RE:RE:Comments from RBC this morning
Fantome wrote: Thanks Hawk for the reference.
Analysts use many different formula to make predictions on future SPs. The use of EV to EBITA is one that many of them use for a number of reasons. In my experience over the years...I take a somewhat different approach for dividend payers since the overwhelming characteriztic of these investors is a determination of the dividend yield and comparing that number to a risk free return from say a GIC.
I have found over the years that except under unusual market conditions the dividend yield on these types of companies is relatively constant and provides a good basis for assessing the future SP of a company as the market emerges from an unusual situation.
In the case of PPL...the historical dividend yield has been relatively constant at between 4.75% and 5%. As we emerge from the COVID situation....using these numbers IMO provide a reasonably accurate expected price range for the shares....
Taking the promised 22 cents a month dividend which gives is 2.64 annual we get the following expected range in the SP for PPL.....53-55 a share.
For me...I will be using these numbers as my planning assumption and the determination for future action. How long it will take to get there is anyone's guess....based on my experience...a reasonable guess would be sometime in the second half of next year after the merger is completed and Heartland is on-line and producing plastics since this would be after the main uncertainty clouds have dissipated regarding the merger and completion of Heartland.
I fully agree bud! It's not usually the sole buying metric, but it gives a great idea of expectations and is a great dive in point when looking for value. I've done a few analysis using it lately on here for different stocks, but people jump on those ideas and reject them, glad to see someone else that likes them too.
Its better with longer term data companies like Pembina, CNR, BCE, mortgage based companies and others tied to dividend payouts. That said I think Pembina is disconnecting from the past range for the future. I too believe the value is pre-Covid, low 50s area, but I also feel that historic 4.75-5% range is going to rise to the the 5.25 area maybe 5.5% just because if the sediment currently for oil/gas based stocks.
At the current 22 cents that gives a $48.00 - 50.28 range, at 23 cents thats $50.18 - 52.57 and finally at 24 cents thats $52.36 - 54.85 (since they indicate this at closing of IPL and of Heartland this is my expectation and what we would call 'priced in'). That all said these are for what I'd call fair value, if I'm in the market to buy, I'd want to be below those ranges I find.