Is it a good company at a reasonable price? This is a utility stocks and is therefore generally a safe stock. However, at some point, we will be getting off oil and gas, but I would think that this will take more than 20 years. I have no intentions of selling my shares in this company even though its return is now lower than when I bought this company. In the last 5 and 10 years total return is in the 8% per year range and before that around 15% per year. The current price is in the reasonable and below the median range.
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 I have well with this stock. I have owned it for 22 years and I have a total return of 15.75% per year with 7.26% from capital gains and 8.49% from dividends.
If you had invested in this company in December 2013, for $1,010.34 you would have bought 27 shares at $37.42 per share. In December 2023, after 10 years you would have received $600.28 in dividends. The stock would be worth $1,231.74. Your total return would have been $1,832.02. This would be a total return of 7.33% per year with 2.00% from capital gain and 5.33% from dividends.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $37.42 | $1,010.34 | 27 | 10 | $600.28 | $1,231.74 | $1,832.02 |
The current dividend yield is good with dividend growth low. The current dividend yield is good (5% to 6% ranges) at 5.64%. The 5 and 10 year median dividend yields are also good at 6.05% and 5.53%. The historical median dividend yield is high (7% and over) at 7.10%. The dividend growth is low (below 8% per year) at 3.6% per year over the past 5 years. The last dividend increase occurred in 2023 and it was for 2.3%. However, the dividend increased by 4.1% between 2022 and 2023.
The Dividend Payout Ratios (DPR) are fine going by the DPR for AFFO and CFPS. The DPR for 2023 for Earnings per Share (EPS) is too high at 89% with 5 year coverage at 106%. The DPR for 2023 for Adjusted Funds from Operations (AFFO) is fine at 55% with 5 year coverage at 55%. The DPR for 2023 for Cash Flow per Share (CFPS) is fine at 51% with 5 year coverage at 42%. The DPR for 2023 for Free Cash Flow (FCF) is high at 75% with 5 year coverage at 86%.
| Item | Cur | 5 Years |
|---|---|---|
| EPS | 88.80% | 105.85% |
| AFFO | 55.20% | 54.84% |
| CFPS | 40.93% | 41.97% |
| FCF | 75.16% | 86.21% |
Debt Ratios are fine, but Liquidity Ratio could be improved. The Long Term Debt/Market Cap Ratio for 2023 is good at 0.39 and currently at 0.38. The Liquidity Ratio for 2023 is too low at 0.82. If you added in Cash Flow after dividends, the ratios are still too low at 1.18 and currently at 1.27. I prefer this ratio to be 1.50 or higher. The Debt Ratio for 2023 is good at 1.94. The Leverage and Debt/Equity Ratios for 2023 are fine at 2.06 and 1.06.
| Type | Year End | Ratio Curr |
|---|---|---|
| Lg Term R | 0.39 | 0.38 |
| Intang/GW | 0.24 | 0.23 |
| Liquidity | 0.82 | 0.82 |
| Liq. + CF | 1.18 | 1.27 |
| Debt Ratio | 1.94 | 1.94 |
| Leverage | 2.06 | 2.06 |
| D/E Ratio | 1.06 | 1.06 |
The Total Return per year is shown below for years of 5 to 26 to the end of 2023. 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. So, if you held this stock for 15 years, dividends would have grown by 3.89% per year, your total return would be 15.77% per year with 7.58% from capital gains and 8.19% from dividends. See chart below.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2018 | 5 | 3.55% | 8.32% | 2.40% | 5.92% |
| 2013 | 10 | 4.94% | 7.33% | 2.00% | 5.33% |
| 2008 | 15 | 3.89% | 15.77% | 7.58% | 8.19% |
| 2003 | 20 | 4.66% | 14.09% | 6.44% | 7.65% |
| 1998 | 25 | 4.20% | 16.38% | 7.08% | 9.30% |
| 1997 | 26 | 6.17% | 20.08% | 8.15% | 11.93% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 13.12, 14.69 and 16.25. The corresponding 10 year ratios are 16.12, 18.66 and 21.20. The corresponding historical ratios are 18.39, 20.76 and 23.35. The current P/E Ratio is 15.05 based on a stock price of $47.38 and EPS estimate for 2024 of $3.15. 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 also have Adjusted Funds from Operations (AFFO) data. The 5-year low, median, and high median Price/ Adjusted Funds from Operations Ratios are 7.99, 9.13 and 11.01. The corresponding 10 year ratios are 9.15, 10.25 and 12.18. The current P/AFFO Ratio is 9.40 based on stock price of $47.38 and AFFO estimate for 2023 of $5.04. 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.
I also have Funds from Operations (FFO) data. The 5-year low, median, and high median Price/ Funds from Operations Ratios are 7.26, 8.64 and 10.14. The corresponding 10 year ratios are 8.41, 9.41 and 11.81. The current P/FFO Ratio is 9.89 based on stock price of $47.38 and FFO for last 12 months of $4.79. 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 $40.74. The 10-year low, median, and high median Price/Graham Price Ratios are 1.06, 1.18 and 1.38. The current ratio is 1.13 based on a stock price of $47.38. 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.
I get a 10-year median Price/Book Value per Share Ratio of 1.68. The current ratio is 1.92 based on a stock price of $47.38, Book Value of $2,208M and Book Value per Share of $24.67. The current ratio is 14% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I also have an estimate for the Book Value per Share for 2024 of $28.80. This implies a ratio of 1.84 based on a stock price of $47.38 and Book Value of $14,164. This ratio is 9% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a 10-year median Price/Cash Flow per Share Ratio of 9.76. The current ratio is 8.87 based on a stock price of $47.38, Cash Flow per Share estimate for 2024 of $5.34 and Cash Flow of $2,932M. The current ratio is 9% below the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get an historical median dividend yield of 7.10%. The current dividend yield is 5.64% based on dividends of $2.67 and a stock price of $47.38. The current dividend yield is 21% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively expensive. Dividend yields were quite high between 1997 (start of my records) until 2011 when they moderated. This company used to be an income trust and income trusts had high dividend yields compared to corporations.
I get an historical median dividend yield of 5.3%. The current dividend yield is 5.64% based on dividends of $2.67 and a stock price of $47.38. The current dividend yield is 6% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable and below the median.
The 10-year median Price/Sales (Revenue) Ratio is 2.93. The current P/S Ratio is 2.66 based on Revenue estimate for 2024 of $9,778M, Revenue per Share of $17.81 and a stock price of $47.38. The current ratio is 9% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
Results of stock price testing is that the stock price is probably reasonable. The 10 year median dividend yield test shows the stock price as reasonable and below the median. The P/S Ratio tests confirms this. Most of the rest of the testing shows the stock price as reasonable and above or below the median. The exception is the historical median dividend yield test which shows stock price as expensive, but yields were a lot higher prior to 2011 and after.
When I look at analysts’ recommendations, I find Strong Buy (8), Buy (4) and Hold (5). The consensus would be a Buy. The 12 months stock price consensus is $52.52 with a high of $58.00 and low of $39.50. The consensus price of $52.52 implies a total return of 16.48% with 10.85% from capital gains and 5.64% from dividends.
There were 7 buy recommendations on Stock Chase with the last one for 2024 being a Hold. Even the Hold recommendations says that it is currently fairly valued. Stock Chase gives this stock 5 stars out of 5. It is on all the dividend lists that I follow. Robin Brown on Motley Fool says buy this company for its passive income. Get an retirement revenue stream says Christopher Liew on Motley Fool by investing in this company. The company put out a Press Release about their 2023 results.
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. It has two warnings of has a high level of debt; and shareholders have been diluted in the past year.
Pembina Pipeline is a midstream company serving the Canadian and North American (primarily Bakken) markets with an integrated product portfolio. Its 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 Wednesday, April 22, 2024 around 5 pm. Tomorrow on my other blog I will write about Natural Occurring Retirement Communities.... learn more on Tuesday, April 23, 2024 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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