I own this stock of TC Energy Corp (TSX-TRP, NYSE-TRP). When I bought this stock, it was on Mike Higgs' Canadian Dividend Growth Stock list and the other dividend lists that I followed.
When I was updating my spreadsheet, I noticed that I have done well on this stock, but not as well as last year. My total return February 2021 is 9.56% per year. However, this time last year I had a total return of 11.28% per year. I also bought this stock over a few years, so some of the pieces are doing as well as others. However, it just points to the fact it is good to buy a stock over time rather than all at one time.
The dividend yields are currently good with dividend growth moving lower. The current dividend is good (5% and 6% ranges) at 5.78%. The 5, 10 and historical median dividend yield are lower and moderate (2% to 4% ranges) at 4.94%, 4.10% and 4.30%. The last dividend increase was low (under 8%) at 7.41% in 2021. The last 5 years the dividend increases were at 9.3% per year, but this is the highest they have ever been as in other years, the dividend increases were all under 8% per year.
The Dividend Payout Ratios (DPR) need improving. The DPR for EPS for 2020 is 67% with 5 year coverage at 82%. The DPR for EPS has been rather too high since 2015 and is now moving lower. The DPR for CFPS for 2020 is 48% with 5 year coverage also at 48%. This is high also as I prefer this ratio to be 40% or less. For this stock I also have an DPR for an Adjusted EPS and the ratio is 76% with 5 year coverage at 75%. The DPR for Adjusted Funds from Operations (AFFO) for 2020 is 41% with 5 year coverage at 44%. The DPR for Free Cash Flow cannot be calculated for either 2020 or for the last 5 years as FCF has been negative. Also, sites do not agree on FCF, they do agree it has been negative.
Debt Ratios are acceptable, but not good. Long Term Debt/Market Cap Ratio for 2020 is 0.70. The Asset/Current Liabilities Ratio is 8.37, so this is good coverage. The Long Term Debt can be paid off in 4.9 years with cash flow. 3 years is better, but this is ok. The Liquidity Ratio is very low at 0.43. If we add in cash after dividends and the current portion of the long term debt, it becomes 1.07. There is coverage, but no safety margin. The Debt Ratio for 2020 is 1.49. I like the last two ratios to be 1.50 and above. The Leverage and Debt/Equity Ratios for 2020 are 3.03 and 2.03 and so ok.
The Total Return per year is shown below for years of 5 to 32 to the end of 2020. 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 12.34, 13.95 and 16.48. The corresponding 10 year ratios are 17.07, 18.37 and 19.66. The corresponding historical ratios are 12.30, 13.95 and 16.03. The current P/E Ratio is 14.72 based on $58.72 and EPS estimate for 2021 of $4.09. The current ratio of 14.72 is below the 10 year low median ratio of 17.07. This stock price testing suggests that the stock price is relatively cheap.
I get a Graham Price of $51.83. The 10 year low, median, and high median Price/Graham Price Ratios are 1.23, 1.38 and 1.46. The current P/GP Ratio is 1.16 based on a stock price of $58.72. The current ratio of 1.16 is lower than the 10 year low median ratio of 1.23. 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 2.11. The current P/B Ratio is 2.06 based on a Book Value of $27,445M, Book Value per Share of $29.19 and a stock price of $58.72. The current ratio of 2.06 is 2.3% below the 10 year median ratio of 2.11. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 10 year median Price/Cash Flow per Share Ratio of 8.62. The current P/CF Ratio is 8.11 based on Cash Flow per Share estimate for 2021 of $7.42, Cash Flow of $6,975M and a stock price of $58.72. The current ratio of 8.11 is 5.8% below the 10 year median ratio of 8.62. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get an historical median dividend yield of 4.30%. The current dividend yield is 5.78% based on a stock price of $58.72 and dividends of $3.48. The current dividend yield of 5.78% is 34% above the historical median dividend yield of 4.30%. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median dividend yield of 4.10%. The current dividend yield is 5.78% based on a stock price of $58.72 and dividends of $3.48. The current dividend yield of 5.78% is 41% above the 10 year median dividend yield of 4.10%. This stock price testing suggests that the stock price is relatively cheap.
The 10 year median Price/Sales (Revenue) Ratio is 3.80. The current P/S Ratio is 4.00 based on Revenue estimate for 2021 of $14,149, Revenue per Share of $15.05 and a stock price of $58.72. The current ratio of 4.00 is 5% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
Results of stock price testing is that the stock price is probably reasonable and maybe cheap. The dividend yield tests are showing the stock price as cheap, but the P/S Ratio test does not confirm that and suggests that the stock price is reasonable and a bit above the median.
Is it a good company at a reasonable price? I own this stock and I plan to continue to hold it. I think that it is still a long term investment. It is a dividend growth stock. I also think that the stock price is reasonable at this time.
When I look at analysts’ recommendations, I find Strong Buy (7), Buy (11) and Hold (5). The consensus would be a Buy. The 12 month stock price consensus is $68.32. This implies a total return of 19.27% with 13.49% from capital gains and 5.78% from dividends based on a current stock price of $60.20.
Analysts on Stock Chase think this stock is a buy. Sneha Nahata on Motley Fool says the four best stocks to buy now are TC Energy Corp, Fortis Inc, Enbridge Corp, and Canadian Utilities. The Executive Summary on Simply Wall Street gives this stock 4 stars out of 5 and lists 2 risk factors. A writer on Simply Wall Street thinks the dividends are not well covered by EPS and Cash Flow. They also do not like the fact that the company has a negative Free Cash Flow. .
TC Energy operates as an energy infrastructure company, consisting of pipeline and power generation assets in Canada, the United States, and Mexico. Its web site is here TC Energy Corp.
The last stock I wrote about was about was TransAlta Corp (TSX-TA, NSYE-TAC) ... learn more. The next stock I will write about will be AltaGas Ltd (TSX-ALA, OTC-ATGFF) ... learn more on Monday, March 29, 2021 around 5 pm.
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