I own this stock of Pembina Pipelines Corp (TSX-PPL, NYSE-PBA). This is a dividend growth utility Stocks. In December 2001 I thought it would be a good time to purchase this stock as the market was relatively low. Pipeline stocks are conservative and the return on this one was good at 9.7%. When I purchased this stock, it was an Income Trust company.
When I was updating my spreadsheet, I noticed I have done quite well with this stock over the years. I have had it for 19 years and my total return is 15.67% with 6.84% from capital gains and 8.83% from dividends. The company declared an EPS loss for 2020 because it wrote off some investments.
The dividend yields are good with dividend growth low. The current dividend yield is good (5% to 6% ranges) at 6.75%. The 5 and 10 year median dividend yields are also good at 5.19% and 5.18%. The historical median dividend yield is High (over 6%) at 7.20%. This stock used to be an income trust and this explains the high dividend yield for the historical median dividend yield.
The Dividend Payout Ratios (DPR) need to be improved. The DPR for EPS for 2020 is non-calculable because an EPS loss in 2020. The 5 year coverage is high at 158%. The DPR for EPS is expected to decline over the next few years and be around 110% in 2021. The DPR for CFPS for 2020 is 46% with 5 year coverage at 49%. This is a bit high as I prefer this to be around 40%. The DPR for 2020 for Free Cash Flow is 125% with 5 year coverage at 244%. The DPR for FCF for 2021 is expected to be better at 68%.
Debt Ratios could be improved. The Long Term Debt/Market Cap ratio for 2020 is fine at 0.62%. It has to a current one of 0.50 because of the rising stock price. The Liquidity Ratio for 2020 is 0.56 and if you add in cash flow after dividends it is still low at 1.04. If you add back the current portion of the loan it is 1.57. The Leverage and Debt/Equity Ratios for 2020 are 2.09 and 1.09.
The Total Return per year is shown below for years of 5 to 23 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. |
|---|---|---|---|---|---|
| 2015 | 5 | 7.05% | 7.20% | -0.03% | 7.23% |
| 2010 | 10 | 4.71% | 10.93% | 3.37% | 7.55% |
| 2005 | 15 | 5.92% | 12.37% | 4.32% | 8.05% |
| 2000 | 20 | 4.94% | 16.80% | 6.46% | 10.34% |
| 1997 | 23 | 6.76% | 20.02% | 7.30% | 12.71% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 16.88, 18.86 and 20.84. The corresponding 10 year ratios are 23.47, 27.90 and 32.33. The corresponding historical ratios are 19.82, 22.66 and 24.95. The current P/E Ratio is 16.31 based on a stock price of $37.36 and EPS estimate for 2021 of $2.29. This P/E is low than the 10 year low median P/E and in fact lower than all the low median P/E Ratios. This stock price testing suggests that the stock price is relatively cheap.
If you look at P/E Ratios compared to Total Returns for the 5, 10, 15, and 20 year periods, I find the following. For example, total return over the past 15 years is 12.37% per year, the starting P/E Ratio (the one from 15 years ago) was 24.54. From the point of view of this chart, a P/E Ratio of 16.31 would be fine.
| Year | Tot Return | Start P/E |
|---|---|---|
| 5 | 7.20% | 29.56 |
| 10 | 10.93% | 18.95 |
| 15 | 12.37% | 24.54 |
| 20 | 16.80% | 10.75 |
I get a Graham Price of $33.53. The 10 year low, median, and high median Price/Graham Price Ratios are 1.33, 1.52 and 1.70. The current P/GP Ratio is 1.11 based on a stock price of $37.36. This ratio is low than the 10 year low median ratio. 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 1.79. The current P/B Ratio is 1.71 based on Book Value of $11,999M, Book Value per share of $21.82 and a stock price of $37.36. The current ratio is 4.3% below the 10 year median ratio. 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 14.74. The current P/B Ratio is 8.36 based on Cash Flow per Share estimate for 2021 of $4.47, Cash Flow of $2,459M and a stock price of $37.36. The current ratio is 43% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get an historical median dividend yield of 7.20%. The current dividend yield is 6.75% based on dividends $2.52 and a stock price of $37.36. The current dividend yield is 6% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable but above the median. This problem with this test is that the company was an income trust. Income Trusts always had very high dividend yields.
I get a 10 year median dividend yield of 5.18%. The current dividend yield is 6.75% based on dividends $2.52 and a stock price of $37.36. The current dividend yield is 30% 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 2.93. The current P/S Ratio is 3.03 based on Revenue estimate for $6,787M, Revenue per Share of $12.34 and a stock price of $37.36. The current ratio is 3.4% 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. The dividend yield is 30% below the 10 year median dividend yield. The P/S Ratio test shows the current ratio slightly above the 10 year median test. Most of the tests show the stock price as cheap or reasonable and below the median.
Is it a good company at a reasonable price? I think that the stock price is currently reasonable. I think it is a good company. It has lots of debt, but so do most pipeline companies. A low Liquidity Ratio is common with pipeline companies. They have not cut their dividends so Management seems to feel this is not necessary at this time. analyst below the dividend will start increasing again next year and in 2023.
When I look at analysts’ recommendations, I find Strong Buy (6), Buy (5) and Hold (8). The consensus would be a Buy. The 12 months stock price if $39.26. This implies a total return of 11.83% with 6.75% from dividends and 5.09% from capital gains. This is pretty normal for this company.
Analyst on Stock Chase think this stock is a Buy. Rajiv Nanjapla on Motley Fool says that even though this stock has gone up by 23.7%, it is still 22.7% lower than its January 2020 levels. The Executive Summary on Simply Wall Street gives this stock 3 stars out of 5 and lists 3 risk. A writer on Simply Wall Street does not like the fact that the company paid out in dividends more than it could afford. A writer on Simply Wall Street says the fair value for this stock is $55.86 CDN$. Sure Dividend provides an analysis of this stock last year.
Pembina Pipeline is an integrated midstream energy infrastructure company in western Canada and North Dakota, highlighted by its regional pipeline network. Its web site is here Pembina Pipelines Corp.
The last stock I wrote about was about was Barrick Gold Corp (TSX-ABX, NYSE-GOLD) ... learn more. The next stock I will write about will be Canadian Natural Resources (TSX-CNQ, NYSE-CNQ) ... learn more on Friday, April 23, 2021around 5 pm. Tomorrow on my other blog I will write about 3 REITs to Buy.... learn more on Thursday, April 22, 2021 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.
No comments:
Post a Comment