I do not own this stock of Husky Energy Inc (TSX-HSE, OTC-HUSKF), but I used. I had been tracking this stock prior to buying it. I sold this stock to buy Canadian Utilities Ltd (TSX-CU, OTC-CDUAF). I gave up hoping for an oil and gas recovery. I never had much in oil and gas in any event. I had Husky from 2008 to 2017 and had a total loss of 4.53% per year.
When I was updating my spreadsheet, I noticed it did not come anywhere near the estimates given last year. However, this company is in the Oil and Gas sector and the bottom fell out of the market in this sector. There is only a bit of insider buying going on. The big cut in dividends shows that the company does not expect to do well in the short term.
The dividend yields are moderate with dividend growth varied. The current dividend yield is low (under 2%) at 0.85% because of recent dividend cut. It has not often been low. The 5 year dividend yield is just into the low range at 1.99%. The 10 and historical dividend yields are moderate (2% to 4% ranges) at 4.00% and 3.87%. Dividend have gone down as well as up and some years they were flat. Of The 18 years of dividend payments, 7 years saw dividend increases and 6 years saw dividend decreases.
The Dividend Payout Ratios (DPR) are generally not good. The Dividends have not always been well covered by DPR. I cannot calculate the coverage for 2019 nor for the last 5 years because of EPS losses. The DPR for CFPS for 2019 is low at 15% with 5 year coverage at 14%. The DPR for Free Cash Flow for 2019 cannot be calculated before of negative FCF. The 5 year coverage is very high at 92%.
Debt Ratios are probably fine. The Long Term Debt/Market Cap Ratio for 2019 is fine at 0.44. However, it rises to 1.02 because the stock price has fallen some 49% this year. The Liquidity Ratio for 2019 is 1.07. When you add in Cash Flow after dividends it is good at 1.60. However, this ratio is much lower currently at 1.01 and when you add in estimated Cash Flow after dividends it is only 1.12. Of course, we really do not know how accurate the estimate is. Leverage and Debt/Equity Ratio for 2019 are good at 1.92 and 0.93. The current ones also are good at 1.93 and 0.93
The Total Return per year is shown below for years of 5 to 30 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 | -16.06% | -15.35% | -17.64% | 2.29% |
| 2009 | 10 | -9.78% | -5.95% | -10.06% | 4.11% |
| 2004 | 15 | 0.86% | 5.65% | -3.26% | 8.91% |
| 1999 | 20 | 3.48% | 12.82% | 1.69% | 11.12% |
| 1994 | 25 | 4.56% | -1.05% | 5.61% | |
| 1989 | 30 | 3.86% | -0.63% | 4.49% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 9.56, 12.88 and 16.20. The corresponding 10 year ratios are 12.34, 14.71 and 17.21. The corresponding historical ratios are 9.64, 12.37 and 14.63. The current P/E Ratio is negative as is the one for 2021. The P/E Ratio for 2022 is 9.38 based on a stock price of $5.91 and EPS estimate for 2022 of $0.63. This testing suggests that the stock price is relatively cheap.
I estimate the Graham Price to be $14.66. The 10 year low, median, and high median Price/Graham Price Ratios are 0.73, 0.90 and 1.10. The current P/GP Ratio is 0.40. 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 1.35. The current P/B Ratio is 0.39 based on a Book Value of $15,247M, Book Value per Share of $15.17 and a stock price of $5.91. The current ratio is 71% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median P/CF Ratio is 5.05. The current P/CF Ratio is 10.55 based on 2020 Cash Flow per Share estimate of $0.56, Cash Flow of $563M and a stock price of $5.91. The current ratio is 109% above the 10 year ratio. This stock price testing suggests that the stock price is relatively expensive.
I get an historical median dividend yield of 3.87%. The current dividend yield is 0.85% based on dividends of $0.05 and a stock price of $5.91. The current dividend yield is 78% below the historical dividend yield. This stock price testing suggests that the stock price is relatively expensive.
I get a 10 year median dividend yield of 4.00%. The current dividend yield is 0.85% based on dividends of $0.05 and a stock price of $5.91. The current dividend yield is 79% below the 10 year dividend yield. This stock price testing suggests that the stock price is relatively expensive.
The 10 year median Price/Sales (Revenue) Ratio is 1.16. The current P/S Ratio is 0.43 based on 2020 Revenue estimate of $13,838M, Revenue per Share of $13.82 and a stock price of $5.91. The current ratio is 63% below the 10 year 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. The best test is the P/S Ratio testing and this is showing the stock price as relatively cheap. The P/B Ratio testing also show the stock as relatively cheap and there is no problem with this test. I cannot use the dividend yield tests as there has recently been a big cut to the dividends.
The problem with the P/E testing is that the next two estimates are showing EPS losses and you cannot do any testing of the P/E Ratio with EPS losses. This is also the same with the Graham Price as it is hard to calculate with EPS losses. The problem with the P/CF Ratio test is that the CFPS estimate for 2020 is 81% below the CFPS for 2019. The P/CF Ratio for 2021 and 2022 are 3.00 and 1.66 respectively and would show the stock price as cheap.
Is it a good company at a reasonable price? I am not fond of resource stocks and have very little. This is a good size Canadian company. However, I do like good dividend payers. This company has over the past 18 years increased dividends 7 times, but have decreased them 6 times with other years of no changes. Not much good for a dividend paying stock. I would not buy again.
When I look at analysts’ recommendations, I find Buy (1), Hold (1), Underperform (3) and Sell (3). The consensus would be Underperform. The 12 month stock price consensus is $4.21. This implies a total loss of 27.92% with a capital loss of 28.76 and dividends of 0.85%.
Analysts on Stock Chase are lately negative on this company. Vineet Kulkarni on Motley Fool says although the stock is up from the March lows, the worse may not be over. A writer on Simply Wall Street reviews this stock. A writer on Simply Wall Street thinks the company has too much debt. Gabriel Friedman on Financial Post talks about oil prices going up last Friday.
Husky Energy is one of Canada's largest integrated energy companies, operating in western Canada, the United States, and the Asia-Pacific and Atlantic regions. Its web site is here Husky Energy Inc .
The last stock I wrote about was about was Maxar Technologies Ltd (TSX-MAXR, NYSE-MAXR) .... learn more. The next stock I will write about will be Goeasy Ltd (TSX-GSY, OTC-EHMEF) ... learn more on Wednesday, June 10, 2020 around 5 pm. Tomorrow on my other blog I will write about Buybacks.... learn more on Tuesday, June 9, 2020 around 5 pm.
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