I do not own this stock of Teck Resources Ltd (TSX-TECK.B, NYSE-TECK). In 2008, I wanted to cover some resource stocks and this is one that I decided to take a look at.
When I was updating my spreadsheet, I noticed dividends are inconsistent. They go up and down and are flat sometimes. Whenever they declare a dividend cut, the stock price drops precipitously.
Dividends can vary a lot. As you can see from the chart below, it has varied a lot how much of the total return is in dividends. Dividend yields are low (below 2%) and moderate (2 to 4% range) but at the low end of the moderate range. The current dividend yield is 0.92%. The 5, 10 and historical median dividend yields are 0.74%, 1.02% and 1.54%.
The Dividend Payout Ratios are fine, but they have varied a lot over the years. The DPR for EPS for 2018 is 4% with 5 year coverage at 32%. The DPR for CFPS for 2018 is 3% with 5 year coverage at 9%.
Debt Ratios are currently fine. These ratios have varied a lot over time, but mostly they have been good. The Long Term Debt/Market Ratio for 2018 is 0.33 with a current ratio of 0.53. Debt has varied a lot over the years. Since 2016, debt was declining, but in 2019, long term debt has increased by 20%. The Liquidity Ratio for 2018 is 2.11 with 5 year median also at 2.11. The Debt Ratio for 2018 is 2.39 with 5 year median at 2.05. The Leverage and Debt/Equity Ratio for 2018 is 1.72 and 0.72 respectively, with the 5 year median rations at 1.92 and 0.92 respectively.
The Total Return per year is shown below for years of 5 to 24 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 chart below.
|From||Years||Div. Gth||Tot Ret||Cap Gain||Div.|
The 5 year low, median, and high median Price/Earnings per Share Ratios are 4.58. 6.32 and 8.03. The corresponding 10 year ratios are 5.49, 10.63 and 16.97. The corresponding historical ratios are 7.97, 11.42 and 16.97. The current P/E Ratio is 7.06 based on a stock price of $21.67 and 2019 EPS estimate of $3.07. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a Graham Price of $52.92. The 10 year low, median, and high median Price/Graham Price Ratios are 0.44, 0.73 and 1.05. The current P/GP Ratio is 0.41 based on a stock price of $21.67. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median Price/Book Value per Share Ratio of 0.84. The current P/B Ratio is 0.53 based on a Book Value of $21,136M, Book Value per Share of $40.54 and a stock price of $21.67. The current ratio is some 36% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I get an historical median dividend yield of 1.54%. The current dividend yield is 0.92% based on dividends of $0.20 and a stock price of $21.67. The current yield is 40% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively expensive.
The 10 year median Price/Sales (Revenue) Ratio is 1.55. The current P/S Ratio is 1.00 based on 2019 Revenue estimate of $10,913M, Revenue per Share of $21.71 and a stock price of $21.67. The current ratio is some 35% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
Results of stock price testing is that the stock price is probably cheap. Most of the stock testing show this. However, there is an exception and that is the Dividend Yield test. Dividends often depend on the outlook for the future that management has.
If the dividend yield test is showing the stock as expensive, then it could point to lack of a positive outlook on behave of management. This is by its nature a short term outlook. Last year the company did do a buy back of shares for an amount higher than dividends. Dividends Paid was at $172M and the buyback was for $189M. I do not know how to judge buybacks as it seems everyone is doing that so I cannot say that it points to anything in particular.
Is it a good company at a reasonable price? I would never buy a resource stock for the long term. These sorts of stocks I feel are cyclical and you should only hold them for the short term. The stock is relatively cheap but tends to be really cheap just after they do a dividend cut. The stock failing the dividend yield tests show that you should be cautious in buying this stock.
When I look at analysts’ recommendations, I find Strong Buy (9), Buy (11) and Hold (3). The consensus would be a Strong Buy. The 12 month stock price consensus is $36.89. This implies a total return 71.16% with 70.24% from capital gains and 0.92% from dividends.
See what analysts are saying on Stock Chase . There is various opinion on whether or not you should buy this stock. Jason Phillips on Motley Fool says it is a blue chip stock trading near its 52 week low. A writer on Simple Wall Street thinks the stock is undervalued. The company talks on Global Newswire about it being named to the Dow Jones Sustainability World Index (DJSI). James Snell on The Free Press talks about what Teck is doing to help save our environment..
Teck Resources Ltd is a diversified miner with zinc, copper, coal, and oil sands operations in Canada, the United States, Chile, and Peru. Zinc is Teck's primary commodity in terms of EBITDA contribution, followed by copper, coking coal, and oil sands. 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 Monday, October 07, 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.
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