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 that earnings are rising much faster than Revenue per Share. Revenue growth over the past 5 and 10 years is at 6.4% and 7.5% per year. However, Revenue per Share growth was at 0.5% and 2.1% per year. The growth in earnings for the past 5 and 10 years is 15.2% and 3.8% per year. The Revenue per Share is low because of increasing outstanding shares. Shares have been increasing by 5.6% and 5.3% per year over the past 5 and 10 years.
The dividend yields are moderate (2% to 4% ranges) to good (5% and above). The current dividend is 5.95% with 5, 10 and historical median dividend yields at 4.00%, 4.37% and 5.08%. The most recent growth in dividends is moderate (8% to 14%) with growth for the past 5 years at 9% per year.
The Dividend Payout Ratios are too high. The DPR for 2018 is 90.5% with 5 year coverage at 104.3%. The DPR for CFPS is 51% with 5 year coverage at 48%. This used to be an income trust. A lot of the past income trust companies are having a hard time getting their DPR down to a good value. The company converted to a corporation in 2010 and the DPR is getting better gradually. According to Morningstar the Free Cash Flow for 2018 is negative.
Debt Ratios are fine but the Liquidity Ratio is a low. The Long Term Debt/Market Cap Ratio for 2018 is 0.39. The Liquidity Ratio for 2018 is 1.00 with 5 year median at 1.09. If you add in cash flow after dividends, the ratio becomes 1.33 for 2018 with a 5 year median of 1.59. The Debt Ratio is good at 1.67 with 5 year median at 1.59. The Leverage and Debt/Equity Ratios for 2018 are 2.48 and 1.48 with 5 year medians at 2.81 and 1.81.
The Total Return per year is shown below for years of 5 to 16 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. |
|---|---|---|---|---|---|
| 2013 | 5 | 8.96% | 0.93% | -4.19% | 5.12% |
| 2008 | 10 | 7.56% | 20.32% | 11.34% | 8.98% |
| 2003 | 15 | 13.07% | 18.58% | 9.92% | 8.66% |
| 2002 | 16 | 19.76% | 10.80% | 8.96% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 23.26, 29.21 and 35.35. The corresponding 10 year ratios. The corresponding 10 year ratios are 22.41, 25.70 and 28.77. The corresponding historical median ratios are 18.79, 22.58 and 26.37. The current P/E Ratio is 13.79 based on a stock price of $32.26 and 2019 EPS estimate of $2.34. This stock price testing suggests that the stock price is relatively cheap.
The 5 year capital gain is a negative 4.19% per year had a starting P/E Ratio of 34.19. The 10 year capital gain was 11.34% per year had a starting P/E of 6.73. The 15 year capital gain 9.92% per year had a starting P/E 16.45. So, a P/E starting ratio of 13.79 is not bad.
I get a Graham Price of $26.62. 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 1.21 based on a stock price of $32.26. 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 3.86. The current P/B Ratio is 2.40 based on a Book Value of $2,882M, Book Value per Share of $13.46 and a stock price of $32.26. The current ratio is 38% 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 5.08%. The current dividend yield is 5.95% based on dividends of $1.92 and a stock price of $32.26. The current yield is 17% above the historical median yield. This stock price testing suggests that the stock price is relatively reasonable and below the median.
The 10 year median dividend yield is 4.37%. The current dividend yield is 5.95%. The current yield is 36% above the 10 year median dividend yield. This stock price testing suggests that the stock price is relatively cheap. On the other hand, the most recent dividend increase was 6.7% which is lower than the 5 year growth of 8.96% per year. Dividend increases generally depend on the confidence management has in the future and they are pull back.
The 10 year median Price/Sales (Revenue) Ratio is 1.43. The current P/S Ratio is 1.79 based on 2019 Revenue estimate of $3,867M, Revenue per Share of $18.06 and a stock price of $32.26. The current ratio is 25% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
Results of stock price testing is that the stock price is probably reasonable. The P/S Ratio cannot be ignored. Analysts are projecting a decline in Revenue of 13.6%. At the end of the second quarter the Revenue is down by 8%, so the projection seems reasonable. The P/S Ratio test says that the stock price is expensive because the current ratio is more than 20% above the 10 year ratio.
Is it a good company at a reasonable price? The is a good dividend growth company. The shareholders did not make much money over the past 5 years, because 5 years ago the stock price got too high. The stock price is probably reasonable.
When I look at analysts’ recommendations, I find Strong Buy (3), Buy (9) and Hold (2). The consensus is a Buy. The 12 month stock price consensus is $40.21. This implies a total return of 30.60% with 24.64% from capital gains and 5.95% from dividends based on a stock price of $32.26.
See what analysts are saying on Stock Chase. Most analysts think it is a buy. Christopher Liew on Motley Fool thinks this is a good dividend stock. A writer on Simply Wall Street thinks this company’s P/E Ratio is too high.. A writer on Simply Wall Street talks about the lack of return for this stock over the past 5 years. The company talks about their third quarterly results on Newswire.
Keyera operates as a midstream energy business in western Canada. Its primary operations consist of 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 November 11, 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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