Is it a good company at a reasonable price? The price seems reasonable. This seems to be a reasonable energy company to buy. However, personally, I do not have much of in resources stocks (1 to 2% of my portfolio. I think that these stocks are too volatile for my purposes of living of my dividends. Although I realize that other people in my situation think differently.
I own this stock of Canadian Natural Resources (TSX-CNQ, NYSE-CNQ). I first bought CNQ in September 2012 because the dividend yield was relatively high. The 5 and 10 year median dividend yields were 0.73% and 0.75%. The current one was at 1.31% and I got it with a yield of 1.32%. In April 2013 I bought more shares of this stock because the yield is now at 1.54%. I bought another 100 shares in 2020 because the yield was 11.63%
When I was updating my spreadsheet, I noticed lately that I have done quick well with this stock. My total return over 10 years is 16.19% with 13.81% from Capital Gains and 2.38% from dividends. As this is a resource stock, I do not have much of it. It is 0.6% of my portfolio. I only have resource stocks because they are important to the TSX and I need to pay attention to them. I pay attention because I own some.
This company is doing better than expected in 2021. The Adjusted Earnings Per Share (AESP) came in at $6.25 when it was expected at $3.20. The EPS came in at $6.46, when it was expected in at $3.14. Revenue was expected at $23,862M and came in at $30,057M. Free Cash Flow (FCF) was expected at $7,441M and came in at $9,986M.
If you had invested in this company in December 2011, $1,030.05 you would have bought 27 shares at $38.15 per share. In December 2021, after 10 years you would have received $296.46 in dividends. The stock would be worth $1,443.15. Your total return would have been $1,739.61.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $38.15 | $1,030.05 | 27 | 10 | $296.46 | $1,443.15 | $1,739.61 |
The dividend yields are moderate with dividend growth moderate. The current dividend yield is moderate (2% to 4% ranges) at 3.88%. The 5, and 10 year dividend yields are moderate at 4.04% and 2.69%. The historical median dividend yield is low (below 2%) at 1.03%. The dividend yields changed from low to moderate around 2014. The dividends have been increasing at a moderate rate (between 8% and 14%) for the past 5 years with a dividend increase rate of 14.8% per year over the past 5 years. The last increase was in 2022 and it was for 27.7%. For much of this company’s history dividend increases have been good (15% and higher).
The Dividend Payout Ratios (DPR) are good. The DPR for EPS for 2021 is 25% with 5 year coverage at 50%. The DPR for Adjusted EPS for 2021 is 29% with 5 year coverage at 58%. The DPR for Cash Flow per Share for 2021 is 16% with 5 year coverage at 20%. The DPR for Free Cash Flow (FCF) for 2021 is 20% with 5 year coverage at 33%.
Debt Ratios are fine. The Long Term Debt/ Market Cap Ratio for 2021 is 0.22 and going to 0.14 in 2022. This is good and low. The Liquidity Ratio for 2021 is 0.80. If you add in cash flow after dividends it is 2.46 and this is fine. The Debt Ratio for 2021 is good at 1.93. The Leverage and Debt/Equity Ratios are fine at 2.08 and 1.08 for 2021.
The Total Return per year is shown below for years of 5 to 31 to the end of 2021. 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. |
|---|---|---|---|---|---|
| 2016 | 5 | 14.81% | 7.67% | 4.55% | 3.12% |
| 2011 | 10 | 18.19% | 5.77% | 3.43% | 2.34% |
| 2006 | 15 | 18.57% | 5.45% | 3.68% | 1.77% |
| 2001 | 20 | 21.08% | 15.42% | 12.82% | 2.60% |
| 1996 | 25 | 11.90% | 10.21% | 1.69% | |
| 1991 | 30 | 19.41% | 17.09% | 2.31% | |
| 1990 | 31 | 22.07% | 19.39% | 2.69% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 6.63, 7.96 and 9.29. The corresponding 10 year ratios are 7.77, 9.64 and 11.51. The corresponding historical ratios are 10.57, 15.13 and 16.76. The current P/E Ratio is 6.84 based on a stock price of $77.34 and EPS estimate for 2022 of $11.30. The current ratio is below the low of the 10 year median ratios. This stock price testing suggests that the stock price is relatively cheap.
Because we also have an Adjusted Earnings per Share (AEPS) I will look at that also. The 5 year low, median, and high median P/AEPS Ratios are 9.47, 11.37 and 13.26. The corresponding 10 year ratios are 10.40, 13.09 and 15.15. The current P/AEPS Ratio is 7.74 based on a stock price of $77.34 and AEPS estimate for 2022 of $9.99. This ratio is below the low of the 10 year median ratios. This stock price testing suggests that the stock price is relatively cheap.
There is also Adjusted Funds from Operations (AFFO) values. The 5 year low, median, and high median P/AFFO Ratios are 3.50, 5.33 and 6.59. The corresponding 10 year ratios are 4.13, 5.69 and 7.00. The current P/AFFO Ratio is 6.46 based on a stock price of $77.34 and AFFO estimate for 2022 of 11.97. The current ratio is between the median and high ratios of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a Graham Price of $89.66. The 10 year low, median, and high median Price/Graham Price Ratios are 0.73, 0.99 and 1.16. The current P/GP Ratio is 0.86 based on a stock price of $77.34. The current ratio is between the low and median of 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/Book Value per Share Ratio of 1.41. The current P/B Ratio is 2.45 based on a Book Value of $36,645M, Book Value per Share of $31.62 and a stock price of $77.34. The current ratio is 74% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
I also have a Book Value per Share (BVPS) estimate for 2022 of 2.26. This estimate gives a P/B Ratio of 2.26 based on a stock price of $77.34 and Cash Flow of 439.958M and a BVPS of $2.26. This P/B Ratio is 60% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable expensive.
I get a 10 year median Price/Cash Flow per Share Ratio of 5.53. The current P/CF Ratio is 4.80 based on Cash Flow per Share (CFPS) estimate for 2022 of $16.10, Cash Flow of $18,811M and a stock price of $77.43. The current ratio is 13% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get an historical median dividend yield of 1.03%. The current dividend yield is 3.88% based on a stock price of $77.34 and dividends of $3.00. The current dividend yield is 277% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median dividend yield of 2.69%. The current dividend yield is 3.88% based on a stock price of $77.34 and dividends of $3.00. The current dividend yield is 44% above the 10 year median dividend yield. This stock price testing suggests that the stock price is relatively cheap.
The 10 year median Price/Sales (Revenue) Ratio is 2.11. The current P/S Ratio is 2.31 based on a stock price of $77.34, Revenue estimate for 2022 of $37,712M and Revenue per Share of $33.42. The current ratio is 10% 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 still reasonable. The dividend yield tests are saying the stock price is cheap, but there also has been a big growth in dividends in 2022 of some 55%. The P/S Ratio test is saying the stock price is reasonable but above the median. The other tests vary but mostly say cheap to reasonable.
Last year I said that the results of stock price testing were that the stock price was probably cheap. Both dividend yield tests point to this as does the P/S Ratio test. Some of tests show the stock price cheap and others show a stock price that is reasonable but below the median.
When I look at analysts’ recommendations, I find Strong Buy (7), Buy (8) and Hold (7). The consensus would be a Strong Buy. The 12 month stock price consensus is $86.86. This implies a total return of 16.19% with 12.31% from capital gains and 3.88% from dividends. Note the stock reached $86.36 a few days ago and has been falling since then. This high is close to the 12 month price consensus.
When I looked at analysts’ recommendations last year, I found Strong Buy (8), Buy (10) and Hold (4). The consensus was Buy. The 12 month stock price consensus is $47.40. This implies a total return of 29.75% with 4.95% from dividends and 24.80% from capital gains based on a stock price of $37.98. What happened was a price move to $77.34 and total return of $108.58 with 103.63% from capital gains and 4.95% from dividends.
Analysts on Stock Chase think this stock is currently a Buy. Stock Chase gives this stock 5 stars out of 5. Christopher Liew on Motley Fool says this stock is beating the TSX and its dividend is decent. Joey Frenette on Motley Fool thinks this stock is a Canadian energy king and is also ripe to buy. The company announces its fourth quarter results via a BOE Report. There is a Zack research report on Yahoo Finance.
Canadian Natural Resources is one of the largest oil and natural gas producers in western Canada, supplemented by operations in the North Sea and Offshore Africa. The company's portfolio includes light and medium oil, heavy oil, bitumen, synthetic oil, natural gas liquids, and natural gas. Its web site is here Canadian Natural Resources.
The last stock I wrote about was about was Pembina Pipelines Corp (TSX-PPL, NYSE-PBA) ... learn more. The next stock I will write about will be Barclays PLC ADR (LSE-BARC, NYSE-BCS) ... learn more on Wednesday, April 27, 2022 around 5 pm. Tomorrow on my other blog I will write about Investing FOMO.... learn more on Tuesday, April 26, 2022 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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