Is it a good company at a reasonable price? This stock is Utility Energy stock. If you look at the chart for the last 12 year, the stock price is relatively high. You should expect volatility because the stock is part of the energy business. It has a high level of debt, but most utility companies do. Mostly this stock has done well by its shareholders, but initial purchase price seems to count. My testing is showing that the stock price could be still reasonable.
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 they have not had a very good start to this year with Revenue, AFFO, and Net Income all down. For this year, analysts expect Revenue, AFFO, and Cash Flow to decrease. In the chart below, I am showing 5 and 10 year total growth and per year growth in columns 3 and 4. Column 5 shows growth expected over 12 months to the first quarter in 2024 and expected growth over this year.
| Yr | Item | Tot. Gwth | Per Year | Gwth | Coverage |
|---|---|---|---|---|---|
| 5 | Revenue Growth | 57.96% | 9.57% | -0.71% | <-12 mths |
| 5 | AFFO Growth | 21.10% | 3.90% | -3.22% | <-12 mths |
| 5 | Net Income Growth | 7.56% | 1.47% | -19.72% | <-12 mths |
| 5 | Cash Flow Growth | 61.42% | 10.05% | 12.67% | <-12 mths |
| 5 | Dividend Growth | 13.95% | 2.65% | 4.08% | <-12 mths |
| 5 | Stock Price Growth | 24.10% | 4.41% | 37.43% | <-12 mths |
| 10 | Revenue Growth | 115.22% | 7.97% | -2.17% | <-this year |
| 10 | AFFO Growth | 102.72% | 7.32% | -5.36% | <-this year |
| 10 | Net Income Growth | 188.78% | 11.19% | 20.91% | <-this year |
| 10 | Cash Flow Growth | 153.31% | 9.74% | -1.34% | <-this year |
| 10 | Dividend Growth | 75.00% | 5.76% | 4.49% | <-this year |
| 10 | Stock Price Growth | 0.20% | 0.02% | 37.43% | <-this year |
In the following chart, I am showing Capital Gains and Total Return against the starting values for P/E Ratio, P/S Ratio and Dividend yield. On the 10 year Capital Gain and Total Return is low and the starting P/E Ratio was relatively high and the Dividend Yield relatively low compared to other years. So, maybe for this stock we should look closely at the P/E Ratio and Dividend Yield to determine if price is relatively good or not.
| # Years | Cap. Gain | Total Ret | Beg P/E | Beg P/S | Beg Yield |
|---|---|---|---|---|---|
| 5 | 4.41% | 11.24% | 16.43 | 2.05 | 5.41% |
| 10 | 0.02% | 5.26% | 28.95 | 1.89 | 3.09% |
| 15 | 8.98% | 18.30% | 10.69 | 1.04 | 7.36% |
| 20 | 8.51% | 17.61% | 26.16 | 1.05 | 7.57% |
| current | 19.42 | 1.42 | 4.77% |
The current dividend yield is moderate with dividend growth low. The current dividend yield is moderate (2% to 4% ranges) at 4.82%. The 5, 10 and historical median dividend yields are good (5% and 6% ranges) a t6.26%, 5.68% and 6.02%. The 5 year dividend yield is low (below 8% per year) at 2.7% per year over the past 5 years. The last dividend increase was this year and it was for 4%. This used to be an income trust and all these companies are having a hard time getting dividends right after becoming corporations.
The Dividend Payout Ratios (DPR) are fine. The DPR for 2023 for Earnings per Share (EPS) is very high at 106% with 5 year coverage at 134%. The DPR for 2023 for Adjusted Funds from Operations (AFFO) is good at 52% with 5 year coverage at 61%. The DPR for 2023 for Cash Flow per Share (CFPS) is fine, but a bit high at 43% with 5 year coverage at 51%. I prefer this to be 40% or less. The DPR for 2023 for Free Cash Flow (FCF) is too high at 178% with 5 year coverage at 828%. However, these is no agreement on what the FCF is.
| Item | Cur | 5 Years |
|---|---|---|
| EPS | 105.95% | 133.71% |
| AFFO | 52.55% | 60.74% |
| CFPS | 43.71% | 51.26% |
| FCF | 177.95% | 827.66% |
Debt Ratios show that the company has too much debt, but the Liquidity Ratio is fine. The Long Term Debt/Market Cap Ratio for 2023 is fine at 0.53 and good currently at 0.38. The Liquidity Ratio for 2023 is low at 1.34 and 1.30 currently. If you added in Cash Flow after dividends, the ratios are fine at 2.00 and currently at 1.87. The Debt Ratio for 2023 is fine at 1.46 and 1.46 currently. I would prefer this to be at 1.50 or higher. The Leverage and Debt/Equity Ratios for 2023 are too high at 3.16 and 2.16 and currently at 3.16 and 2.16. I prefer them to be below 3.00 and 2.00
| Type | Year End | Ratio Curr |
|---|---|---|
| Lg Term R | 0.53 | 0.38 |
| Intang/GW | 0.01 | 0.01 |
| Liquidity | 1.34 | 1.30 |
| Liq. + CF | 2.00 | 1.87 |
| Debt Ratio | 1.46 | 1.46 |
| Leverage | 3.16 | 3.16 |
| D/E Ratio | 2.16 | 2.16 |
The Total Return per year is shown below for years of 5 to 21 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. See chart below.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. | check |
|---|---|---|---|---|---|---|
| 2018 | 5 | 2.65% | 11.24% | 4.41% | 6.83% | 11.24% |
| 2013 | 10 | 5.76% | 5.26% | 0.02% | 5.24% | 5.26% |
| 2008 | 15 | 5.90% | 18.30% | 8.98% | 9.32% | 18.30% |
| 2003 | 20 | 10.37% | 17.61% | 8.51% | 9.10% | 17.61% |
| 2002 | 21 | 18.78% | 9.25% | 9.54% | 18.78% |
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 20.67, 23.29 and 25.75. The corresponding historical ratios are 13.27, 21.17 and 24.26. The current P/E Ratio is 19.42 based on a stock price of $42.73 and EPS estimate for 2024 of $2.20. The current ratio is below the low ratios for the 10 year median ratios. This stock price testing suggests that the stock price is relatively cheap.
I also have Funds from Operations (FFO) data. The 5-year low, median, and high median Price/ Funds from Operations Ratios are 6.92, 8.47 and 9.84. The corresponding 10 year ratios are 8.67, 10.66 and 12.28. The current P/FFO Ratio is 10.22 based on FFO estimate for 2024 of $4.18 and a stock price of $42.73. 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 Adjusted Funds from Operations (AFFO) data. The 5-year low, median, and high median Price/ Adjusted Funds from Operations Ratios are 7.91, 9.76 and 11.61. The corresponding 10 year ratios are 11.08, 12.75 and 14.25. The current P/AFFO Ratio is 12.10 based on AFFO estimate for 2024 of $3.53 and a stock price of $42.73. 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 Graham Price of $24.49. The 10-year low, median, and high median Price/Graham Price Ratios are 1.31, 1.73 and 1.91. The current P/GP Ratio is 1.74 based on a stock price of $42.73. This ratio is between the median and high ratio 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 2.56. The current ratio is 3.53 based on a stock price of $42.73, Book flue of $2,777M and Book Value per Share of $12.12. The current ratio is 38% above the 10 year median ratios. This stock price testing suggests that the stock price is relatively expensive.
I also have a Book Value per Share estimate for 2024 of $12.30. This implies a ratio of 3.47 based on a stock price of $42.73 and Book Value of $2,819M. This ratio is 36% 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 10.92. The current P/CF Ratio is 10.17 based on Cash Flow per Share estimate for 2024 of $4.20, Cash Flow of $962M, and a stock price of $42.73. The current ratio is 7% 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 6.02%. The current dividend yield is 4.87% based on dividends of $2.08 and a stock price of $42.73. The current dividend yield is 19% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable but above the median. However, this stock used to be an Income Trust and these companies have higher yields than corporations.
I get an historical median dividend yield of 5.68%. The current dividend yield is 4.87% based on dividends of $2.08 and a stock price of $42.73. The current dividend yield is 14% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable but above the median. However, this stock used to be an Income Trust and these companies have higher yields than corporations.
The 10-year median Price/Sales (Revenue) Ratio is 1.79%. The current ratio is 1.42% based on Revenue estimate for 2024 of $6,900M, Revenue per Share of $30.11 and a stock price of $42.73. The current ratio is 20.7% below 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 reasonable, but could be cheap. The dividend yield testing is saying the stock price is reasonable but above the median. The problem with this test is that the company used to be an income trust which can have quite high yields. The P/S Ratio test is saying that the stock price is cheap, and this is a good test. Most of the rest of the testing is saying that the stock price is reasonable and above or below the median.
When I look at analysts’ recommendations, I find Strong Buy (3), Buy (3) and Hold (7). The consensus would be a Buy. The 12 month stock price consensus is $43.46 with a high of $48.00 and low of $38.00. The consensus stock price of $43.46 implies a total return of 6.58% with 1.71% from capital gains and 4.87% from dividends based on a current stock price of $42.73.
Analysts on Stock Chase give this stock 4 buys and one Hold in 2024. There are no negative comments. Stock Chase gives this stock 4 stars out of 5. Aditya Raghunath on Motley Fool says this is an energy stock with a steady and growing dividend. Amy Legate-Wolfe on Motley Fool says even though it is up this year, it is still a buy. The company put out a Press Release about their fourth quarter of 2023. The company put out a Press Release about their second quarter of 2024.
Simply Wall Street via Yahoo Finance reviews this stock. Simply Wall Street gives this stock 3 and one half stars out of 5. Simply Wall Street has 3 warnings of dividend of 4.82% is not well covered by earnings; has a high level of debt; and large one-off items impacting financial results.
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, October 30, 2024 around 5 pm. Tomorrow on my other blog I will write about Dividend Increases learn more on Tuesday, October 29, 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.
See my site for an index to these blog entries and for stocks followed. I have three blogs. The first talks only about specific stocks and is called Investment Talk. The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter. I am on Instagram. Or you can just Google #walktoronto spbrunner8166 to see my pictures.
No comments:
Post a Comment