Thursday, March 21, 2013

Veresen Inc 2

I own this stock of Veresen Inc. (TSX-VSN, OTC- FCGYF). I have done well on this stock as I got it at a good price. I have a total return 28.97% per year on this stock with 16.02% per year from capital gain and 12.95% per year from dividends.

When I look at the insider trading report, I see a bit of insider buying ($0.7M) and no insider selling. There seems to be low insider ownership and little in the way of options. They have an option like vehicle called Deferred Share Units, but few insiders seem to have any or much of these types of options. The CEO is new and seems to have received some $30,000 in options for 2012.

The 5 year low, median and high median Price/Earnings Ratios are 23.79, 29.84 and 35.89. The current P/E Ratio is 42.06 based on 2013 earnings of $0.31 and current stock price of $13.04. First, all these P/E Ratios are very high for a utility. Even at that the current P/E is higher than the 5 year high median value.

I get a current Graham Price of $6.41. The 10 year low, median and high median Price/Graham Price Ratios are 1.13, 1.35 and 1.58. The current P/GP Ratio is 2.03. The current ratio is high compared to historical ratio. Also, for utility companies you would expect the P/GP Ratio to be around 1.00 in any event.

The 10 year Price/Book Value per Share Ratio is 1.91 and the current P/B Ratio is 15% higher at 2.21. This would point to a rather relatively reasonable stock price. The main problem with the book value is that it is going south. Until they earn more than they pay in dividends, this will continue.

The dividend yield is 7.67% and the 5 year median dividend yield is 8.92% a value some 14% higher. This higher dividend yield points to a stock price relatively reasonable to a bit high.

Looking at the Price/AFFO Ratios, I get a 5 year high median of 10.6 and the current P/AFFO Ratio is 11.96. I get a 5 year median Price/Cash Flow per Share Ratio on closing stock price of 7.74 and a current P/CF Ratio of 12.36. There is no measurement that I see where it does not show the stock price as relatively high.

When I look at analysts' recommendations, I get Strong Buy, Buy and Hold recommendation and the consensus recommendation is a Buy. (This is the most common configuration you can get with analysts' recommendations.) The 12 month stock price consensus is $13.50. This implies a total return of 11.2%, with 7.67% from dividends and 3.53% from capital gains.

One analyst says that this is a buy because the stock can provide attractive income for its shareholders. Some analysts have wondered about the sustainability of the dividend and also whether it will be able in the future to raise the dividend. There are some recent comments on this stock at Stock Chase.

I think that there is not much room for a stock price increases given the lack of any future potential dividend increase. Because a yield of 7.7% is quite good as a return on this stock I will continue to hold what I have. However, I am keeping an eye on this stock. (There is no other utility I want to replace this with and all the good ones seem to have relatively high stock prices.) In the meantime, I do not think much is going to happen with this stock.

Veresen is a leading diversified energy infrastructure company that owns and operates energy infrastructure assets across North America. We are engaged in three principal business lines of Pipelines, Midstream and Power (gas-fired and renewable facilities). Its web site is here Veresen. See my spreadsheet at vsn.htm.

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. See my website for stocks followed and investment notes. Follow me on Twitter or StockTwits.

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