I own this stock of TC Energy Corp (TSX-TRP, NYSE-TRP). I bought the stock in 2000 at an opportune time. The company had been cutting their dividend payments in order to re-organize and get the company into shape for long term profitability. This company’s stock fell hard because of this. People who depend on dividends for their income can be an unforgiving lot and can get really upset at company when a trusted company cuts its dividends.
When I was updating my spreadsheet, I noticed that I have done well with this stock earning a total return of 11.28% per year with 6.49% from capital gains and 4.79% from dividends. However, over the past 5 years the total return is just 7.88% per year with $3.91% from capital gains and 3.98% from dividends. I also noticed that there is some insider selling over the past year. However, since the stock has been tanking with the market, there has been some buying between $50.00 and $65.00 a share.
The dividend yields are moderate with dividend growth low to moderate. The current dividend yield is in the good range (5% and 6% range) which would come as no surprise as we are currently in a bear market. The current dividend yield is 6.08%. The 5, 10, and historical dividend yields are 4.23%, 4.10% and 4.30%.
Over the last 5 years the dividend increases were at 9.12% per year. This is higher than in the past. See the chart below. However, the last dividends increase for 2020 was lower at 8%.
The Dividend Payout Ratios are fine, but could stand for improvement and are improving. The DPR for EPS for 2019 was 69% with 5 year coverage at 123%. The 5 year coverage is high because of an earnings loss in 2015 and low earnings in 2016. The DPR for CFPS for 2019 was 49% with 5 year coverage at 46%. I prefer the CFPS coverage to be 40% or less. The DPR for Free Cash Flow is not calculable because of negative FCF. Both Wall Street Journal and Morningstar agree that FCF has been negative, but do not agree on the exact figures. Analysts expect the FCF to be positive in 2020 after being negative for the last 3 years.
Debt Ratios have room for improvement. The Long Term Debt/Market Cap Ratio for 2019 is 0.53. Even with the recent decline, it is still good at 0.69. The Debt Ratio is fine at 1.48. The Leverage and Debt/Equity Ratios are fine at 3.06 and 2.06 respectively.
The Liquidity Ratios are not as good as I would like. The one for 2019 is 0.59. Even adding in Cash Flow after dividends and current portion of long term debt and current notes payable, it is just 1.38. When the Liquidity Ratio it is below 1.00, it means that current assets cannot cover current debt. This utility has a lot of debt. The Liquidity Ratios have varied a lot over time, but often have been low. It is best when this ratio is 1.50 or better. The final value has been less than 1.50, 6 times in last 20 years.
The Total Return per year is shown below for years of 5 to 29 to the end of 2019. 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. |
|---|---|---|---|---|---|
| 2014 | 5 | 9.12% | 7.88% | 3.91% | 3.98% |
| 2009 | 10 | 6.96% | 10.95% | 6.69% | 4.26% |
| 2004 | 15 | 6.40% | 9.83% | 5.77% | 4.06% |
| 1999 | 20 | 4.94% | 14.51% | 8.82% | 5.69% |
| 1994 | 25 | 4.67% | 10.28% | 5.74% | 4.53% |
| 1990 | 29 | 5.13% | 9.08% | 4.96% | 4.12% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 12.34, 13.95 and 16.48. The corresponding 10 year ratios are 17.80, 19.10 and 20.74. The corresponding historical ratios are 12.31, 13.99 and 16.03. The current P/E Ratio is 13.00 based on a stock price of $53.32 and 2020 EPS estimate of $4.10. This stock price testing suggests that the stock price is relatively cheap.
I get a Graham Price of $51.29. The 10 year low, median, and high median Price/Graham Price Ratios are 1.23, 1.38 and 1.46. The current P/GP Ratio is 1.04 based on a stock price of $53.32. 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 2.05. The current P/B Ratio is 1.87 based on a stock price of $53.32, Book Value of $26,762M, and Book Value per Share of 28.52. The current P/B Ratio is 9% below the 10 year ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get an historical median dividend yield of 4.30%. The current dividend yield is 6.08% based on dividends of $3.24 and a stock price of $53.32. The current yield is 41% above the historical dividend yield. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median dividend yield of 4.10%. The current dividend yield is 6.08% based on dividends of $3.24 and a stock price of $53.32. The current yield is 48% above the 10 year dividend yield. This stock price testing suggests that the stock price is relatively cheap.
The 10 year median Price/Sales (Revenue) Ratio is 3.71. The current P/S Ratio is 3.53 based on a stock price of $53.32, Revenue estimate for 2020 of $14,191M, Revenue per Share of $15.12 and a stock price of $53.32. The current ratio is 5% below the 10 year ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
Results of stock price testing is that the stock price is cheap to reasonable. You cannot ignore the P/S Ratio test and it is jus showing the price as reasonable. The P/B Ratio test is showing the same. Other good tests, like the dividend yield tests, are showing the stock price as cheap. The value in the dividend yield test is that you are basing this on current values, not values in the past or estimates.
Is it a good company at a reasonable price? I own this stock and feel that it is a good utility to own. The price is cheap to reasonable.
When I look at analysts’ recommendations, I find Strong Buy (7), Buy (8) and Hold (8). The consensus would be a Buy. The 12 month stock price is $72.57. This implies a total return of 42.18% with 36.10% from capital gains and 6.08% from dividends.
See what analysts are saying on Stock Chase. They like this stock and say positive things. Andrew Walker on Motley Fool says the company has a solid dividend paying history. A writer on Simply Wall Street looks at this company’s ROCE. A writer on Simply Wall Street talks about analysts’ projections after the last financials. Anna Zalik on The Conversation talks about this company’s name change.
TC Energy operates as an energy infrastructure company, consisting of pipeline and power generation assets in Canada, the United States, and Mexico. Its web site is here TC Energy Corp.
The last stock I wrote about was about was TransAlta Corp (TSX-TA, NSYE-TAC)) ... learn more. The next stock I will write about will AltaGas Ltd (TSX-ALA, OTC-ATGFF) ... learn more on Monday, March 23, 2020 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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