I do not own this stock of Teck Resources Ltd (TSX-TECK.B, NYSE-TECK). The time to buy this stock is when it cuts its dividend. For example, I bought this stock in 2008 and sold in 2009. I bought this stock because the company purchased Fording Canadian Coal Trust at exactly the wrong time and got into financial difficulties and the stock price dropped off a cliff as they had to cut dividends. When the stock recovered somewhat in 2009, I sold for a profit.
When I was updating my spreadsheet, I noticed insiders were buying when the stock was dropping from $14.00 to $9.00 and then stopped buying when it went up again.
The dividend yields are low with dividend growth currently non-existent. The dividend yields have been mostly low (under 2%) with the current dividend yield at 1.09%. The 5, 10 and historical dividend yields are also low at 0.74%, 1.06% and 1.50%
The Dividend Payout Ratios (DPR) are fine. The DPR for 2019 for EPS is non -calculable because of earning loss, but the 5 year coverage is low at 30%. The DPR for CFPS for 2019 is 3% with 5 year coverage at 6%. The DPR for Free Cash Flow for 2019 using figures from Morningstar is 693% with 5 year coverage at 19%. Morningstar and Market Screener agree on FCF, but Wall Street Journal does not.
Debt Ratios are good. The Long Term Debt/Market Cap Ratio for 2019 is 0.43 and is fine. The Liquidity Ratio for 2019 is 1.62. The Debt Ratio for 2019 is 2.28. The Leverage and Debt/Equity Ratios for 2019 are 1.78 and 0.78.
The Total Return per year is shown below for years of 5 to 26 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 | -25.98% | 4.03% | 1.81% | 2.22% |
| 2009 | 10 | 0.00% | -5.30% | -7.24% | 1.93% |
| 2004 | 15 | 1.94% | 2.86% | -0.40% | 3.27% |
| 1999 | 20 | 3.53% | 8.98% | 4.84% | 4.14% |
| 1994 | 25 | 2.81% | 3.81% | 1.41% | 2.41% |
| 1993 | 26 | 2.70% | 4.01% | 1.62% | 2.39% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 2.19, 5.91 and 7.23. The corresponding 10 year ratios are 5.49, 10.63 and 16.97. The corresponding historical ratios are 6.53, 11.11 and 14.28. The current P/E Ratio is negative, so I cannot do this stock price test.
However, the P/E Ratio for 2021 is positive and it is 8.92 based on a stock price of $18.37 and 2021 EPS estimate of $2.06. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get an estimated Graham Price of $42.62. The 10 year low, median, and high median Price/Graham Price Ratios are 0.44, 0.73 and 1.05. The current P/GP Ratio is 0.43. 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 0.79. The current P/B Ratio is 0.47 based on a stock price of $18.37, Book Value of $20,814M and a Book Value per Share of $39.20. The current P/B Ratio is 41% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median Price/Cash Flow per Share Ratio of 4.68. The current P/CF Ratio is 6.10 based on Cash Flow per Share estimate for 2020 of $3.01, Cash Flow of $1,598M and a stock price of $18.37. The current ratio is some 30% 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 1.50%. The current dividend yield is 1.09% based on dividends of $0.20 and a stock price of $18.37. The current dividend yield is 27% 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 1.06%. The current dividend yield is 1.09% based on dividends of $0.20 and a stock price of $18.37. The current dividend yield is 2.83% above the historical dividend yield. This stock price testing suggests that the stock price is relatively reasonable and below the median.
The 10 year median Price/Sales (Revenue) Ratio is 1.42. The current P/S Ratio is 1.09 based on Revenue estimate for 2020 of $8,910, Revenue per Share of $16.78 and a stock price of $18.37. The current ratio is some 23% 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 to reasonable. I like the dividend yield test, but it does not work well on companies that cut their dividends, especially if the dividend cuts are recent. Dividends are down by 26% per year over the past 5 years. The next one I like is the P/S Ratio test and this test says the stock price is relatively cheap. The P/B Ratio tests shows this also. It is a good test as it is not based on any estimates.
The problem with the P/CF Ratio test is that analysts expect a big drop in cash flow in 2020. A problem with the P/GP Ratio test is that the Graham Price is an estimate because of negative earnings.
Is it a good company at a reasonable price? This is a material sector stock and so is risky. I do not consider material sector stocks to be long term investments, but you can make money in the short term. They tend to be cyclical so if the stock is low you can make a capital gain if the stock price goes up. I have bought this for short terms in the past, but do not consider it a long term investment.
When I look at analysts’ recommendations, I find Strong Buy (7), Buy (8) and Hold (5). The consensus would be a Buy. The 12 month consensus stock price is $22.54. This implies a total return of 23.79% with 22.70% from capital gains and 1.09% from dividends.
Analysts do not seem to like mining companies at present on Stock Chase. Jitendra Parashar on Motley Fool thinks a second wave of Covid will stop the current rally in this stock. This report from a writer on Simply Wall Street in February 2020 says that the ROCE for this company is better than for similar companies. Dan Healing on the National Observer talks about the CEO defending strategy as investors criticize performance.
Teck is a diversified miner with coal, copper, zinc, and oil sands operations in Canada, the United States, Chile, and Peru. Its web site is here Teck Resources Ltd.
The last stock I wrote about was about was Linamar Corporation (TSX-LNR, OTC-LIMAF) ... learn more. The next stock I will write about will be Logistec Corp (TSX-LGT.B, OTC-LTKBF) ... learn more on Wednesday, October 07, 2020 around 5 pm. Tomorrow on my other blog I will write about Dividend Stocks October 2020.... learn more on Tuesday, October 6, 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.
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