I do not own this stock of Stantec Inc (TSX-STN, NYSE-STN). I bought this stock in April of 2008 to make some capital gains. It was a non-dividend paying stock at that point. I lot of people were recommending it as a great stock. The reason it was recommend is that it is in the infrastructure business. There are many that think this company will profit from government money promised for infrastructure building. I bought and sold this stock between 2008 and 2011 and did not make any money. It was a non-core holding. With their new policy of dividends, this stock has become more interesting.
When I was updating my spreadsheet, I noticed that the stock price is up 69% this year to $69.63 the highest it has ever been. In this case, it does make a difference in Total Return, especially for 5 and 10 years.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2015 | 5 | 8.40% | 16.73% | 15.47% | 1.26% |
| 2010 | 10 | 9.28% | 19.22% | 17.58% | 1.64% |
| 2005 | 15 | 12.97% | 12.17% | 0.81% | |
| 2000 | 20 | 17.36% | 16.61% | 0.75% | |
| 1995 | 25 | 20.25% | 19.56% | 0.69% | |
| 1994 | 26 | 14.25% | 13.75% | 0.49% |
The dividend yields are low with dividend growth moderate. The current dividend yield is low (below 2%) at 0.93%. The 5 and 8 year median dividend yields are also low at 1.59% and 1.45%. The dividend growth is moderate (8% to 14% ranges) at 8.40% per year for the last 5 year. The last dividend increase was lower at 6.45% and it occurred in 2021.
This stock has a very low dividend yield, so it might be of interest to look at what sort of yield is now being made on investments made at 5, 10, 15, 20 and 25 years ago. The yield is shown in the table below. For example, if this stock was bought 15 years ago, the shareholder would have a current yield on the original investment of 6.02%. Also, I like to look at what percentage of the original cost that would have been paid by dividends if the stock was purchased 5, 10, 15, 20, and 25 years ago. See the chart below. For example, if this stock was purchased 15 years ago, a shareholder would have covered 42.73% of the cost of the shares.
| Years | Yield | Cost Cov |
|---|---|---|
| 5 | 2.05% | 8.86% |
| 10 | 5.08% | 36.11% |
| 15 | 6.02% | 42.73% |
| 20 | 24.56% | 174.42% |
| 25 | 89.49% | 635.59% |
At the current yield of 0.93% and the dividend increase of 8.40% per year over the past 5 years, in years from 5 to 25, a shareholders can expect growth in yield to be as shown in the table below. So at the lower starting yield, the growth is yield is a lot lower.
| Years | Growth | Yield |
|---|---|---|
| 5 | 49.69% | 1.39% |
| 10 | 124.08% | 2.08% |
| 15 | 235.43% | 3.12% |
| 20 | 402.12% | 4.66% |
| 25 | 651.64% | 6.98% |
The Dividend Payout Ratios (DPR) are fine. The DPR for EPS for 2020 is 40% with 5 year coverage at 46%. The DPR for CFPS for 2020 is $11% with 5 year coverage at 17%. The DPR for Free Cash Flow is 12% with 5 year coverage at 21%. Free Cash Flow varies by site, but not my much.
Debt Ratios are fine. The Long Term Debt/Market Cap Ratio for 2020 is 0.14 and is low and good. The Liquidity Ratio is good at 1.59. The Debt Ratio is good at 1.78. The Leverage and Debt/Equity Ratios are fine at 2.27 and 1.27.
The Total Return per year is shown below for years of 5 to 26 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 | 8.40% | 5.19% | 3.77% | 1.42% |
| 2010 | 10 | 9.28% | 13.16% | 11.53% | 1.63% |
| 2005 | 15 | 10.95% | 9.96% | 0.99% | |
| 2000 | 20 | 17.52% | 16.53% | 0.99% | |
| 1995 | 25 | 18.74% | 17.90% | 0.83% | |
| 1994 | 26 | 14.18% | 13.51% | 0.67% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 23.13, 26.41 and 29.68. The corresponding 10 year ratios are 19.09, 22.46 and 25.87. The corresponding historical ratios are 14.75, 16.51 and 21.84. The current P/E Ratio is 32.75 based on a stock price of $71.07 and EPS estimate for 2021 of $2.17. The current P/E Ratio is above the high ratio of the 10 year median ratios. This stock price testing suggests that the stock price is relatively expensive.
I get a Graham Price of $29.73. The 10 year low, median, and high median Price/Graham Price Ratios are 1.28, 1.49 and 1.79. The current P/GP Ratio is 2.39 based on a stock price of $71.07. This ratio is above the high ratio of the 10 year median ratios. This stock price testing suggests that the stock price is relatively expensive.
I get a 10 year median Price/Book Value per Share Ratio of 2.07. The current P/B Ratio is 3.93 based on a stock price of $71.07, Book Value of $2011.8M, and Book Value per Share of $18.10. The current ratio is 90% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
I get a 10 year median Price/Cash Flow per Share Ratio of 11.59. The current P/CF Ratio is 21.09 based on a stock price of $71.07, Cash Flow per Share estimate for 2021 of $3.37 and Cash Flow of $374.6M. The current ratio is 82% above the 10 year median ratios. This stock price testing suggests that the stock price is expensive.
Because the Cash Flow per Share in 2020 is expected to drop by some 38%, I also looked at the P/CF Ratio for 2022. This ratio is 14.71 based on CFPS estimate for 2022 of $4.83, Cash Flow of $536.9M and a stock price of 71.07. This ratio is 27% above the 10 year median ratio of 11.59. This stock price testing suggests that the stock price is relatively expensive.
I get an historical and 8 year median dividend yield of 1.45%. The current dividend yield is 0.93% based on dividends of $0.66 and a stock price of $27.07. The current dividend yield is 36% below the historical and 8 year median dividend yield. This stock price testing suggests that the stock price is relatively expensive.
The 10 year median Price/Sales (Revenue) Ratio is 1.13. The current P/S Ratio is 2.17 based on Revenue estimate for 2021 of $3,646M, Revenue per Share of $32.80 and a stock price of $71.07. The current ratio is 92% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
Results of stock price testing is that the stock price is that it is expensive. The Dividend Yield test and the P/S Ratio tests show the stock price as expensive. Also, all the tests show this too.
Is it a good company at a reasonable price? The stock price is expensive, not reasonable at this point in time. It has been doing better in recent times, except for 2020. Analysts certainly expect that it will do quite well over the next few years. Long Term total returns has been good for shareholders.
When I look at analysts’ recommendations, I find Strong Buy (2), Buy (7) and Hold (3). The consensus would be a Buy. The 12 month stock price consensus is $76.83. This implies a total return of $9.03% with 8.10% from capital gains and 0.93% from dividends based on a current stock price of $41.68.
When I looked at analysts’ recommendations last year, I found Strong Buy (3), Buy (5) and Hold (2). The consensus would be a Buy. The 12 month stock price is $46.00. That implied a total return of 11.85%, with 10.36% from capital gains and 1.49% from dividends based on a current stock price of $41.68. What happened was a total return of 72.00% with 70.51% from capital gains and 1.49% from dividends. I said last year that the stock price was probably reasonable.
Most, but not all analysts on Stock Chase think it is a buy. Jitendra Parashar on Motley Fool says this company could be another great Canadian growth stock. Jitendra Parashar on Motley Fool thinks that the synergies from the assets of the Cardno firm can keep this stock rising in the near term. Esteban Duarte of Bloomberg on Yahoo Finance says Stantec is looking to buy acquisitions in US because of the recently passed infrastructure bill.
Stantec Inc is a global engineering and construction firm. The Company's services include engineering, architecture, interior design, landscape architecture, surveying, environmental sciences, project management, and project economics, from initial project concept and planning through to design, construction administration, commissioning, maintenance, decommissioning, and remediation. Stantec derives the substantial majority of its sales from the United States and Canada, and the company works in both the public and private sectors. Its web site is here Stantec Inc.
The last stock I wrote about was about was Keg Royalties Income Fund (TSX-KEG.UN, OTC-KRIUF) ... learn more. The next stock I will write about will be Methanex Corp (TSX-MX, NASDAQ-MEOH) ... learn more on Friday, December 10, 2021 around 5 pm. Tomorrow on my other blog I will write about Something to Buy December 2021.... learn more on Thursday, December 09, 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.
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