Friday, May 2, 2014

Veresen Inc.

I own this stock of Veresen Inc. (TSX-VSN, OTC-FCGYF). I bought this stock in 2008 as Fort Chicago Energy Partnership. At that time it was a publicly traded limited partnership with increasing and high dividends. In 2010 the company changed to a corporation.

The dividends are good with a current one at 6.23% and a median dividend yield at 7.73%. Since 2008 the dividends on this stock has remained level. I doubt that the dividends will increase anytime soon as the Dividend Payout Ratio for earnings is at 370% for 2013 and has a 5 year median value of 357%.

The DPR for cash flow is better with a 5 year median value of 65%. However, the DPR for cash flow for 2013 was higher at 94%. The DPR for AFFO, which some analysts are measuring it against comes in at 88% for 2013 and the 5 year median value is also 88%.

My total return is 30.03% per year with 18.13% per year from capital gains and 11.90% per year from dividends. The 5 and 10 year total return on this stock is at 18.46% and 10.99% per year. The portion of the total return attributable to dividends is at 8.48% and 7.51% over these periods. The portion of the total return attributable to capital gains is at 9.98% and 3.49% per year over these periods.

The outstanding shares have increased by 8.5% and 7.1% per year over the past 5 and 10 years. Shares have increased due to Share Issues, DRIP and Debenture Conversion. This makes the "per share" values important. There has not been much if any growth in Revenues, Earnings or Cash Flow over the past 5 and 10 years. These values hit a high point in 2010 and 2011 and then slide downward. There was growth in all these values in 2013.

Revenue is down by 7% and 1% per year over the past 5 and 10 years. Revenue per Share is down by 14% and 7% per year over the past 5 and 10 years. If you look at 5 year running averages, the decline is not quite as bad with the decrease in Revenue per share down by 8% and 7% per year over the past 5 and 10 years. Revenue was up by 20% in 2013.

The Net Income is down by 1% per year over the past 5 and 10 years. EPS is down by 10% and 8% per year over the past 5 and 10 years. For 2013, earnings were up by 35%.

Cash flow is down by 1% and up by 5% per year over the past 5 and 10 years. The CFPS is down by 9% and 2% per year over the past 5 and 10 years. If you look at the 5 year running averages, CFPS was down by 3% and up by 12% per year over the past 5 and 10 years. There was no growth in CFPS in 2013.

The Return on Equity on this stock is low and it has never reached 10%. The ROE in 2013 was 5.3% and the 5 year median was 5.4%. The ROE on comprehensive income for 2013 was much better at 9.5% and the 5 year median is 8.5%.

The Liquidity Ratio for 2013 is low at 0.54, but if you take off the current portion of the long term debt it is quite good at 2.12. The Debt Ratio is quite good at 1.67. The Leverage and Debt/Equity Ratios are fine at 2.50 and 1.50.

I have done well with this stock. However, on this stock I think that the easy money has been made and I expect on a go forward basis my total return will be considerably less. I also do not see any dividend increases in the near future for this company. The current dividend yield is quite good at 6.23%. See my spreadsheet at vsn.htm.

This is the first of two parts. The second part will be posted on Monday, May 5, 2014 and will be available here. The first part talks about the stock and the second part talks about the stock price.

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.

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

2 comments:

Marypat said...

Hi Susan,
Thank you for sharing your thoughts on these stocks. As a newer investor, I really appreciate your insight and your opinion carries a lot of weight because you already 'walk the walk'. Don't worry I do my own due diligence.
I was wondering if you would consider taking a look at Vermilion (VET) on the TSX at some point in the future. I have owned this for a couple of years now and have been quite happy with my return. I'd be interested in your thoughts.
Cheers!

SPBrunner said...

Marypat: You do not say why Vermilion is a good investment. I already cover 156 stocks and reluctent to take on more unless it is a very good dividend growth stock.

I do not favour energy stocks and have little in my portfolio, just 2%.