By Richard Rittorno
To continue our hunt for yield within the natural gas pipeline master limited partnerships, we turn our sights on to Spectra Energy Corp (SE).
Spectra Energy Corp. owns and operates a portfolio of natural gas-related energy assets including natural gas infrastructure. SE operates in three areas of the natural gas industry: gathering and processing, transmission and storage, and distribution.
Between those areas, SE operates in four market segments: the United States Transmission, Distribution, Western Canada Transmission & Processing, and Field Services.
Since SE is in the natural gas utilities industry and has positive earnings, the PEG, PE and price-to-book ratios are the most appropriate valuation measures. SE seems inexpensive with a PEG value of 2.5128, below the natural gas utilities industry median PEG of 2.64, and supported by a PE of 17.2127 — also well below the industry median of 15.66.
SE is one of the more profitable companies in the natural gas utilities industry with a net margin of 24.48%. Its operating margin and net margin are among the strongest of any peer while its gross margin is above the industry median.
SE currently offers a dividend yield of 3.52% with current price of $31.55. The dividend is in line with the industry average and still significantly above the S&P 500, which yields 2.10%.
SE has a debt to total capital ratio of 55.48%, in line with the natural gas utilities industry. Warning: SE’s quick ratio of 0.47 shows that there are not enough liquid assets to satisfy current liabilities in the event that operating earnings are unable to do so.
Quick rundown on technicals:
Looking at SE’s daily chart (right), traders will find price making higher lows since hitting it 52-week low. With price hitting a 52-week high recently on above-average volume, we might see a pull back to the trendline. Fibonaccis also confirm SE’s wiliness to pull back and rest as price has hit the natural resting place at the 0.27% extension level.
Price could be looking for a little further pullback to the trendline, which could indicate a possible sideways trade before continuing the trend — or if nothing else, the trend itself could simply continue.