Is it a good company at a reasonable price? Stock price still seems reasonable. I will not be buying more because I have enough of this stock. Expect low dividend yields in the future. I think that all Dividend growth portfolios should have some dividend growth utility stocks. This is a good dividend growth utility stock to consider.

I own this stock of Pembina Pipelines Corp (TSX-PPL, NYSE-PBA). 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 analyst expected an increase in Revenue about 9%, but it increased by 39%. After a loss in 2020, analysts expected EPS of $2.20 for 2021, however, EPS came in at $1.99. What I do not like about their statements is that everything is in the millions, including outstanding shares. So, they spend $47M for share based payments to insiders and they do not tell you how many shares are involved?

I have done well with this company. My total return, after owning this company for 20years is 16.20% with 8% from capital gains and 8.20% from dividends.

If you had invested in this company in December 2011, $1,008.44 you would have bought 34 shares at $29.66 per share. In December 2021, after 10 years you would have received $689.79 in dividends. The stock would be worth $1,304.58. Your total return would have been $1,994.37.

Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
---|---|---|---|---|---|---|

$29.66 | $1,008.44 | 34 | 10 | $689.79 | $1,304.58 | $1,994.37 |

The dividend yields are good with dividend growth low. The current dividend yield is good (5% to 6% ranges) at 5.09%. The 5 and 10 year median dividend yields are also good at 5.18% and 5.17%. The historical median dividend yield is high (7% and above) at 7.18%. Yields are high because this stock used to be an income trust. Expect yields to decline to a moderate range (2% to 4%) in the future. The dividend growth is low (below 8%) with dividend growth at 5.92% per year over the past 5 years. There has been no dividend growth in 2021, but analysts expect some in 2022.

The Dividend Payout Ratios (DPR) are fine, but could improve. The DPR for EPS for 2021 is 127% with 5 year coverage at 147%. Analysts expect the DPR for EPS to be around 89% in 2022. Because this is a utility, I have Adjusted Funds from Operations (AFFO). The DPR for AFFO for 2021 is fine at 53% with 5 year coverage at 56%. I also have Funds from Operations (FFO). The DPR for FFO for 2021 is 42% with 5 year coverage at 53%. The DPR for Cash Flow per Share (CFPS) for 2021 is 39% with 5 year coverage at 45%. The DPR for Free Cash Flow (FCF) for 2021 is 77% with 5 year coverage at 133%.

Debt Ratios are fine but Liquidity Ratio could improve. The Long Term Debt/Market Cap for 2021 is fine at 0.46. The Liquidity Ratio for 2021 is 0.52 and even adding in Cash Flow after dividends, it is only 102. Assets/Current Liabilities Ratio is very good at 13.16 and the Debt to Cash Flow (Years) is good at 3.64. The Debt Ratio for 2021 is good at 1.84. The problem with a low liquidity ratio is that the company may not have cash when they need it (like in a recession), even though they have lots of assets. On the other hand, utilities always have lots of debt.

The Total Return per year is shown below for years of 5 to 24 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 | 5.92% | 3.94% | -1.77% | 5.72% |

2011 | 10 | 4.71% | 8.56% | 2.61% | 5.95% |

2006 | 15 | 5.76% | 15.32% | 6.86% | 8.46% |

2001 | 20 | 4.47% | 14.49% | 6.30% | 8.19% |

1997 | 24 | 6.47% | 20.16% | 8.08% | 12.09% |

The 5 year low, median, and high median Price/Earnings per Share Ratios are 15.36, 18.45 and 20.84. The corresponding 10 year ratios are 23.27, 26.12 and 28.98. The corresponding historical ratios are 19.17, 22.53 and 24.54. The current P/E Ratio is 17.49 based on a stock price of $49.50 and EPS estimate for 2022 of $2.83. 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 this is a utility, I have Adjusted Funds from Operations (AFFO) values. The 5 year low, median, and high median P/AFFO are 9.01, 10.07 and 11.57. The corresponding 10 year ratios are 10.98, 13.42 and 15.05. The current P/AFFO Ratio is 11.12 based on a stock price of $49.50 and AFFO estimate for 2022 of $4.45. This is between the low and median ratios of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable and below the median.

Because this is a utility, I have Funds from Operations (FFO) values. The 5 year low, median, and high median P/FFO are 8.20, 9.21 and 10.63. The corresponding 10 year ratios are 10.46, 12.31 and 14.16. The current P/FFO Ratio is 10.27 based on a stock price of $49.50 and FFO for last 12 months of $4.82. This 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 $36.94. The 10 year low, median, and high median Price/Graham Price Ratios are 1.19, 1.31 and 1.60. The current P/GP Ratio is 1.34 based on a stock price of $49.50. the current ratio is between the median and high 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 10 year median Price/Book Value per Share Ratio of 1.74. The current P/B Ratio is 2.31 based on a stock price of $49.50, Book Value of $11,786M and Book Value per Share of $21.43. The current ratio is 33% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.

I got an estimate for the Book Value per Share for 2022. This gives a P/B Ratio of 2.12 based on a Book Value per Share estimate for 2022 of $23.40, Book Value of $12,870M and a stock price of $49.50. The current ratio is 22% 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 13.55. The current P/CF Ratio is 10.60 based on a stock price of $49.50, Cash Flow per Share estimate for 2022 of $4.67 and Cash Flow of $2,569M. The current P/CF Ratio is 22% 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 7.18%. The current dividend yield is 5.09% based on dividends of $2.52 and a stock price of $49.50. The current dividend yield is 29% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively expensive. This is not a good test as the company used to be an income trust company and income trust had much higher dividend yields than corporations.

I get a 10 year median dividend yield of 5.18%. The current dividend yield is 5.09% based on dividends of $2.52 and a stock price of $49.50. The current dividend yield is 2% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable but above the median.

The 10 year median Price/Sales (Revenue) Ratio is 2.93. The current P/S Ratio is 3.21 based on Revenue estimate for 2022 of $8,490M, Revenue per Share of $15.44 and a stock price of $49.50. 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 probably still reasonable, but it is above the median. The 10 year median dividend yield test and P/S Ratio test both say this. Because this stock used to be an income trust, I would ignore the historical median yield test. The other tests do vary, but most are showing reasonable and above or below the median.

Last year I said that the results of stock price testing were that the stock price was 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. So, last year would have a decent time to buy this stock.

When I look at analysts’ recommendations, I find Strong Buy (5), Buy (5), Hold (5) and Underperform (1). The consensus is a Buy. The 12 months stock price consensus is $48.44. This implies a total return of 2.95% with a capital loss of 2.14% and dividend of 5.09%. The high of the stock price estimates is $57.00 and this would imply a total return of 20.24% with 15.15% from capital gains and 5.09% from dividends.

When I looked at analysts’ recommendations last year, I find Strong Buy (6), Buy (5) and Hold (8). The consensus was a Buy. The 12 months stock price was $39.26. This implies a total return of 11.83% with 6.75% from dividends and 5.09% from capital gains based on a stock price of $37.36. What happened was move to a stock price of $49.50 and a total return of 39.24% with 32.49% from capital gains and 6.75% from dividends. So, last year the analysts were off quite a bit.

Analyst with Buy recommendations on Stock Chase like the dividend yield. Stock Chase gives this stock 5 stars out of 5. Andrew Button on Motley Fool likes the yield of this stock and thinks the dividends are sustainable. Rajiv Nanjapla on Motley Fool says that despite the recent surge in stock price, it is still reasonably priced. The company shows its fourth quarter results via newswire. The company announces on Newswire a deal with KKR.

Simply Wall Street has a report on Yahoo Finance about this company’s dividend. Simply Wall Street has two warnings about this stock of has a high level of debt and dividend is not well covered by earnings

Pembina Pipeline is midstream company serving the Canadian and North American (primarily Bakken) markets with an integrated product portfolio. The firms' assets include pipelines and gas gathering, as well as assets across fractionation, storage, and propane exports. 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 Monday, April 25, 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.

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Thanks for the review Susan. I own PPL for many years now and like you, I feel I have enough PPL stocks in my portfolio. I did very well on PPL, I am also registered on a DRIP for the dividend to roll over into precious PPL stocks.

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