Is it a good company at a reasonable price? The bad news is that their dividend payout ratios are too high. Another is that they have too much debt. The good news that this is a utility stock and it is up by 7.8% year to date, but it is still cheap. The dividend is good and there is no expectation it will be cut. See the next two paragraphs on how dividends have gone in the past and will go possibly in the future. After all, a main reason to buy this stock is dividends. The stock price seems to be relatively cheap at present.
Shareholders have done well with dividends in the past. See chart below. Shareholders who have had this stock for 15 years have a current yield of 20.32% on this initial investment with the dividend increasing 57% and the cost of their original purchase price being paid by dividends 230%. That is the dividends paid far more so far in the original stock price than 100%.
| Div Yd | Years | Start Div | Div Inc | Cost Covered |
|---|---|---|---|---|
| 6.17% | 5 | 4.72% | 30.77% | 30.10% |
| 6.92% | 10 | 9.27% | -25.29% | 60.42% |
| 20.32% | 15 | 12.93% | 57.22% | 230.40% |
| 34.19% | 20 | 29.00% | 17.88% | 448.25% |
If dividends continue to increase at the current 5 year ratio of 3.17%, then in 15 years, the dividends paid would be $3.19 and the yield on the original stock price of $31.89 would be 10.02% the dividends paid to date would cover 102% of the cost of the stock.
| Div Pd | Div Yield | Years | At IRR | Div Cov |
|---|---|---|---|---|
| $2.34 | 7.33% | 5 | 3.17% | 33.41% |
| $2.73 | 8.57% | 10 | 3.17% | 65.14% |
| $3.19 | 10.02% | 15 | 3.17% | 102.22% |
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. Jennifer worked as a Portfolio Manager for Manulife Asset Management Limited after working for Investor's digest.
When I was updating my spreadsheet, I noticed this company is also changing their dividend payments from monthly to quarterly. They will now pay dividends in March, June, September, and December, the third cycle. They also increased the dividends being paid each year by 4%.
As you can see from the following chart, growth is slower when you compare the 5 and 10 year growth rates.
| Year | Item | Tot. Growth | Per Year |
|---|---|---|---|
| 5 | Revenue Growth | 106.84% | 15.65% |
| 5 | AFFO Growth | 9.26% | 1.79% |
| 5 | Net Income Growth | 13.24% | 2.52% |
| 5 | Cash Flow Growth | 80.13% | 12.49% |
| 5 | Dividend Growth | 16.89% | 3.17% |
| 5 | Stock Price Growth | -16.46% | -3.53% |
| 10 | Revenue Growth | 139.96% | 9.15% |
| 10 | AFFO Growth | 125.19% | 8.46% |
| 10 | Net Income Growth | 151.37% | 9.66% |
| 10 | Cash Flow Growth | 288.83% | 14.54% |
| 10 | Dividend Growth | 87.32% | 6.48% |
| 10 | Stock Price Growth | 20.21% | 1.86% |
If you had invested in this company in December 2012, for $1,009.22 you would have bought 41 shares at $24.62 per share. In December 2022, after 10 years you would have received $666.76 in dividends. The stock would be worth $1,213.19. Your total return would have been $1,879.95. This is a total return would be a total return of 7.78% per year with 1.86% from capital gain and 5.92% from dividends.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $24.62 | $1,009.22 | 41 | 10 | $666.76 | $1,213.19 | $1,879.95 |
The current dividend yield is good with dividend growth restarting. The current dividend rate is good (5% to 6% ranges) at 6.27%. The 5 year and historical median dividend yields are also good at 6.13% and 5.98. The 10 year median dividend yield is moderate (2% to 4% ranges) at 4.82%. The dividend increases over the past 5 years is low (below 8%) at 3.2% per year. The dividends were flat between 2020 and 2022. In 2023, dividends were change from monthly to quarterly and were increased by 4.2%.
The Dividend Payout Ratios (DPR) are too high and are not expected to significantly change over the short term. The DPR for 2022 for Earnings per Share (EPS) is 130% with 5 year coverage at 130% also. The DPR for 2023 is better but high, coming in at 95%. The DPR for 2022 for Funds from Operations (FFO) is 65% with 5 year coverage at 62%. The DPR for 2022 for Cash Flow per Share (CFPS) is 54% with 5 year coverage at 53%. This is too high and I like these to be at 40% or lower. The DPR for 2023 is expected to be 47% and this is still too high. The DPR for 2022 for Free Cash Flow (FCF) is 1459% with 5 year coverage at negative. There is some disagreement on what the FCF is for the company, but most of the values are close.
| Item | Cur | 5 Years |
|---|---|---|
| EPS | 129.73% | 129.44% |
| AFFO | 65.08% | 61.76% |
| CFPS | 53.73% | 53.13% |
| FCF | 1458.58% | -512.07% |
Debt Ratios are not bad and they do have too much debt, but utilities tend to have lots of debt. The Long Term Debt/Market Cap Ratio for 2022 is 0.53 and is fine. The Liquidity Ratio for 2022 is low at 1.11, but if you add in Cash Flow after Dividends it is good at 1.59. The Debt Ratio is fine for 2022 at 1.49, but I prefer it to be 1.50 or higher. The Leverage and Debt/Equity Ratios are too high at 3.04 and 2.04 respectively. I prefer them to be below 3.00 and 2.00.
| Type | Year End | Ratio Curr |
|---|---|---|
| Lg Term R | 0.53 | 0.52 |
| Intang/GW | 0.01 | 0.01 |
| Liquidity | 1.11 | 1.13 |
| Liq. + CF | 1.59 | 1.69 |
| Debt Ratio | 1.49 | 1.48 |
| Leverage | 3.04 | 3.07 |
| D/E Ratio | 2.04 | 2.07 |
The Total Return per year is shown below for years of 5 to 20 to the end of 2022. 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. |
|---|---|---|---|---|---|
| 2017 | 5 | 3.17% | 2.10% | -3.53% | 5.63% |
| 2012 | 10 | 6.48% | 7.78% | 1.86% | 5.92% |
| 2007 | 15 | 6.61% | 15.94% | 7.61% | 8.34% |
| 2002 | 20 | 10.82% | 18.86% | 9.30% | 9.56% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 16.31, 20.12 and 23.82. The corresponding 10 year ratios are 23.05, 27.31 and 30.88. The corresponding historical ratios are 18.28, 21.67 and 25.29. The current P/E Ratio is 15.41 based on a stock price of $31.89 and EPS estimate for 2023 of $2.07. The current ratio is below the low ratios of the 10 year median ratios. This stock price testing suggests that the stock price is relatively cheap.
I also have Adjusted Fund from Operations (AFFO) data. The 5-year low, median, and high median Price/ Adjusted Fund from Operations Ratios are 8.30, 10.31 and 11.95. The corresponding 10 year ratios are 12.92, 14.36 and 15.80. The current P/AFFO Ratio is 8.88 based on AFFO estimate for 2023 of $3.59 and a stock price of $31.89. The current 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 get a Graham Price of $24.21. The 10-year low, median, and high median Price/Graham Price Ratios are 1.55, 2.12 and 2.33. The current P/GP Ratio is 1.32 based on a stock price of $31.89. The current 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 get a 10-year median Price/Book Value per Share Ratio of 2.88. The current P/B Ratio is 2.53 based on a stock price of $31.89, Book Value of $2,884M, and Book Value per Share of $12.59. The current ratio is 14% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I also have an estimate for the Book Value per Share for 2023. With a stock price of $31.89, the Book Value would be $3,048M and a P/B Ratio of 2.40. This ratio is 17% 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 11.13. The current P/CF Ratio is 7.67 based on a stock price of $31.89, Cash Flow per Share estimate of $4.16 and Cash Flow of $953M. 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 5.98%. The current dividend yield is 6.27% based on a stock price of $31.89 and dividends of $2.00. The current dividend yield is 5% 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 4.82%. The current dividend yield is 6.27% based on a stock price of $31.89 and dividends of $2.00. 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 1.79. The current P/S Ratio is 1.08 based on a stock price of $31.89, Revenue estimate for 2023 of $6,752M and Revenue per Share of $29.46. The current ratio is 40% 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 probably cheap. The 10 year median dividend yield test says this and it is confirmed by the P/S Ratio test. Most people now like the 10 year median dividend yield test rather than the historical one and they are probably right. All the rest of the testing is showing the stock price as reasonable and below the median or cheap.
When I look at analysts’ recommendations, I find Strong Buy (2), Buy (4) and Hold (7). The consensus would be a Buy. The 12 month stock price consensus is $34.92, with a high of $39.00 and low of $30.00. The consensus price implies a total return of 15.77% with 9.50% from capital gains and 6.27% from dividends.
Most analysts on Stock Chase like this stock for its dividend, but a hold is worried about the amount of debt it has. It is on all the dividend list I follow. Stock Chase gives this stock 4 stars out of 5. Adam Othman on Motley Fool likes this stock for its dividend. Rajiv Nanjapla on Motley Fool likes the dividends and thinks they safe. The company put out a Press Release on their 2022 results. The company put out a Press Release on their second quarterly results.
Simply Wall Street via Yahoo Finance reports on this stock. They seem to like this stock, but they have put out 4 warnings of dividend of 6.19% is not well covered by earnings or cash flows; large one-off items impacting financial results; has a high level of debt; and shareholders have been diluted in the past year. Simply Wall Street gives this stock 2 and one half stars out of 5.
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 Trigon Metals Inc (TSX-TM, OTC-PNTZF) ... learn more. The next stock I will write about will be Cenovus Energy Inc (TSX-CVE, NYSE-CVE) ... learn more on Wednesday, November 1, 2023 around 5 pm. Tomorrow on my other blog I will write about Dividend Stocks November 2023.... learn more on Tuesday, October 31, 2023 around 5 pm..
This blog is meant for educational purposes only and is not to provide investment advice. I am not a licensed professional investment advisor. 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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