Sound bite for Twitter and StockTwits is: Dividend Growth Utility. The stock price would seem to be relatively cheap. They do not have their dividend Payout Ratios under control. The Debt Ratio could be improved. See my spreadsheet on Keyera Corp.
I do not own this stock of Keyera Corp (TSX-KEY, OTC-KEYUF). I started to review some of the stock recommended by Jennifer Dowty from a column she wrote and I reviewed in February 2010 on Dividends and Special Dividends. The title of the article in Investor’s Digest was Dividend Stocks: Buy, Hold and Collect. Jennifer is now a Portfolio Manager for Manulife Asset Management Limited.
When I was updating my spreadsheet, I noticed that stock has fallen some 44% this year so far. It started out as an income trust where a company can pay out more in dividend than the EPS. However, becoming a corporation, they need to get the Dividend Payout Ratio for EPS under control and they have not done this. Analyst expect them to increase the dividend in the short term, but still not get the DPR or EPS under control.
The dividend yields are currently high with dividend growth moderate, but falling into low growth. The current dividend is high (7% and above) at 10.15%. The 5 and 10 year median dividend yields are moderate (2% to 4% ranges) at 4.22% and 4.37%. The historical median dividend yield is good (5% and 6% ranges) at 5.41%.
The Dividend Payout Ratios (DPR) are too high. The DPR for EPS for 2019 is 89% with 5 year coverage at 103%. Analyst expect this ratio to be over 100% over the next couple of year. The DPR for CFPS for 2019 is 53% with 5 year coverage at 51%. This is too high also. I prefer the DPR for CFPS to be 40% or less. The DPR for Free Cash Flow for 2019 is negative as I the 5 year coverage. The expect DPR for FCF for 2020 is expected to be around 177% and this is too high.
Debt Ratios need improving. The Long Term Debt/Market Cap Ratio is 0.34 an is at a good level. The Liquidity Ratio for 2019 is low at 0.80. If you add in cash flow after dividends it is just 1.40. The company has a history of low Liquidity Ratios with 5 year median at 1.00 and adding in Cash flow after dividends at 1.40. I prefer this ratio to be 1.50 or higher. The Leverage and Debt/Equity Ratios are fine at 2.46 and 1.46.
The Total Return per year is shown below for years of 5 to 17 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 | 8.00% | 0.85% | -3.44% | 4.29% |
| 2009 | 10 | 7.41% | 17.53% | 10.77% | 6.77% |
| 2004 | 15 | 8.45% | 18.71% | 10.91% | 7.80% |
| 2002 | 17 | 12.68% | 20.31% | 11.94% | 8.37% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 23.26, 25.42 and 27.58. The corresponding 10 year ratios are 22.41, 25.70 and 28.77. The corresponding historical ratios are 18.04, 22.18 and 26.32. The current P/E Ratio is 17.84 based on a stock price of $18.91 and EPS estimate for 2020 of $1.06. This stock price testing suggests that the stock price is relatively cheap.
I get a Graham Price of $18.12. The 10 year low, median, and high median Price/Graham Price Ratios are 1.77, 2.11 and 2.47. The current P/GP Ratio is 1.04 based on a stock price of $18.91. 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 3.86. The current P/B Ratio is 1.37 based on a stock price of $18.91, Book Value of $6,044M and Book Value per Share of $13.77. The current ratio is 64% 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 14.04. The current P/CF Ratio is 4.99 based on a stock price of $18.91, Cash Flow per Share estimate for 2020 of $3.79 and Cash Flow of $858M. The current cash flow ratio is 64% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I get an historical median dividend yield of 5.41%. The current dividend yield is 10.15% based on dividends of $1.92 and a stock price of $18.91. The current dividend yield is 88% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively cheap.
I get an historical median dividend yield of 4.37%. The current dividend yield is 10.15% based on dividends of $1.92 and a stock price of $18.91. The current dividend yield is 133% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively cheap.
The 10 year median Price/Sales (Revenue) Ratio is 1.68. The current P/S Ratio is 1.25 based on Revenue estimate for 2020 of $3343M, Revenue per Share of $15.13 and a stock price of $18.91. The current ratio is 26% below the 10 year median 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 dividend yield tests are showing the stock price as relatively cheap and this is confirmed by the P/S Ratio test. Since this stock used to be an income trust, it had relatively high yields before becoming a corporation in 2010, so the 10 year median yield test is the usual one to refer to in such cases. All the other stock price tests are showing the stock price as relatively cheap.
Is it a good company at a reasonable price? This stock is selling at a reasonable price, in fact the price seems to be rather cheap. All the pipeline stocks have fallen a lot and probably too much considering the risk involved. It is hard to know how long the transition to renewables will take, but usually such transitions take a long time.
When I look at analysts’ recommendations, I find Strong Buy (6), Buy (11) and Hold (2). The consensus would be a Buy. The 12 month stock price consensus is $26.74. This implies a total return of 51.56% with 41.41% from capital gains and 10.15% from dividends.
Most of the analysts like this stock on Stock Chase. Kay Ng on Motley Fool says it has a high dividend and upside potential. A writer on Simply Wall Street is worried about dividend coverage and so am I. He also says that dividends have been cut during the past 10 years and this is not true. However, they are paid in CDN$ and this is a US site. A writer on Simply Wall Street says the company’s intrinsic value is $29.75 CDN$ and so this stock is sell below the intrinsic value. This article on Kalkine Media talks about 3 energy dividend stock, one of which is Keyera Corp.
Keyera operates as a midstream energy business in western Canada. Its primary operations consist of gathering, processing, and fractionation of natural gas in western Canada; storage and transportation of crude oil and natural gas byproducts; and marketing of natural gas liquids. Its web site is here Keyera Corp.
The last stock I wrote about was about was Pivot Technology Solutions (TSX-PTG, OTC- PVVTF) ... learn more. The next stock I will write about will be Cenovus Energy Inc (TSX-CVE, NYSE-CVE) ... learn more on Monday, November 9, 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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