Is it a good company at a reasonable price? The stock price is relatively cheap. Most utilities have lots of debt. They have a good record of dividend increases with increases in 16 of the 18 years I cover. However, there was no dividend increase in 2021 and analysts do not one expect anytime soon. Dividend Payout Ratios are high, but are expected to decrease. You could collect a good dividend while waiting for the company to revive. It is cheap. However, it is always a risk when you get a company cheap. It is on Money Sense’s list of 100 best Canadian dividend stocks. It is a utility and utility stocks provide good income. This stock has a medium risk level. So, it is probably relatively safe to buy.
I do not own this stock of Keyera Corp (TSX-KEY, OTC-KEYUF). I started to review some of the stock recommended by Jennifer Dowty from a column she wrote and I reviewed in February 2010 on Dividends and Special Dividends. The title of the article in Investor’s Digest was Dividend Stocks: Buy, Hold and Collect. Jennifer is now works for the Globe and Mail.
When I was updating my spreadsheet, I noticed that revenues, after decreasing for two years is up by some 65% in 2021. Analysts did expect a good increase, but of some 48%. Analysts expected a big increase in EPS of some 514%, and EPS was up but by 425%.
The estimates for the company seem to all decline from 2022 to 2023. For example, Revenue for these years is $6,635M, $5,363M, and $5,874M. EPS are for these years $2.26, $2,06, and $2,02. Cash Flow per Share over these years are $3.73, $3.46, and $3.43. The only estimates to improve is those for dividends.
If you had invested in this company in December 2011, for $1,000.00 you would have bought 40 shares at $25.00 per share. In December 2021, after 10 years you would have received $614.70 in dividends. The stock would be worth $1,141.20. Your total return would have been $1,755.90.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $25.00 | $1,000.00 | 40 | 10 | $614.70 | $1,141.20 | $1,755.90 |
The dividend yields are good with dividend growth low. The current dividend yield is good (5% and 6% ranges) at 6.55%. The 5 year and historical median dividend yields are also good at 5.94% and 5.94%. The 10 year median dividend yield is moderate (2% to 4% ranges) at 4.42%. The dividend growth is low (below 8%) at 4.65% per year for the past 5 years. Dividends have been flat from 2020 to 2022. Analysts expect them to increase in 2023. But last year they expected an increase in 2022. The last dividend increase was in 2019 and it was for 6.7%.
The Dividend Payout Ratios (DPR) are probably fine based on AFFO. The DPR for EPS for 2021 is 131% with 5 year coverage at 125%. The DPR for EPS is expected to be 85% in 2022. The DPR for Adjusted Funds from Operations (AFFO) for 2021 is 63% with 5 year coverage at 61%. The DPR for Cash Flow per Share (CFPS) for 2021 is 55% with 5 year coverage at 54%. It is only a bit lower in 2022 at 51%. The DPR for CFPS is better if it is 40% or less. The DPR for Free Cash Flow (FCF) for 2021 is 631% with the 5 year coverage negative. The DPR for FCF for 2022 is expected to be negative in 2022.
Debt Ratios are rather high as the company has a lot of debt, but they will probably be fine. The Long Term Debt/Market Cap Ratio for 2021 is 0.55 and is fine. The Liquidity Ratio for 2021 is 1.20. If you add in Cash Flow after dividends it is 1.38. It is better if this is 1.50 or better. The Debt Ratio for 2021 is 1.49. This is also better at 1.50. The Leverage and Debt/Equity Ratios are too high at 3.06 and 2.06 and are better at below 3.00 and 2.00. Companies in this business tend to have high debt loads.
The Total Return per year is shown below for years of 5 to 19 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 | 4.65% | -1.61% | -6.75% | 5.13% |
| 2011 | 10 | 7.29% | 6.93% | 1.33% | 5.60% |
| 2006 | 15 | 6.82% | 17.33% | 8.56% | 8.76% |
| 2002 | 19 | 11.46% | 19.04% | 9.60% | 9.44% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 16.31, 20.12 and 23.93. The corresponding 10 year ratios are 23.05, 27.59 and 32.07. The corresponding historical ratios are 18.04, 22.18 and 26.32. The current P/E Ratio is 12.98 based on a Stock Price of $29.33 and EPS estimate for 2022 of $2.26. This ratio is below the low ratio of the 10 year median ratios. This stock price testing suggests that the stock price is relatively cheap.
I also have Distributable Cash data. The 5-year low, median, and high median Price/ Distributable Cash are 8.30, 10.31 and 12.33. The corresponding 10 year ratios are 12.92, 14.59 and 16.34. The current P/DC Ratio is 10.08 based on a stock price of $29.33 and DC of $2.91. The current ratio is below the low the of the 10 year median ratios. This stock price testing suggests that the stock price is relatively cheap.
I get a Graham Price of $25.12 . The 10-year low, median, and high median Price/Graham Price Ratios are 1.77, 2.22 and 2.52. The current P/GP Ratio is 1.17 based on a stock price of $29.33. 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.
I get a 10-year median Price/Book Value per Share Ratio of 3.53. The current P/B Ratio is 2.36 based on a stock price of $29.33, Book Value of $2,743M and a Book Value per Share of $12.41. The current ratio is 33% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I also have a Book Value per Share estimate for 2022 of $13.30. This would produce a P/B Ratio of 2.21 with a stock price of $29.33 and Book Value of $2,940M. The current ratio is 28% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I get a 10-year median Price/Cash Flow per Share Ratio of 11.42. The current P/CF Ratio is 7.86 based on Cash Flow per Share estimate of $3.73, Cash Flow of $824M and a stock price of $29.33. The current ratio is 31% 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 5.94%. The current dividend yield is 6.55% based on dividends of $1.92 and a stock price of $29.33. The current dividend yield is 10% above the historical median dividend yield This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 10 year median dividend yield of 4.42%. The current dividend yield is 6.55% based on dividends of $1.92 and a stock price of $29.33. The current dividend yield is 48% 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 1.79. The current P/S Ratio is 0.98 based on Revenue estimate for 2022 of $6,501M, Revenue per Share of $30.02 and a stock price of $29.33. The current ratio is 45% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
Results of stock price testing is that the stock price is cheap. The 10 year median dividend yield test says this as does the P/S Ratio test. All the tests say the same thing except for the historical median dividend yield test which says the price is reasonable and below the median.
When I look at analysts’ recommendations, I find Strong Buy (5), Buy (5) and Hold (4). The consensus would be a Buy. The 12 month stock price consensus is 34.43. This implies a total return of 23.93% with 17.39% from capital gains and 6.55% from dividends based on a current stock price of $29.33.
Analysts on Stock Chase think this stock is a Buy. It is on the Money Sense list with a C Rating. Stock Chase gives this stock 4 stars out of 5. Jitendra Parashar on Motley Fool thinks this is a safe stock to buy now. Vineet Kulkarni on Motley Fool thinks this is a good passive income stock to buy. The company put out a Press Release on their 2021 results. The company put out a Press Release on their second quarter of 2022 results.
Simply Wall Street on Yahoo Finance reviews this stock. Simply Wall Street gives out 3 risks for this stock of earnings are forecast to decline by an average of 3.6% per year for the next 3 years, dividend of 6.78% is not well covered by earnings or cash flows and has a high level of debt.
Keyera is a midstream energy business that operates primarily out of Alberta. Its primary lines of business consist of the gathering and processing of natural gas in western Canada, the storage, transportation, and liquids blending for natural gas liquids and crude oil, and the marketing of NGLs, iso-octane, and crude oil. Its web site is here Keyera Corp.
The last stock I wrote about was about was Dollarama Inc (TSX-DOL, OTC-DLMAF) ... learn more. The next stock I will write about will be Cenovus Energy Inc (TSX-CVE, NYSE-CVE) ... learn more on Wednesday, November 2, 2022 around 5 pm. Tomorrow on my other blog I will write about Dividend Stocks November 2022 .... learn more on Tuesday, November 1, 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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