I own this stock of Pembina Pipelines Corp (TSX-PPL, NYSE-PBA). This is a dividend growth utility Stocks. 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 it would seem from the INK report that the selling overpowered what was being bought. The thing is that the selling was mostly to do with stock options and rights. Most of the $2M in insider buying occurred after the price dropped recently below $40.00.
The dividend yields are good to high with dividend growth low. This stock used to be an income trust and income trusts had generally high (7% and above) dividend yields. Dividend yields came down after it changed to a corporation, but with the recent bear market they are high again. The current dividend is high at 9.48%, with 5, 10 year median yields good (5% and 6% range) at 5.17% and 5.18%. The historical median is still high at 7.18%. The dividend growth is low (under 8%). See chart below. The last increase was for 2020 and it was for 5%.
The Dividend Payout Ratios are fine, and are improving. The DPR for 2019 is 89% with 5 year coverage at 116%. It was only in 2018 that the DPR was below 100%. Income Trust stocks can pay out more than corporations can, so when it changed to a corporation, the company needed to lower it DPR. It is in that process. The DPR for CFPS for 2019 is 45% with 5 year coverage at 53%. The DPR for Free Cash Flow for 2019 is 149% with 5 year coverage at 4593%. Analysts expect the DPR for FCF to be 82% in 2020. Morningstar, Wall Street Journal and Market Screener do not agree on what the FCF is.
As an income trust, the DPR for Funds from Operations (FFO) and Adjusted Funds from Operations (AFFO) were important. They are still publishing FFO and AFFO values. The DPR for AFFO for 2019 was 54% with 5 year coverage at 61%. The DPR for FFO was 48% with 5 year coverage at 57%.
Debt Ratios are fine. The Long Term Debt/Market Cap Ratio for 2019 is good at 0.38. It is still fine with the much lower current stock price at 0.69. The Liquidity Ratio for 2019 is 0.68. If you add in cash flow after dividends it is 1.53 with 5 year median also at 1.53. The Debt Ratio is good for 2019 at 2.02 with 5 year median even better at 2.18. The Leverage and Debt/Equity Ratios are good at 1.98 and 0.98 for 2019 with 5 year ratios at 1.85 and 0.85.
The Total Return per year is shown below for years of 5 to 22 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.|
The 5 year low, median, and high median Price/Earnings per Share Ratios are 21.02, 22.78 and 24.54. The corresponding 10 year ratio is 23.47, 27.90 and 32.33. The corresponding historical ratios are 19.92, 22.78 and 25.36. The current P/E Ratio is 11.87 based on a current stock price of $26.58 and 2020 EPS estimate of $2.24. This stock price testing suggests that the stock price is relatively cheap.
I get a Graham Price of $36.25. The 10 year low, median, and high median Price/Graham Price Ratios are 1.41, 1.68 and 1.87. The current P/GP Ratio is 0.73 based on a stock price of $26.58. 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 1.87. The current P/B Ratio is 1.02 based on a Book Value of $14,286M, Book Value per Share of $26.07 and a stock price of $26.58. The current ratio is 46% below the 10 year ratio. This stock price testing suggests that the stock price is relatively cheap.
I get an historical median dividend yield of 7.18%. The current dividend yield is 9.48% based on dividends of $2.52 and a stock price of $26.58. The current yield is 32% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median dividend yield of 5.18%. The current dividend yield is 9.48% based on dividends of $2.52 and a stock price of $26.58. The current yield is 83% above the 10 year median dividend yield. This stock price testing suggests that the stock price is relatively cheap.
The 10 year median Price/Sales (Revenue) Ratio is 2.75. The current P/S Ratio is 1.95 based a stock price of $26.58, 2020 EPS estimate of $7,473M, and Revenue per Share of 13.64. The current ratio is 29% below the 10 year median ratio.
Results of stock price testing is that the stock price is relatively cheap. This cannot be a surprise. All the testing is showing the same result. What I like to see is that the P/S Ratio test confirms the dividend yield test. In this case the 10 year median dividend yield test. This is done. The historical dividend yield test is probably not good as the company used to be an income trust. I see no problem with the other tests.
Is it a good company at a reasonable price? I like this company and I will continue to hold this stock. This basically a utility stock. Even though the market was down, I have earned 14.88% per year on this which I have held for some 18 years. The stock price is cheap and I think unfairly so. This can happen in a bear market. Of course, I could be wrong, but I was willing to buy more of this stock yesterday.
When I look at analysts’ recommendations, I find Strong Buy (7), Buy (12) and Hold (2). The consensus would be a Buy. The 12 month stock price is $37.00. This implies a total return of 48.68% with 39.20% from capital gains and 9.48% from dividends.
See what analysts are saying on Stock Chase. There are very missed views. Robin Brown on Motley Fool says it is currently an absolute bargain over 8%. A writer on Simply Wall Street in January 2020 said that the intrinsic value of the stock was $101 and it was undervalued as it was trading at $51.. In a recent Press Release the company announces first quarter 2020 results and a dividend increase. In a company Press Release among the actions taken to protect their people in connection with the Covid 19 Flu, the company says that they have the resilient cash flow stream to protect its dividend through this current downturn..
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 17, 2020 around 5 pm. Tomorrow on my other blog I will write about Dividend Growth 2.... learn more on Thursday, April 16, 2020 around 5 pm.
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