I own this stock of Pembina Pipelines Corp (TSX-PPL, NYSE-PBA). In December 2001 I thought it would be a good time to purchase this stock as the market was relatively low. Pipeline stocks are conservative and the return on this one was good at 9.7%. When I purchased this stock, it was an Income Trust company.
When I was updating my spreadsheet, I noticed that they have been raising money recently for capital expenditures. Also, the outstanding shares have increased by 10% and 14% per year over the past 5 and 10 years. This means that real growth would show in the per share values.
The dividend yield is current moderate, but was good (5% or over) in the past. This company used to be an income trust and income trusts have higher yields than corporations. Yields have gone from good to moderate. The current yield is 4.56% with 5, 10 and historical median yields at 5.00%, 5.30% and 7.66%. The median yield since switching to a corporation is 5.19%.
When they switched to a corporation in 2010, they kept the dividends flat for a time, but then have gradually increase their dividends. The dividend growth is low (under8% per year). See chart below for the dividend increases over the past 5 to 21 years. The most increase was in 2018 and it was for 5.6%. However, the dividends paid in 2018 was 10.4% higher than those paid in 2017. This is because there was a dividend increase late in 2017 and another one in 2018.
The Dividend Payout Ratios are getting better. The DPR for EPS for 2018 is 98% with 5 year coverage at 133%. The DPR for EPS has been declining. The DPR for CFPS for 2018 is 43% with 5 year coverage at 56%. Both these DPRs must still decline.
Debt Ratios are fine. The Long Term Debt/Market Cap Ratio for 2018 is 0.34. The Liquidity Ratio for 2018 is 0.68. If you add in cash flow after dividends it is 1.43 and if you add back in the current portion of the long term debt it is 2.12. This is a vulnerability as the company depends on cash flow to cover current liabilities.
The Debt Ratio is very good at 2.17 with 5 year median of 2.23. The Leverage and Debt/Equity Ratios are also very good at 1.85 and 0.85 respectively. The 5 year medians are also 1.85 and 0.85, respectively.
The Total Return per year is shown below for years of 5 to 21 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.
I have had this stock for 17 years and I have made a total return of 17.34% per year with 9.96% from capital gains and 7.38% from dividends. The dividend portion of the total return will decrease along with the dividend yield since they have switched from an income trust to a corporation.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2013 | 5 | 6.34% | 6.56% | 1.60% | 4.96% |
| 2008 | 10 | 4.06% | 18.10% | 10.27% | 7.83% |
| 2003 | 15 | 5.03% | 15.09% | 7.82% | 7.27% |
| 1998 | 20 | 4.36% | 17.12% | 8.28% | 8.84% |
| 1997 | 21 | 6.80% | 20.83% | 9.56% | 11.27% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 26.93, 34.56 and 42.20. The corresponding 10 year ratios are 23.47, 27.90 and 32.33. The corresponding historical ratios are 19.92, 22.91 and 25.36. The current P/E Ratio is 21.20 based on a stock price of $50.04 and 2019 EPS estimate of $2.36. This stock price testing suggests that the stock price is relatively cheap.
I get a Graham Price of $55.20. The 10 year low, median, and high median Price/Graham Price Ratios are 1.29, 1.61 and 1.83. The current P/GP Ratio is 1.29 based on a stock price of $50.04. This stock price testing suggests that the stock price is relatively reasonable and below the median. It is close to cheap.
I get a 10 year median Price/Book Value per Share Ratio of 1.71. The current P/B Ratio is 1.76 based on Book Value of $11,920, Book Value per Share of $28.35 and a stock price of $50.04. The current P/B Ratio is some 3% above the 10 year median 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 7.66%. However, since this used to be an income trust company and s not a corporation, we should probably use the yield since the change to a corporation. That yield is 5.19%. The current dividend yield is 4.56% based on a stock price of $50.04 and dividends of $2.28. The current yield is 12% lower than the one since becoming a corporation. This stock price testing suggests that the stock price is relatively reasonable but above the median.
The 10 year median Price/Sales (Revenue) Ratio is 2.74. The current P/S Ratio is 3.10 based on 2019 Revenue estimate of $8,211M, Revenue per Share of $16.16 and a stock price of $50.04. The current ratio is 13% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
Results of stock price testing is that the price is above the median. The good tests for this stock are the P/B Ratio and P/S Ratio tests and it would seem from these tests that the stock price is above the median. The P/E Ratios are really high for a utility stock. The P/GP Ratios are also high for a utility stock. The problem with the dividend yield is that the stock used to be an income trust and these stocks had much higher dividend yields than corporations.
When I look at analysts’ recommendations, I find Strong Buy (2) and Buy (17). The consensus would be a Buy. The 12 month stock price is $55.33. This implies a total return of 15.13% with 10.57% from capital gains and 4.56% from dividends.
See what analysts are saying about this stock on Stock Chase. They like the company but a couple says it is overvalued. Matt Smith on Motley Fool thinks this is a good defensive stock. A writer on Simply Wall Street talks about total shareholder return for this stock. Michael Lumsden at My Grand Prairie Now talks about a pipelined approved to be built under the Smoky River. Mike Billings on Hawthorn Caller gives some statistics on this stock.
Pembina Pipeline is an integrated midstream energy infrastructure company in western Canada and North Dakota, highlighted by its regional pipeline network. The company operates over 9,000 kilometers of conventional hydrocarbon pipelines, coupled with 1,650 kilometers of heavy oil and oil sands pipelines. Gas processing facilities, natural gas liquids infrastructure, and a marketing business round out the integrated value chain. Its web site is here Pembina Pipelines Corp.
The last stock I wrote about was about was Barrick Gold Corp (TSX-ABX, NYSE-ABX) ... learn more. The next stock I will write about will be Canadian Natural Resources (TSX-CNQ, NYSE-CNQ) ... learn more on Friday, April 19, 2019 around 5 pm. Tomorrow on my other blog I will write about Metro and Jean Coutu.... learn more on Thursday, April 18, 2019 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.
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