I do not own this stock of Kirkland Lake Gold (TSX-KL, NYSE-KL). This stock was recommended to me by Sue O'Reilly in 2019 and I wish I had bought it when she talked about it. Sue O'Reilly runs the Meetup Group of StockTwits.
When I was updating my spreadsheet, I noticed this stock has really taken off recently, starting in 2017. Not only has the share price increased, at 107% per year over the past 5 years, but revenues and earnings are also increasing rapidly. They switched from reporting in CDN$ to US$ in 2016. They started dividend payments in CDN$ in 2017, but switched them to US$ in 2020.
The dividend yields are low with dividend growth high. They just started to pay dividends in 2017. The dividend yield has been low (under 2%) from the start. Today, the dividend yield is 1.22%. The three year median dividend yield is just 0.32%. The dividend growth is high. It has grown by 178% per year over the past 3 years. The last dividend increase was in 2020 and it was for 108%. However, most companies starting dividends start them low and increase them rapidly over the next few years. So the current increases really tells us nothing about future increases.
The Dividend Payout Ratios (DPR) are great. The DPR for EPS for 2019 was 4.65%. The DPR coverage for the last 3 years is 2.8%. It is expected to be 14% this year. The DPR for CFPS for 2019 is 3.05%. This is expected to be 9% this year. The DPR for Free Cash Flow for 2019 is 6.37%. It is expected to be 14% this year.
Debt Ratios are all good. They have no long term debt. They used to have a long term debt until 2016 when they paid it all off. The Liquidity Ratio is good at 1.91. The Debt Ratio is quite high and very good at 3.45. The Leverage and Debt/Equity Ratios are both good at 1.41 and 0.41.
The Total Return per year is shown below for years of 5 to 18 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 9.33, 14.87 and 23.07. The corresponding 10 year ratios are 9.27, 14.75 and 21.65. The corresponding historical ratios are negative. Note that there was only earning losses prior to 2010 and some also after 2010.. The current P/E Ratio is 12.75 based on a stock price of $57.61 and 2020 EPS estimate of $4.82. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a Graham Price of $35.23. The 10 year low, median, and high median Price/Graham Price Ratios are 0.66, 1.20 and 1.74. The current P/GP Ratio is 1.64 based on a stock price of $57.61. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a 10 year median Price/Book Value per Share Ratio of 1.67. The current P/B Ratio is 4.72 based on a stock price of 57.61, Book Value of $2,559M and a Book Value per Share of $12.21. The current P/B Ratio is 183% above the 10 year median. This stock price testing suggests that the stock price is relatively expensive.
I get an historical median dividend yield of 0.32%. The current dividend yield is 1.22% based on dividend of $0.70 and a stock price of $57.61. The current dividend yield is 282% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively cheap. Since we have only 3 years of data, it makes no sense to do any other dividend yield testing.
The 10 year median Price/Sales (Revenue) Ratio is 2.70. The current P/S Ratio is 2.73 based on 2020 Revenues estimate of $3,303M, Revenue per Share of $15.76 and a stock price of $57.61. The current ratio is 34% 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 expensive. The tests are showing various results. The dividend yield testing which shows that the stock price as relatively cheap is not confirmed by the P/S Ratio test which shows the stock price as relatively expensive. The P/B Ratio test also shows that the stock price is relatively expensive. There are no problems with the P/S Ratio test, nor with the P/B Ratio test.
The problem with the P/E Ratio test is that there were so many years with earnings losses. This would be a problem for the P/GP Test also. The problem with the dividend yield test is that they just started to pay dividends. Dividends often increase sharply after a company initiates dividends.
Is it a good company at a reasonable price? There is a lot to admire in this company with the current big growth in revenue, earnings and book value and no debt. I think that it is overpriced at the moment, but I intend to keep an eye on it. You should know that this is a highly speculative stock.
When I look at analysts’ recommendations, I find Strong Buy (5), Buy (5) and Hold (4). The consensus would be a Buy. The 12 month stock price consensus is $66.80. This implies a total return of 17.17% with 15.95% from capital gains and 1.22% from dividends.
See what analysts are saying on Stock Chase. There are mixed reviews but a lot are positive. Andrew Button on Motley Fool talks about the complexity of investing in gold companies. He also says that KL has been flat for a year and May 2019 to May 2020 has been mostly flat with a big dip in March 2020. See the executive summary on Simply Wall Street. A writer on Simply Wall Street looks at the company’s dividend and says the big increases are probably not sustainable. Staff at Northern Ontario Business on May 6 says that the company is beginning to recall its workforce. The company released first quarterly results on Global Newswire.
Kirkland Lake Gold Ltd is a Canada-based gold mining, development, and exploration company with a diversified portfolio of exploration projects. The company's mines and material mineral projects are located in Canada and Australia. Its web site is here Kirkland Lake Gold .
The last stock I wrote about was about was Ag Growth International (TSX-AFN, OTC-AGGZF) .... learn more. The next stock I will write about will be Hammond Power Solutions Inc (TSX-HPS.A, OTC-HMDPF) ... learn more on Wednesday, May 13, 2020 around 5 pm. Tomorrow on my other blog I will write about Stocks, Best Asset Class.... learn more on Tuesday, May 12, 2020 around 5 pm.
Also, on my book blog I have put a review of the book 1177 BC by Eric Cline learn more...
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