Hello Peter
I am trying to decide if it is worth investing in either Keyera or Gibson Energy as both seem to be attractive stable little companies that just go about their businesses.
I would appreciate your comparative analysis of Keyera and Gibson Energy for a very long term hold. Can you comment on debt levels, quality of management, possibility of a takeover, liklihood looking forward of regular dividend increases, and the potential of each company for future growth.
Both companies have nice dividend yields now. but no meaningful increases in share prices so the only reason to own either one is for the annual dividends, but Keyera's share price has fallen from about $50 in 2014 to about $34 at present so the dividends barely make up for the capital loss. Similarly Gibson's share price now [about $20] is the same as it was in 2011 so no growth there either but at least you did get to collect some dividends along the way.
Gibson's dividend was up each year since 2012 but was flat from 2017 to 2019, and Keyera's dividend was raised annually from 2004 till 2020 with twice with no raises, and no raises from 2020 to the present so one wonders if the cash flows are a bit weak some years.
It seems to me that of the two Gibson, although a much smaller company than Keyera, may the better bet.
So in your opinion is there any economic justification in investing in either of these two little companies?
On the other hand maybe this is a wild goose chase looking at Keyera and Gibson and maybe it is better to just stick to PPL, ENB, and TRP.
Thank you.......... Paul W. K.
All the stocks mentioned here have been impacted, to some degree, by higher rates. If and when rates peak, and/or decline, we would expect them to peform better. GEI has $1.7B in debt, about 4X cash flow. We would consider management decent but do not know them well. At 12X earnings and as a relatively small company, wth consistent cash flow, takeover odds are decent, and we note one shareholder, a UK investment fund, owns 17.5%. EPS is expected to decline over the next two years, and with a current yield of 7.7% we doubt management will have an incentive to increase the dividend in the short term. KEY has $4.2B debt, about 5X cash flow. It is more expensive at ~15X earnings. We would consider management good overall. Control is in the market with no shareholder more than 9%. We have considered it a target for some time, and the stock has outperformed GEI by a wide margin. Unlike GEI, EPS is expected to increase over the next 24 months (based on consensus). Payout ratio is barely over 50% so we would consider the odds of a dividend hike higher. Of the two, today we would prefer KEY. PPL/ENB are both much larger, with higher yields, but have lagged its performance. We would be OK owning KEY for income. It is smaller, but hardly 'small' at $7.6B.