gaz Metro (which is now Énergir, L.P. Joseph Solitro on Motley Fool talks about 3 good dividend stocks including Valener. Alvin Rowe on Simply Wall Street talks about the company’s cash flow. However, its cash flow depends highly on companies it has bought into. Sonia Dale on Kentwood Post says the Value Composite One (VC1) for this stock is 44, which implies it is neither under or overvalues.
Valener Inc is an investment holding company engaged in the regulated energy business in the United States and Canada through Gaz Metro. Its core business operations involve natural gas distribution in Quebec and Vermont as well as electricity distribution in Vermont. The company through its subsidiaries holds the interest in wind farm business. It serves more than 200,000 customers in Quebec and over 310,000 customers in Vermont. Its web site is here Valener Inc.
The last stock I wrote about was about was Enghouse Systems Ltd (TSX-ENGH, OTC-EGHSF) ... learn more. The next stock I will write about will be Shaw Communications Inc (TSX-SJR.B, NYSE-SJR) ... learn more on February 1, 2019 around 5 pm. Tomorrow on my other blog I will write about Banks and Ratios.... learn more on Thursday, January 31, 2019 around 5 pm.
Also, on my book blog I have put a review of the book Darius by Pierre Briant learn more...
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