Is it a good company at a reasonable price? First this is an energy sector stock. For me, the energy sector is not a place of long term investing. From the 12 month stock prices given, it would seem like analysts do not expect much in the way of capital gains from this company over the next 12 month. Buying energy stocks is always a risky business. I have around 1% of my portfolio in such stocks, so I am really not a fan.
I have some money in resource stocks to keep track what is happening with resources as Canadian is considered a resource country. Resource stocks tend to be cyclical, so I see the only way to make money is to buy when a company is at a low and sell, when it is at a high. To me, this stock looks relatively at a high.
I do not own this stock of Ovintiv Inc (TSX-OVV, NYSE-OVV). I have owned this stock before as Alberta Energy Co. I held it for short periods and made money. This company split into two companies in the later part of 2009 - Encana Corporation and Cenovus Energy Inc. On January 27, 2020, this company has changed its name from Encana Corp (TSX-ECA, OTC-ECA) to Ovintiv Inc (TSX-OVV, OTC-OVV).
When I was updating my spreadsheet, I noticed that there were complicated changes to this stock over the years. I do not like to invest in complications. Also, for the past 15 years, this stock has not been making shareholders any money. I am sure that there are much better companies to invest in.
If you had invested in this company in December 2012, for $1,081.30 you would have bought 11 shares at $98.30 per share. In December 2022, after 10 years you would have received $122.75 in dividends. The stock would be worth $754.16. Your total return would have been $876.91. This is a total return would be a total loss of 2.25% per year with 3.54% from capital loss and 1.29% from dividends.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $98.30 | $1,081.30 | 11 | 10 | $122.75 | $754.16 | $876.91 |
The current dividend yield is moderate with dividend growth currently good, but it has fluctuated greatly. The current dividend yield is moderate (2% to 4% ranges) at 2.36%. The 5, 10 and historical dividend yields are low (below 2%) at 1.68%, 1.61% and 1.82%. The last dividend increase was for 20% and it occurred in 2023. However, this company, or its predecessors, have raised dividends 14 times and decreased them 7 times over the past 30 years. Dividends were recently decreased in 2013, 2014 and 2016. Then there were some big raises in dividends in 2019, 2021 and 2022 and 2023.
The Dividend Payout Ratios (DPR) are currently good. The DPR for 2022 for Earnings per Share (EPS) is 7% with 5 year coverage at 70%. The DPR for 2022 for Adjusted Earnings per Share (AEPS) is 14% with 5 year coverage at 30%. The DPR for 2022 for Cash Flow per Share (CFPS) is 6% with 5 year coverage at 4%. The DPR for 2022 for Free Cash Flow (FCF) is 12% with 5 year coverage at 14%.
| Item | Cur | 5 Years |
|---|---|---|
| EPS | 6.75% | 69.63% |
| AEPS | 13.87% | 29.81% |
| CFPS | 5.97% | 4.21% |
| FCF | 11.74% | 13.92% |
Debt Ratios are fine. The Long Term Debt/Market Cap Ratio for 2022 is good at 0.25. The Liquidity Ratio for 2022 is low at 0.61, but when you add in cash flow after dividends it is better at 1.92. The current one at 1.45 is low as I prefer this to be at 1.50 or better. The Debt Ratio for 2022 is good at 2.04. The Leverage and Debt/Equity Ratios for 2022 are good at 1.96 and 0.96, and fine currently at 2.10 and 1.10.
| Type | Year End | Ratio Curr |
|---|---|---|
| Lg Term R | 0.25 | 0.44 |
| Intang/GW | 0.20 | 0.21 |
| Liquidity | 0.61 | 0.45 |
| Liq. + CF | 1.92 | 1.45 |
| Debt Ratio | 2.04 | 1.91 |
| Leverage | 1.96 | 2.10 |
| D/E Ratio | 0.96 | 1.10 |
The Total Return per year is shown below for years of 5 to 30 to the end of 2022 in CDN$. 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 | 27.87% | -3.09% | -3.95% | 0.86% |
| 2012 | 10 | -10.69% | -2.25% | -3.54% | 1.29% |
| 2007 | 15 | -3.02% | -4.32% | -6.02% | 1.70% |
| 2002 | 20 | 2.31% | 3.47% | 0.45% | 3.03% |
| 1997 | 25 | 5.34% | 8.26% | 4.24% | 4.02% |
| 1992 | 30 | 4.90% | 9.44% | 5.38% | 4.06% |
The Total Return per year is shown below for years of 5 to 21 to the end of 2022 in US$. 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 | 25.93% | -4.47% | -5.32% | 0.85% |
| 2012 | 10 | -13.39% | -5.29% | -6.45% | 1.16% |
| 2007 | 15 | -5.03% | -6.28% | -7.93% | 1.66% |
| 2002 | 20 | 3.10% | 5.01% | 0.99% | 4.01% |
| 2001 | 21 | 5.56% | 6.06% | 1.81% | 4.25% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 2.98, 5.12 and 7.25. The corresponding 10 year ratios are 2.76, 4.45 and 6.14. The corresponding historical ratios are 6.53, 8.08 and 9.91. The current P/E Ratio is 6.87 based on a stock price of $67.25 and EPS of $9.78 ($7.15 US$). The current ratio is higher than then high ratio of the 10 year median ratios. This stock price testing suggests that the stock price is relatively expensive. This testing is in CDN$.
I also have Adjusted Earnings per Share (data). The 5-year low, median, and high median Price/Adjusted Earnings per Share Ratios are 5.90, 8.74 and 11.58. The corresponding 10 year ratios are 7.11, 12.32 and 17.37. The current P/AEPS Ratio is 6.93 based a stock price of $49.10 and AEPS Estimate for 2023 of $7.09. The current ratio is below the low ratio of the 10 year median ratios. This stock price testing suggests that the stock price is relatively cheap. This testing is in US$.
I get a Graham Price of $106.43. The 10-year low, median, and high median Price/Graham Price Ratios are 0.54, 1.07 and 132. The current P/GP Ratio is 0.63 based on a stock price of $67.25. The current ratio is between the low and median ratios of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable and below the median. This testing is in CDN$.
I get a 10-year median Price/Book Value per Share Ratio of 1.35. The current P/B Ratio is 1.29 based on a stock price of $49.10, Book Value of $9,316M and Book Value per Share of $37.92. The current ratio is 4% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median. This testing is in US$ and you will get a similar result in CDN$.
I have Book Value per Share estimates for 2023 of $37.70 US$. The Book Value would be $9,263M and the Ratio would be 1.30 based on a stock price of $49.10. The current ratio is 3% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median. This testing is in US$.
I get a 10-year median Price/Cash Flow per Share Ratio of 3.00. The current P/CF Ratio is 3.34 based on a stock price of $49.10, Cash Flow per Share estimate for 2023 of $14.70 and Cash Flow of $3,612M. The current ratio is 11% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get an historical median dividend yield of 1.82%. The current dividend yield is 2.44% based on a stock price of $49.10 and Dividends of $1.20. The current dividend yield is 34% 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 1.61%. The current dividend yield is 2.44% based on a stock price of $49.10 and Dividends of $1.20. The current dividend yield is 51% 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 1.61. The current P/S Ratio is 1.11 based on Revenue estimate for 2023 of $10,907M, Revenue per Share of $44.39 and a stock price of $49.10. The current ratio is 31% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
Results of stock price testing is that the stock price is probably relatively cheap. The dividend yield tests say this and it is confirmed by the P/S Ratio test. I am doing testing mostly in US$ because the company reports in US$, estimates are given in US$ and dividends are paid in US$. Most of the testing is showing the stock price as relatively cheap or reasonable and below the median.
When I look at analysts’ recommendations, I find Strong Buy (10), Buy (3) and Hold (10). The consensus would be a Buy. The 12 month stock price is $68.89 ($50.34 US) with a high of $89.05 ($65.07 US$) and low of $45.16 ($33.00 US$). With a 12 months stock price of $68.89, this implies a total return of 4.88% with 2.44% from capital gains and 2.44% from dividends. The low expected total return makes the large number of Hold recommendations understandable.
There is only one recommendation on Stock Chase for this company and it is Do Not Buy. Stock Chase gives this stock 3 stars out of 5. It is not on any of the dividend lists I follow. There is nothing recent on Motley Fool, but this time last year, Daniel Da Costa, thought it was a buy. Adam Othman on Motley Fool talks about this stock and that you can make money on owning it for short periods of time. The company put out a Press Release on their results for 2022. The company put out a Press Release on their second quarter of 2023.
Zacks via Yahoo Finance did a recent report on this stock. Simply Wall Street via Yahoo Finance put out a report on this stock. Simply Wall Street gives this stock 3 and one half stars out of 5. They have 4 warnings of earnings are forecast to decline by an average of 9.7% per year for the next 3 years; unstable dividend track record; has a high level of debt; and shareholders have been diluted in the past year.
Ovintiv is an independent oil and gas producer with key assets in the Permian, Eagle Ford, Montney, and Duvernay areas. Its web site is here Ovintiv Inc.
The last stock I wrote about was about was CCL Industries Inc (TSX-CCL.B, OTC-CCDBF) ... learn more. The next stock I will write about will be Dollarama Inc (TSX-DOL, OTC-DLMAF) ... learn more on Wednesday, October 25, 2023 around 5 pm. Tomorrow on my other blog I will write about Worst Stocks.... .... learn more on Tuesday, October 24, 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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