Monday, January 17, 2022

Bank of Nova Scotia

Sound bite for Twitter and StockTwits is: Dividend Growth Bank. The stock price could be reasonable, but it also could be on the expensive side. It certainly is not cheap. I worry about the current high P/S Ratio. See my spreadsheet on Bank of Nova Scotia.

Is it a good company at a reasonable price? The stock price could be reasonable, but it also could be on the expensive side. It certainly is not cheap. I like all Canadian Banks. However, I do not think this one has done as well over time as other Canadian Banks. It has however a good history of dividends and dividend increases.

When I look at analysts’ recommendations, I find Strong Buy (5), Buy (5) and Hold (3). The consensus would be a Buy. The 12 month stock price consensus is $94.15. This implies a total return of 5.53% with 1.23% from capital gains and 4.30% from dividends.

The range for the 12 month price consensus is $104.00 to $84. With the top range you would expect a total return of 16.13% with 11.83% from capital gain and 4.30% from dividends. With the $84 price, you would expect a loss of 5.38%, with a capital loss of 9.68% and dividends of 4.30%.

When I look at analysts’ recommendations last year, I found Strong Buy (2), Buy (6), Hold (4) and Underperform (3). The consensus would be a Buy. The 12 months stock price is $69.25. This implies a total return of 3.77% with a capital loss of 1.35% and dividends of 5.13%, based on a stock price of $70.20. What happened was a rise of the stock price to $93.00 with a total return of 37.61% with 32.48% from capital gains and 5.13% from dividends. Last year I said that the stock price was cheap to reasonable.

I do not own this stock of Bank of Nova Scotia (TSX-BNS, NYSE-BNS). This is one of the big banks of Canada. All our big banks are dividend growth companies. Besides, my son owns shares in this bank. This company has a financial year ending at October 31 each year.

When I was updating my spreadsheet, I noticed that last year analysts expected the EPS to be up 14% to 6.03, but EPS is up 45% to $7.70.

I have two calculations on investing at around $1,000 and what would stock be worth today:
  • If you had invested in BNS in December 1995, $1,004.40 you would have bought 135 Shares. In December 2021, after 25 years you would have received $6,415.88 in dividends. The stock would be worth $9,477.00. Your total return would have been $15,892.88.

  • If you had invested in BNS in December 1988, $1,001.81 you would have bought 274 Shares. In December 2021, after 32 years you would have received $13,532.18 in dividends. The stock would be worth $19,234.80. Your total return would have been $32,766.98.
Cost Tot. Cost Shares Years Dividends Stock Val Tot Ret
$7.44 $1,000.40 135 25 $6,415.88 $9,477.00 $15,892.88
$3.66 $1,001.81 274 32 $13,532.18 $19,234.80 $32,766.98

The dividend yields are moderate with dividend growth low. The current dividend yield is moderate (2% to 4% ranges) at 4.30%. The 5, 10 and historical dividend yields are also moderate at 4.88%, 4.37% and 4.17%. The dividend growth is currently low with growth over the past 5 years at 4.56% per year. The last dividend increase occurred in the financial year of 2022 and it was for 11.1%. This is after no increases in the financial years of 2020 and 2021.

The Dividend Payout Ratios (DPR) are fine as Cash Flow is not considered important for banks. The DPR for EPS for 2021 is 47% with 5 year coverage at 52%. The DPR for Cash Flow per Share is non-calculable for 2021 because of negative Cash Flow. The 5 year coverage is 31%. The DPR for Free Cash Flow and going with FCF from Wall Street Journal, the DPR for FCF for 2021 is 26% with 5 year coverage at 35%. Morningstar site says the FCF is negative for 2021.

Debt Ratios are fine. Because this is a bank, I am looking at the Debt/Covering Assets Ratio which for 2021 is 0.67. This is a good ratio. The debt ratio is 1.07 and this is fine for a bank.

The Total Return per year is shown below for years of 5 to 36 to the end of 2021. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See chart below.

From Years Div. Gth Tot Ret Cap Gain Div.
2016 5 7.85% 7.90% 3.68% 4.23%
2011 10 6.53% 10.30% 5.83% 4.47%
2006 15 10.50% 7.44% 3.68% 3.77%
2001 20 10.25% 11.19% 6.70% 4.49%
1996 25 10.25% 13.45% 8.57% 4.88%
1991 30 10.25% 15.20% 9.81% 5.39%
1986 35 10.25% 13.72% 9.05% 4.66%
1985 36 10.25% 14.31% 9.37% 4.94%

The 5 year low, median, and high median Price/Earnings per Share Ratios are 8.82, 10.71 and 12.44. The corresponding 10 year ratios are 9.59, 11.03 and 12.47. The corresponding historical ratios are 10.29, 11.23 and 13.20. The current P/E Ratio is 11.25 based on a stock price of $93.00 and EPS estimate for 2022 of 8.27. The current P/E Ratio is between the median and high of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable but above the median.

I get a Graham Price of $99.57. The 10 year low, median, and high median Price/Graham Price Ratios are 0.76, 0.85 and 0.97. The current P/GP Ratio is 0.93 based on a stock price of $93.00. The current ratio is between the median and high of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable but above the median.

I get a 10 year median Price/Book Value per Share Ratio of 1.59. The current P/B Ratio is 1.75 based on a Book Value $64,750M, Book Value per Share of $53.28 and a stock price of $93.00. The current ratio is 10% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.

There are analysts estimate for the Book Value per Share for 2022. That estimate is a Book Value per Share of $57.80, Book Value of $70,247M. With a stock price of $93.00, you get a P/B Ratio of 1.61. This ratio is 1% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.

I cannot do a Price/Cash Flow per Share Ratio test as the Cash Flow for 2021 was negative and there are no estimates for 2022.

I get an historical median dividend yield of 4.17%. The current dividend yield is 4.30% based on dividends of $4.00 and a stock price of $93.00. The current dividend yield is 3% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable and below the median.

I get an historical median dividend yield of 4.73%. The current dividend yield is 4.30% based on dividends of $4.00 and a stock price of $93.00. The current dividend yield is 2% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable but above the median.

The 10 year median Price/Sales (Revenue) Ratio is 3.08. The current P/S Ratio is 3.50 based on Revenue estimate for 2022 of $32,307M, Revenue per Share of $26.58 and a stock price of $93.00. The current P/S Ratio is 14% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.

Results of stock price testing is that the stock price is probably reasonable. It is not cheap. The dividend testing put the price as reasonable and above and below the median. The P/S Ratio test says the stock price is reasonable, but above the median. All the other tests say the price is reasonable and above the median.

I look at the total return over a number of years. For P/S Ratio and P/E Ratio, the lower the ratio the cheaper the stock. For yield, the higher the yield, the cheaper the stock. In the chart below, it would seem that the current P/S Ratio is high for good future returns. The P/E and dividend yield would seem to be at a reasonable level

In the following chart the capital gains for the 10 years to December 31, 2021 is 5.83% per year. The beginning yield was at 3.90%, and the P/E Ratio and the P/S Ratio were at 11.00 and 3.52. Does this chart change my opinion of the stock price? You have to worry about the rather high P/S Ratio.

# Years Cap Gains Beg P/E Beg P/S Beg Yield
5 3.68% 12.96 3.30 4.00%
10 5.83% 11.00 3.52 3.90%
15 3.68% 14.68 4.51 2.99%
20 6.70% 12.09 2.50 2.83%
25 8.57% 11.24 2.01 3.08%
30 9.81% 7.70 1.31 5.06%
35 9.37% 4.21%
36 9.37% 5.04%
current 11.25 3.50 4.30%

Analysts on Stock Chase seem to like this bank although they admit it has been lagging other Canadian banks. Jed Lloren on Motley Fool says his top choice for a Canadian bank is BNS. Christopher Liew on Motley Fool likes this bank for consistency of its dividends. BNS reports on their fourth quarterly results on Cision. A Simply Wall Street report on Yahoo Finance talks about insider buying at this bank.

Bank of Nova Scotia is a global financial services provider. The bank has five business segments: Canadian banking, international banking, global wealth management, global banking, and markets, and other. The bank's international operations span numerous countries and are more concentrated in Central and South America. Its web site is here Bank of Nova Scotia.

The last stock I wrote about was about was Toronto Dominion Bank (TSX-TD, NYSE-TD) ... learn more. The next stock I will write about will be National Bank of Canada (TSX-NA, OTC-NTIOF) ... learn more on Wednesday, January 19, 2022 around 5 pm. Tomorrow on my other blog I will write about Best Canadian Banks.... learn more on Tuesday, January 18, 2022 around 5 pm.

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. I have three blogs. The first talks only about specific stocks and is called Investment Talk. The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter or StockTwits. I am on Instagram. Or you can just Google #walktoronto spbrunner8166 to see my pictures.

Friday, January 14, 2022

Toronto Dominion Bank

Sound bite for Twitter and StockTwits is: Dividend Growth Bank. I think that the stock price is currently on the expensive side. Both the Dividend Payout Ratios and Debt Ratios seem fine. I have done well on this stock. Analysts do list this as a buy, but expect little in the way of capital gain over the next year. See my spreadsheet on Toronto Dominion Bank.

Is it a good company at a reasonable price? I still like this bank as I do all Canadian Banks. However, I do not think that they will perform as well in the future as they had in the past. In the past they have taken over other sectors in Canada of trust companies, brokerage companies and also into insurance. They are now expending into foreign banks. I do think the banks will be fine, but this expansion will not be as profitable as their past expansions in Canada. I current think this stock is on the expensive side.

When I look at analysts’ recommendations, I find Strong Buy (4), Buy (4), Hold (5) and Underperform (1). The consensus would be a Buy. The 12 month stock price is $104.66. This implies a total return of 5.75% with 2.27% from capital gains and 3.48% from dividends based on a stock price of $102.34.

I looked at the TD site for their analysts’ rating and they have only three ratings and they are Buy (6), Hold (4) and Sell (1). The consensus is a Buy with a consensus 12 month stock price of $105.25. So, this is not much different than above.

When I look at analysts’ recommendations last year, I found Strong Buy (2), Buy (2), Hold (8), and Underperform (3). The consensus would be a Hold. The 12 month stock price consensus would be $74.43. This implies a total return of 4.70% with 0.43% from capital gains and 4.26% from dividends. Analysts overall do not seem to expect much movement in price. What happened was a total return of 42.35% with 38.09% from capital gains and 4.26% from dividends. Last year I said that I thought the stock price was reasonable.

I own this stock of Toronto Dominion Bank (TSX-TD, NYSE-TD). This stock, as all banks, was on Mike Higgs' Canadian Dividend Growth Stock list and the other dividend lists that I followed. On my investment in this bank, I have made a total return of 13.94% per year with 10.18% from capital gains and 3.76% from dividends.

For the shares I bought in 2000, 21 years ago, I am earning dividend yield on my original investment of 19.27%. My original yield is 2.34%. For the share I bought in 2009, some 12 years ago, I am earing a dividend yield on my original investment of 14.51%. My original yield was 5.12%.

However, dividend increases are currently lower than when I bought shares. So, if you bought shares today, with the lower increase currently at 7.91%, in 12 years your yield would potentially be 8.67% and in 21 years, your yield would potentially be 17.19%. The current dividend yield is 3.48%. Although as for all banks, yields will probably vary over time.

My Yield Org Yield Yrs. Curr Yld Future IRR
14.51% 5.12% 12 3.48% 8.67% 7.91%
19.27% 2.34% 21 3.48% 17.19% 7.91%

When I was updating my spreadsheet, I noticed both Revenue and EPS were higher than analysts though they would be in 2021. Analysts estimates for Revenue was 39,261but revenue came in as $42,562. Analyst estimate for EPS was $5.76, but EPS came in at 7.72.

I have two calculations on investing at around $1,000 and what would stock be worth today:
  • If you had invested in TD Bank in December 1976, $1,000.40 you would have bought 1220 Shares. In December 2021, after 44 years you would have received $45,362.47 in dividends. The stock would be worth $118,315.60. Your total return would have been $163,678.07.
  • If you had invested in TD Bank in December, 1988 $1,001.25 you would have bought 225 Shares. In December 2021, after 32 years you would have received $8,153.44 in dividends. The stock would be worth $21,820.50. Your total return would have been $29,973.94.
Cost Tot. Cost Shares Years Dividends Stock Val Tot Ret
$0.82 $1,000.40 1220 44 $45,362.47 $118,315.60 $163,678.07
$4.45 $1,001.25 225 32 $8,153.44 $21,820.50 $29,973.94

The dividend yields are moderate with dividend growth low. The current dividend yield is moderate (2% to 4% ranges) at 3.48%. The 5, 10 and historical dividend yields are also moderate at 4.03%, 3.76% and 3.52%. The dividend growth for the last 5 years is at 7.91% per year. The last dividend increase was at the end of 2021 and it was for 12.7%. However, the bank went a year without any dividend increases.

The Dividend Payout Ratios (DPR) are fine. The DPR for EPS for 2021 is 41% with 5 year coverage at 44%. The DPR for Cash Flow per Share for 2021 is 11.5% with 5 year coverage at 8%. The DPR for Free Cash Flow for 2021 is 11% with 5 year coverage at 8%. There is disagreement on what the FCF is, but values are close.

Debt Ratios are fine. Because this is a bank, I am looking at Deb/Covering Assets Ratio, which for 2021 is 0.69. This is good. I do calculate a Liquidity Ratio but this is not important for banks. The ratio for 2021 is 3.67. The Debt Ratio, which is important, is 1.06 and this is fine for a bank.

The Total Return per year is shown below for years of 5 to 46 to the end of 2021. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See chart below.

From Years Div. Gth Tot Ret Cap Gain Div.
2016 5 7.91% 11.57% 7.93% 3.64%
2011 10 9.25% 13.65% 9.78% 3.87%
2006 15 8.81% 10.28% 7.06% 3.22%
2001 20 9.19% 11.36% 8.07% 3.29%
1996 25 10.68% 14.00% 10.07% 3.93%
1991 30 9.82% 14.87% 10.73% 4.14%
1986 35 10.22% 14.58% 10.50% 4.07%
1981 40 10.07% 16.33% 11.32% 5.01%
1976 45 10.94% 15.98% 11.19% 4.79%
1975 46 10.72% 15.50% 10.99% 4.50%

The 5 year low, median, and high median Price/Earnings per Share Ratios are 10.50, 11.47 and 12.44. The corresponding 10 year ratios are 10.68, 11.93 and 13.15. The corresponding historical ratios are 10.50, 11.76 and 13.03. The current P/E Ratio is 12.99 based on a stock price of $102.34 and EPS estimate for 2022 of $7.88. The current P/E Ratio is between the median and high of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable but above the median.

I get a Graham Price of $95.65. The 10 year low, median, and high median Price/Graham Price Ratios are 0.84, 0.92 and 1.01. The current P/GP Ratio is 1.07 based on a stock price of $102.34. The current ratio is above the 10 year high ratio. This stock price testing suggests that the stock price is expensive.

I get a 10 year median Price/Book Value per Share Ratio of 1.59. The current P/B Ratio is 1.98 based on a stock price of $102.34, Book Value of $94,118M and Book Value per Share of $51.60. The current ratio is 25% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.

I get a 10 year median Price/Cash Flow per Share Ratio of 3.16. The current P/CF ratio 3.27 based on a stock price of $102.34, Cash Flow for the last 12 months of $50,129M and Cash Flow per Share of $27.48. The current ratio is 3% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.

I get an historical median dividend yield of 3.52%. The current dividend yield is 3.48% based on a stock price of $102.34 and Dividends of $3.56. The current yield is 1% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable but above the median.

I get a 10 year median dividend yield of 3.76%. The current dividend yield is 3.48% based on a stock price of $102.34 and Dividends of $3.56. The current yield is 8% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable but above the median.

The 10 year median Price/Sales (Revenue) Ratio is 3.16. The current P/S Ratio is 4.45 based on Revenue estimate for 2022 of $41,937 and a stock price of $102.34. The current ratio is 41% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.

Results of stock price testing is that the stock price is probably expensive. The dividend yield testing shows the stock price as reasonable but above the median. However, this is not confirmed by the P/S Ratio test which says the stock price is expensive. All the other testing says the stock price is above the median or expensive.

I look at the total return over a number of years. For P/S Ratio and P/E Ratio, the lower the ratio the cheaper the stock. For yield, the higher the yield, the cheaper the stock. In the chart below you can see that the current P/S Ratio looks on the high side. The P/E Ratio looks high against a number of past years. The dividend yield is sort of in the middle of the pack.

In the following chart the capital gains for the 10 years to December 31, 2021 is 9.78% per year. The beginning yield was at 3.47%, and the P/E Ratio and the P/S Ratio were at 11.90 and 3.14. Does this chart change my opinion of the stock price? Not really as the P/S Ratio looks high against other years.

# Years Cap Gains Beg P/E Beg P/S Beg Yield
5 7.93% 14.18 3.29 3.55%
10 9.78% 11.90 3.14 3.47%
15 7.06% 11.00 3.56 2.73%
20 8.07% 20.04 2.12 3.03%
25 10.07% 11.93 2.34 3.19%
30 10.73% 12.16 2.33 4.11%
35 10.50% 8.58 2.51%
40 11.32% 4.53 4.61%
45 11.19%
50 10.99%
current 12.99 3.85 3.48%

All the recent analysts’ recommendations on Stock Chase are a buy. Nicholas Dobroruka on Motley Fool says this stock is on his watch list. Karen Thomas on Motley Fool says the TD Bank is a best-in-class bank stock. The bank talks about their fourth quarterly results on Newswire. In a Bloomberg article, Chief Executive Officer Bharat Masrani said additional share repurchases would be a possible use of the lender’s excess capital if it doesn’t deploy those funds in a major acquisition. A Simply Wall Street article on Yahoo Finance talks about dividends from this bank. Sometimes this US site mistake dividend cuts and currency exchange. Dividends are in CDN$ so if you are in the US dividends can be more volatile when exchanged into US$. I have 46 years of data on this bank and they never cut the dividends once in that time.

Toronto-Dominion is one of Canada's two largest banks and operates three business segments: Canadian retail banking, U.S. retail banking, and wholesale banking. The bank's U.S. operations span from Maine to Florida, with a strong presence in the Northeast. It also has a 42% ownership stake in TD Ameritrade, a discount brokerage. Its web site is here Toronto Dominion Bank.

The last stock I wrote about was about was Calian Group Ltd (TSX-CGY, OTC-CLNFF) ... learn more. The next stock I will write about will be Bank of Nova Scotia (TSX-BNS, NYSE-BNS) ... learn more on Monday, January 17, 2022 around 5 pm.

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. I have three blogs. The first talks only about specific stocks and is called Investment Talk. The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter or StockTwits. I am on Instagram. Or you can just Google #walktoronto spbrunner8166 to see my pictures.

Wednesday, January 12, 2022

Calian Group Ltd

Sound bite for Twitter and StockTwits is: Dividend Paying Tech. I think that the current stock price is relatively expensive. I have done well with this stock as far as capital gains go. The stock price took off in 2018 and hit a high in October 2020 of $69.10 that it has never got back to. Debt Ratios are good. Dividend Payout Ratio needs improving. See my spreadsheet on Calian Group Ltd.

Is it a good company at a reasonable price? I have done well with this small cap growing company. I would like it better to see dividends increased, but they are putting their money into growing the company. I have no plans to sell this company. However, I think that the current stock price is relatively expensive.

I own this stock of Calian Group Ltd (TSX-CGY, OTC-CLNFF). This is an interesting company with a very nice dividend. This stock came up on a Globe Investor site. The Globe Investor Number Cruncher is an investment column about screening for stocks and funds. They did one on companies with little to no debt. I also noted that the Financial Blogger has this stock on his Top Ten Canadian Dividend Stocks list.

I have had this stock for 10 years and I have made 17.88% per year with 13.98% from capital gains and 3.90% from dividends. My current dividend yield is 6.19% on my original purchase. However, I bought the stock before they stopped raising dividends. Currently there are no sign that dividends will be raised anytime soon, so going forward the dividend yield is probably going down.

When I was updating my spreadsheet, I noticed EPS fell due to payout agreements on past acquisitions. This is due to the way that acquisitions payments are structured. I looked at differences in Net Profit statements because EPS fell some 52%. Analysts did expect a drop in EPS, but only of some 7%. They also report an adjusted Net Income and EPS which excludes acquisition costs. TD WebBroker follows this Adjusted EPS. Over the past 5 year Adjusted EPS has grown 13% per year.

If you bought shares in this company in December 1994, 26 years ago for $1,001.00 (approximately $1,000) by December 2021 you would have received $4,040.40 in dividends and your stock would be worth $16,000.40 for a total of $20,040.80.

Cost Tot. Cost Shares Years Dividends Stock Val Tot Ret
$3.85 $1,001.00 260 26 $4,040.40 $16,000.40 $20,040.80

The dividend yields are low with dividend growth non-existent. The current yield is low (below 2%) at 1.99%. The 5, 10 and historical dividend yields are moderate (2% to 4% ranges) at 3.49%, 4.88% and 4.28%. The last dividend increase was in 2013. Before 2013 they consistently raised their dividends at an average rate of 21% per year. There is always a trade-off between paying dividends and re-investing back into the company.

The Dividend Payout Ratios (DPR) need improving and should decline with the flat dividend. The DPR for EPS for 2021 is 105% with 5 year coverage at 56%. The DPR for Cash Flow per Share for 2021 is 23% with 5 year coverage at 30%. The DPR for Free Cash Flow for 2021 is 30% with 5 year coverage at 70%. Sites do not agree on FCF, but there is not much difference.

Debt Ratios are good. The Long Term Debt/Market Cap Ratio for 2021 is 0.02. The Liquidity Ratio for 2021 is 2.16. The Debt Ratio for 2021 is 2.77. The Leverage and Debt/Equity Ratios for 2021 are 1.57 and 0.57.

The Total Return per year is shown below for years of 5 to 28 to the end of 2021. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See chart below.

From Years Div. Gth Tot Ret Cap Gain Div.
2016 5 0.00% 23.51% 20.21% 3.44%
2011 10 1.45% 17.51% 13.48% 3.90%
2006 15 8.49% 15.78% 11.15% 4.60%
2001 20 11.04% 25.79% 17.37% 7.45%
1996 25 15.51% 12.15% 2.96%
1993 28 10.12% 8.14% 2.26%

The 5 year low, median, and high median Price/Earnings per Share Ratios are 14.20, 15.49 and 16.78. The corresponding 10 year ratios are 11.96, 13.12 and 14.22. The corresponding historical ratios are 9.96, 11.35 and 13.39. The current P/E Ratio is 30.80 based on a stock price of $56.37 and EPS estimate of $1.83. The current P/E Ratio is above the 10 years median high. This stock price testing suggests that the stock price is expensive.

If you look at adjusted EPS P/E Ratios, the 5 year low, median, and high median Price/Earnings per Share Ratios are 13.07, 14.25, and 15.44. The corresponding 6 year Adjusted P/E Ratios are 12.36, 13.64 and 15.12. The current Adjust P/E Ratio is 15.49 based on an Adjusted EPS for 2022 of $3.64 and a stock price of $56.37. The current P/E Ratio is above the 6 years median high. This stock price testing suggests that the stock price is expensive. However, the current Adjusted P/E and the 6 year Adjusted P/E Ratio are much closer than in the test above. Also, a P/E Ratio of 15.49 is not a high ratio for P/E.

I get a Graham Price of $32.66. The 10 year low, median, and high median Price/Graham Price Ratios are 1.00, 1.08 and 1.21. The current P/GP Ratio is 1.73 based on a stock price of $56.37. The current ratio is above the 10 year median high ratio. This stock price testing suggests that the stock price is relatively expensive.

I get a 10 year median Price/Book Value per Share Ratio of 2.20. The current P/B Ratio is 2.18 based on a Book Value of $292M, Book Value per Share of $25.91 and a stock price of $56.37. The current ratio is 1% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.

I get a 10 year median Price/Cash Flow per Share Ratio of 10.76. The current P/CF Ratio is 14.79 based on Cash Flow for last 12 months of $46.54M, Cash Flow per Share of $18.35 and a stock price of $56.37. The current Ratio is 37% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.

I get an historical median dividend yield of 4.28%. The current dividend yield is 1.99% based on dividends of $1.12 and a stock price of $56.37. The current dividend yield is 54% below the historical dividend yield. This stock price testing suggests that the stock price is relatively expensive.

I get an historical median dividend yield of 4.88%. The current dividend yield is 1.99% based on dividends of $1.12 and a stock price of $56.37. The current dividend yield is 59% below the historical dividend yield. This stock price testing suggests that the stock price is relatively expensive.

The 10 year median Price/Sales (Revenue) Ratio is 0.69. The current P/S Ratio is 1.12 based on Revenue estimate for 2022 of $567M, Revenue per Share of $50.24 and a stock price of $56.37. The current ratio is 62% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.

Results of stock price testing is that the stock price is probably expensive. This is mainly based on the P/S Ratio test. All the tests are pointing to this except for the P/B Ratio testing. The dividend yield tests are not helpful because the dividends have been flat for a long time.

When I look at analysts’ recommendations, I find Strong Buy (3) and Buy (3). The consensus would be a strong Buy. The 12 month stock price is $78.13. This implies a total return of 40.59% with 38.60% from capital gains and 1.99% from dividends.

When I looked at analysts’ recommendations last year, I found Strong Buy (3) and Buy (4). The consensus was be a Strong Buy. The 12 month stock price consensus is $74.29. This implies a total return of 16.73% with 15% from capital gains and 1.73% from dividends based on a stock price of $64.60. What happened was a capital loss of 11.01% with 12.74% from capital losses and 1.73% from dividends. Analysts were way off what would happen. Last year I thought the stock price was relatively expensive.

There are no recent entries on Stock Chase for this company. Robin Brown on Motley Fool thinks this stock is an interesting growth-at-a-reasonable-price (GARP) stock pick. He admits it is not well followed, but thinks that opens up opportunities for investors. Adam Othman on Motley Fool thinks the company is currently overvalued, but it is a company worthwhile to have on a watchlist. The company announces on their site their fourth quarterly results. A Simply Wall Street report on this stock on Yahoo Finance thinks that investors are more interest in their revenue growth than their earnings growth. Their risks list that dividends not well covered, a large one-off item impacting financial reports, that profit margins lower than last year and shareholders have been diluted in the past year.

Calian Group Ltd operates through four segments namely Advanced Technologies, Health, Learning, and Information Technology. It generates maximum revenue from the Health segment. Its web site is here Calian Group Ltd.

The last stock I wrote about was about was Rogers Sugar Inc (TSX-RSI, OTC-RSGUF) ... learn more. The next stock I will write about will be Toronto Dominion Bank (TSX-TD, NYSE-TD) ... learn more on Friday, January 14, 2022 around 5 pm. Tomorrow on my other blog I will write about Good News from 2021.... learn more on Thursday, January 13, 2022 around 5 pm.

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. I have three blogs. The first talks only about specific stocks and is called Investment Talk. The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter or StockTwits. I am on Instagram. Or you can just Google #walktoronto spbrunner8166 to see my pictures.

Monday, January 10, 2022

Rogers Sugar Inc

Sound bite for Twitter and StockTwits is: Dividend Paying Consumer. I think that the stock price is reasonable. However, you would not buy this for capital gains, but because you can earn a good return on your money with a dividend yield of 6.04%. The Dividend Paying Ratios need improving and they probably will. See my spreadsheet on Rogers Sugar Inc.

Is it a good company at a reasonable price? This could be a good investment if you want a rather stable company with a very good yield. Going forward, most of your total return will be in dividends, but the dividends will be lower than in the past because this company is no longer a income trust.

I do not own this stock of Rogers Sugar Inc (TSX-RSI, OTC-RSGUF). This stock was brought to my attention by Dividend Ninja. This company used to be an Income Trust (TSX-RSI.UN) but it has been converted to a corporation. On its change to a corporation, it lowered its dividend.

When I was updating my spreadsheet, I noticed this stock pays a good dividend (5% to 6% ranges) with a current yield of 6.05%. Some investors like high dividend paying stocks. The current dividend is $0.36 per share. If you hold this stock for 15 years, you could collect $4.68 per share in dividends. If your stock purchase price was $5.95, your dividends to date would cover some 79% of the cost of your stock. See chart below.

Total Div Years At IRR Div Inc
$1.80 5 0.00% 30.25%
$3.24 10 0.00% 54.45%
$4.68 15 0.00% 78.66%

If you bought this stock at the beginning, December 31, 1998, the cost per share would have been $8.20. For $1,000.40 (approximately $1,000) you could have bought 122 Shares. By December 31, 2021 some 23 years later, your stock would be worth $725.90 and you would have collected $1,129.81 in Dividends. Your Total Return would be $1,855.71.

Cost Tot. Cost Shares Years Dividends Stock Val Tot Ret
$8.20 $1,000.40 122 22 $1,129.81 $725.90 $1,855.71

If you bought this one year later on December 31, 1999, the cost per share would have been $5.20. For $1003.60 (approximately $1,000) you could have bought 193 Shares. By December 31, 2021, some 22 years later, your stock would be worth $1,148.35 and you would have collected $1,787.32 in Dividends. Your Total Return would be $2,935.67. As you can see from the Total Return chart below, most of your return is in dividends.

Cost Tot. Cost Shares Years Dividends Stock Val Tot Ret
$5.20 $1,003.60 193 21 $1,787.32 $1,148.35 $2,935.67

The dividend yields are good with dividend growth non-existent. The current dividend yield is good (5% - 6% ranges) at 6.05%. The 5 and 10 year dividend yields are also good at 6.32% and 6.51%. The historical median dividend yield is high (7% and over) at 9.01%. This stock used to be an income trust, so it had high dividend yields. Dividends were decreased in 2011 and they have been flat ever since.

The Dividend Payout Ratios (DPR) need improving. The DPR for EPS for 2021 is 82% with 5 year coverage at 133%. This has been high in the past but analysts expect the DPR for EPS to be lower in the future. The DPR for Cash Flow per Share for 2021 if 32% with 5 year coverage at 42%. It is best if the DPR for CFPS if 40% or less. This DPR has often been too high. The DPR for Free Cash Flow for 2021 is 69% with 5 year coverage at 99.5%. The DPR for FCF is also too high. However, there is considerable disagreement on what the FCF is, but in any case, it is also too high.

Debt Ratios are fine. The Long Term Debt/Market Cap is low and good at 0.18. The Liquidity Ratio is high and good at 2.33. The Debt Ratio is normal and good at 1.57. The Leverage and Debt/Equity Ratios are fine at 2.76 and 1.79.

The Total Return per year is shown below for years of 5 to 24 to the end of 2021. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See chart below.

From Years Div. Gth Tot Ret Cap Gain Div.
2016 5 0.00% 2.90% -2.66% 5.57%
2011 10 1.08% 8.57% 1.24% 7.33%
2006 15 -0.74% 12.95% 3.26% 9.70%
2001 20 -2.36% 10.57% 1.64% 8.93%
1997 24 -2.84% 7.19% -0.67% 7.86%

The 5 year low, median, and high median Price/Earnings per Share Ratios are 11.38, 13.72 and 15.19. The corresponding 10 year ratios are 13.08, 14.70 and 16.46. The corresponding historical ratios are 10.62, 11.62 and 12.62. The current P/E Ratio is 14.51 based on a stock price of $5.95 and EPS estimate for 2022 of $0.41. The current ratio is between the low and median ratios of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable and below the median.

I get a Graham Price of $5.28. The 10 year low, median, and high median Price/Graham Price Ratios are 1.02, 1.16 and 1.30. The current P/GP Ratio is 1.13 based on a stock price of $5.95. The current ratio is between the low and median ratios of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable and below the median.

I get a 10 year median Price/Book Value per Share Ratio of 1.90. The current P/B Ratio is 1.97 based on a Book Value of $313.87, Book Value per Share of $3.03 and a stock price of $5.95. The current ratio is 3% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.

I get a 10 year median Price/Cash Flow per Share Ratio of 11.07. The current P/CF Ratio is 7.85 based on Cash Flow for the last 12 months of $78.6M, Cash Flow per Share of $0.76 and a stock price of $5.95. The current ratio is 29% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.

I get an historical median dividend yield of 9.01%. The current dividend yield is 6.05% based on a stock price of $5.95 and dividends of $0.36. The current dividend yield is 33% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively expensive.

I get a 10 year median dividend yield of 6.51%. The current dividend yield is 6.05% based on a stock price of $5.95 and dividends of $0.36. The current dividend yield is 7% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable but above the median.

The 10 year median Price/Sales (Revenue) Ratio is 0.83. The current P/S Ratio is 0.66 based on Revenue estimate for $931M, Revenue per share of $8.98 and a stock price of $5.95. The current ratio is 20.1% below the 10 median ratio. This stock price testing suggests that the stock price is relatively cheap.

Results of stock price testing is that the stock price is probably reasonable. The P/S Ratio test says it is cheap and the 10 year dividend test says it is reasonable but above the median. There are problems in dividend yield testing because this company used to be an income trust which had very high yields. Also, the dividends have been flat for almost 10 years. Both these conditions are not good for a valid test. None of the other tests say the stock is expensive.

I look at the total return over a number of years. For P/S Ratio and P/E Ratio, the lower the ratio the cheaper the stock. For yield, the higher the yield, the cheaper the stock. In the chart below you can see that the beginning P/S Ratios is lower than at other times. Also, the beginning yield is fairly high at 6.05%.

In the following chart the capital gains for the 10 years to December 31, 2021 is 1.24% per year. The beginning yield was at 6.34%, and the P/E Ratio and the P/S Ratio were at 11.69 and 0.74. Does this chart change my opinion of the stock price? Not really, as there are problems with the dividend yield testing and the P/S Ratio is relatively low.

# Years Cap Gains Beg P/E Beg P/S Beg Yield
5 -2.66% 10.64 1.11 5.39%
10 1.24% 11.69 0.74 6.34%
15 3.26% 8.98 0.73 9.17%
20 1.64% -143.33 0.94 13.81%
current 14.51 0.66 6.05%

When I look at analysts’ recommendations, I find Hold (5) recommendations. The consensus would be a hold. The target price is $6.01. This implies a total return of 7.06% with 1.01% from capital gains and 6.05% from dividends based on a stock price of $5.95.

Last year when I look at analysts’ recommendations, I found Buy (1) and Hold (4). The consensus would be a Hold. The 12 month stock price is $5.60. This implies a total return of 6.24% with a capital loss of 0.18% and dividends of 6.42% based on a stock price of $5.61. What happened was the stock price moved to $5.95 in one year which resulted in a total return of 12.48% with 6.06% from capital gains and 6.42% from dividends based on a starting stock price of $5.61. Last year I thought that the stock price was reasonable.

Analysts on Stock Chase thinks it is a safe stock, but they do not recommend it. Christopher Liew on Motley Fool says it is a stable company with a good dividend. Adam Othman on Motley Fool thinks this is a buy for passive income. The company reports on Globe Newswire their fourth quarterly results. A report from Simply Wall Street on Yahoo Finance talks about this company’s debt and its ROE.

Rogers Sugar Inc is a Canada based sugar producing company. It operates in the following reportable segments: Sugar and Maple products, of which the majority of the revenue comes from sugar products. Its geographical segments include Canada, which is the key revenue generator; the United States; Europe; and others. Its web site is here Rogers Sugar Inc.

The last stock I wrote about was about was Royal Bank of Canada (TSX-RY, NYSE-RY) ... learn more. The next stock I will write about will be Calian Group Ltd (TSX-CGY, OTC-CLNFF) ... learn more on Wednesday, January 12, 2022 around 5 pm. Tomorrow on my other blog I will write about Retirement Etc..... learn more on Tuesday, January 11, 2022 around 5 pm.

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. I have three blogs. The first talks only about specific stocks and is called Investment Talk. The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter or StockTwits. I am on Instagram. Or you can just Google #walktoronto spbrunner8166 to see my pictures.

Friday, January 7, 2022

Royal Bank of Canada

Sound bite for Twitter and StockTwits is: Dividend Growth Bank. Stock price may still be reasonable, but at the top of the reasonable ranges. This banks has been a great investment in the past for shareholders. See my spreadsheet on Royal Bank of Canada.

Is it a good company at a reasonable price? I do think that this is a good bank to invest in. Although you have to wonder if profits will be as good as this bank expands into the USA. US banks have not done as well as Canadian banks in the past and their share prices have been more volatile. The current stock price could be high. Analysts seem also to think so because of the lower return expected over the next year.

I own this stock of Royal Bank of Canada (TSX-RY, NYSE-RY). At the time I bought this stock it was on Mike Higgs' list of Canadian Dividend Growth Stocks and on the dividend lists I followed as were all the banks. I bought this stock in 1995, some 27 years ago. My total return to December 31, 2021 is 17.34% per year with 11.78% from capital gains and 5.56% from dividends.

I have a 66% dividend yield on my original investment bought 27 years ago in 1995. This is just one way of looking at an investment. If you buy this stock today and keep it for 10 years and dividend increases as it has done in the past 5 years at 6.60% per year, then in 10 years you could be getting a dividend yield of 6.51%. See chart below.

Div Yd Years At IRR Div Inc
4.73% 5 6.60% 37.65%
6.51% 10 6.60% 89.47%
8.97% 15 6.60% 160.80%

When I was updating my spreadsheet, I noticed that this time last year, analysts expect this bank to have revenue of $45,560M and EPS of $8.61 for 2021. These both came in much better with Revenue at $49,579 and EPS of $11.10.

For this stock, if you had paid $1,000 to buy shares in December 1988, you would have received 211.86 shares. These shares, after 33 years would be worth $28,445.55 and you would have received $11,290.55 in dividends. The total amount you would have received is $39,734.10.

The dividend yields are moderate with dividend growth low. The current dividend yield is moderate (2% to 4% ranges) at 3.44%. The 5, 10 and historical dividend yields are also moderate at 3.82%, 3.93% and 3.95%. The dividends increases are current low (under 8%) with dividend increases over the past 5 years at 6.6% per year. The last dividend increase was in 2021 and it was for 11%. Generally, in the past, this bank has raised the dividend twice within a financial year. However, there were no increases in the 2021 financial year.

The Dividend Payout Ratios (DPR) are fine. The DPR for EPS for 2021 was 39% with 5 year coverage at 45%. The DPR for Cash Flow per Share for 2021 was 32% with 5 year coverage at 39%. The DPR for Free Cash Flow for 2021 was 11% with 5 year coverage also at 11%. However, there is a big disagreement between sites on what the FCF is. However, under both values, the DPR seems fine.

Debt Ratios are fine. Because this is a bank, I am looking at Debt/Covering Assets Ratio for 2021, which is 0.73 and it is a good one. The Liquidity Ratio I calculate is 7.98, but this ratio is not important for banks. The Debt Ratio is 1.06. For this, any value at 1.04 or higher is fine, although this ratio has been higher on banks since 2008.

The Total Return per year is shown below for years of 5 to 38 to the end of 2021. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See chart below.

From Years Div. Gth Tot Ret Cap Gain Div.
2016 5 6.60% 11.81% 8.12% 3.70%
2011 10 7.46% 14.09% 9.95% 4.14%
2006 15 6.90% 9.34% 6.07% 3.27%
2001 20 9.51% 12.51% 8.68% 3.83%
1996 25 10.57% 14.44% 10.22% 4.22%
1991 30 9.71% 14.66% 10.47% 4.19%
1986 35 8.70% 15.11% 10.54% 4.56%
1983 38 8.01% 13.40% 9.48% 3.92%

The 5 year low, median, and high median Price/Earnings per Share Ratios are 10.31, 11.61, and 12.92. The corresponding 10 year ratios are 10.15, 11.39 and 12.57. The corresponding historical ratios are 10.05, 11.61 and 13.51. The current P/E ratio is 12.58 based on a stock price of $139.60 and EPS estimate for 2022 of $11.10. The current ratio is just above the high of the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but at the top of the range.

I get a Graham Price of $127.63. The 10 year low, median, and high median Price/Graham Price Ratios are 0.88, 0.98 and 1.09. The current ratio is 1.09 based on a stock price of $139.60. The current ratio is at the high of the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but at the top of the range.

I get a 10 year median Price/Book Value per Share Ratio of 1.91. The current P/B Ratio is 2.14 based on a Book Value of $98,600, Book Value per Share of $65.22 and a stock price of $139.60. The current ratio is 12% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.

I get a 10 year median Price/Book Value per Share Ratio of 1.91. The current P/B Ratio also could be 2.02 based on a stock price of $139.60, Book Value per Share estimate for 2022 of $69.10 and Book Value of $98,480M. The current ratio is 6% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.

I get a 10 year median Price/Cash Flow per Share Ratio of 4.37. The current P/CF Ratio is 3.26 based on Cash Flow for the last 12 months of $61,044M, Cash Flow per Share of $42.83 and a stock price of $139.60. The current ratio is 25% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.

I get an historical median dividend yield of 3.95%. The current dividend yield is 3.44% based on dividends of $4.80 and a stock price of $139.60. The current dividend yield is 13% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable but above the median.

I get a 10 year median dividend yield of 3.93%. The current dividend yield is 3.44% based on dividends of $4.80 and a stock price of $139.60. The current dividend yield is 13% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable but above the median.

The 10 year median Price/Sales (Revenue) Ratio is 3.12. The current P/S Ratio is 4.01 based on a stock price of $139.60, Revenue estimate for 2022 of $49,578M and Revenue per Share of $34.79. The current ratio is 29% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.

Results of stock price testing is that the stock price is? First of all, it is not cheap. It might be reasonable based on the dividend yield tests, but the P/S Ratio test does not confirm this and says the stock price is expensive.

I look at the total return over a number of years. For P/S Ratio and P/E Ratio, the lower the ratio the cheaper the stock. For yield, the higher the yield, the cheaper the stock. In the chart below, you can see that beginning P/E Ratios are above and below the current one for good returns. For the best returns, they are below the current ratio. The current P/S Ratio is higher than all the other beginning P/S Ratios. The dividend yield is still below some past good returns.

In the following chart the capital gains for the 10 years to December 31, 2021 is 9.95% per year. The beginning yield was at 4.28%, and the P/E Ratio and the P/S Ratio were at 16.29 and 2.87. Does this chart change my opinion of the stock price? Not really as the current P/S Ratio is higher than all the others on the chart. This could be pointing to a rather high current stock price.

# Years Cap Gains Beg P/E Beg P/S Beg Yield
5 8.12% 13.40 2.89 3.82%
10 9.95% 16.29 2.79 4.28%
15 6.07% 15.46 2.87 2.70%
20 8.68% 14.44 1.99 2.95%
25 10.22% 11.53 1.46 3.02%
30 10.47% 9.27 1.23 4.30%
35 10.54% 8.74 0.91 6.01%
38 13.40% 11.47 1.09 6.30%
current 12.58 3.74 3.44%

When I look at analysts’ recommendations, I find Strong Buy (5), Buy (6), Hold (3) and Underperform (1). The consensus would be a Buy. The 12 month stock price consensus is $144.63. This implies a total return of 7.04% with 3.60% from capital gains and 3.44% from dividends. The rather low return expected matches with the rather high current P/S Ratio.

Some analysts think on Stock Chase that you should buy but others worry about the economy and the beginning of a tightening cycle (that is increasing interest rates). Vishesh Raisinghani on Motley Fool thinks that every though it has had a good bull run in 2021, it is still a relatively attractive buy. Andrew Button on Motley Fool thinks this bank is cheap and will post solid growth. The bank talks about their fourth quarterly results on Newswire. A Simply Wall Street report on Yahoo Finance talks about payout ratios. The problem I see is that there is a big difference in what sites determine is FCF. You wonder how you can trust any FCF calculation when there are such differences.

Royal Bank of Canada is one of the two largest banks in Canada. It is a diversified financial services company, offering personal and commercial banking, wealth-management services, insurance, corporate banking, and capital markets services. The bank is concentrated in Canada, with additional operations in the U.S. and other countries. Its web site is here Royal Bank of Canada.

The last stock I wrote about was about was Bank of Montreal (TSX-BMO, NYSE-BMO) ... learn more. The next stock I will write about will be Rogers Sugar Inc (TSX-RSI, OTC-RSGUF) ... learn more on Monday, January 10, 2022 around 5 pm.

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. I have three blogs. The first talks only about specific stocks and is called Investment Talk. The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter or StockTwits. I am on Instagram. Or you can just Google #walktoronto spbrunner8166 to see my pictures.

Wednesday, January 5, 2022

Bank of Montreal

Sound bite for Twitter and StockTwits is: Dividend Growth Bank. The stock price maybe reasonable, but it could also be on the expensive side. This is a dividend growth stock that has done well for its shareholders over time. There are many ways of looking at this. One is my total return after 34 years of 15.56% per year. See my spreadsheet on Bank of Montreal.

Is it a good company at a reasonable price? I think this is a great dividend growth stock. There are a number of ways of looking at this and I talk about several below. The price maybe reasonable, but could also be rather high. They also just raised the dividend by over 25% after having no increase last year.

I own this stock of Bank of Montreal (TSX-BMO, NYSE-BMO). When I bought this stock in 1983, I thought it was the best bank stock to buy at that time. I also bought some for my Locked-In Account in 2008. I have made 15.56% per year on this stock with 9.38% from capital gains and 6.18% from dividends. I bought this bank in 1982, but have been only tracking it on Quicken since 1987, which is some 34 years. As far as I am concerned, it is a keeper.

When I was updating my spreadsheet, I noticed that if the company increases the dividend at the same rate as they used per year over the past 5 years of 4.76%, then in 15 years’ time, the dividend yield on your original investment would be at 7.85%.

Div Yd Years At IRR Div Inc
4.93% 5 4.76% 26.19%
6.22% 10 4.76% 59.24%
7.85% 15 4.76% 100.95%

For this stock I looked at a scenario of if you had purchased shares in December 1988, you could have bought 142.86 for $1,000. On December 31, 2021, 33 year later, those shares would be worth $19,456.10 and you would have collected $9,501.62 of dividends. Your total return would be $28,957.72.

When I was updating my spreadsheet, I also noticed the analysts were way off on what this bank would earn in 2021. The EPS estimate for 2021 was $8.41 but the EPS came in at $11.58.

The dividend yields are moderate with dividend growth low. The current dividend yield is moderate (2% to 4% ranges) at 3.79%. The 5, 10 and historical dividend yields are also moderate at 4.10%, 4.21% and 4.46%. The dividend increases are low (below 8%) at 4.76% per year for the past 5 years. The last dividend increase is for 2022 and it is for 24.47%.

The Dividend Payout Ratios (DPR) are fine. The DPR for EPS for 2021 is 37% with 5 year coverage at 45%. The DPR for Cash Flow per Share for 2021 is 28% with 5 year coverage at 31%. The DPR for Free Cash Flow for 2021 is 7% with 5 year coverage at 9%. This is a big disagreement between sites on what the FCF is. However, all show DPR coverage at acceptable rates.

Debt Ratios are fine. Since this is a bank, I am looking at Debt/Covering Assets Ratio and for 2021 it is good at 0.86. I do calculate a Liquidity Ratio, but this is not important for banks. The ratio for 2021 is 9.56. The Debt Ratio for 2021 is 1.06. A Debt Ratio of 1.04 and above is acceptable for banks.

The Total Return per year is shown below for years of 5 to 38 to the end of 2021. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See chart below.

From Years Div. Gth Tot Ret Cap Gain Div.
2016 5 4.76% 10.67% 7.12% 3.55%
2011 10 4.24% 13.55% 9.32% 4.23%
2006 15 4.28% 8.07% 4.64% 3.43%
2001 20 6.88% 10.99% 6.89% 4.09%
1996 25 7.44% 11.84% 7.60% 4.23%
1991 30 7.18% 13.67% 8.77% 4.90%
1986 35 6.36% 13.03% 8.31% 4.73%
1983 38 5.84% 13.08% 8.17% 4.91%

The 5 year low, median, and high median Price/Earnings per Share Ratios are 9.97, 11.11 and 12.28. The corresponding 10 year ratios are 10.01, 11.12 and 12.44. The corresponding historical ratios are 10.51, 11.11 and 13.50. The current P/E Ratio is 11.15 based on a stock price of $140.54 and EPS estimate for 2021 of $12.60. The current P/E Ratio is very close to the median 10 year ratio. This stock price testing suggests that the stock price is relatively reasonable and at the median.

I get a Graham Price of $150.76. The 10 year low, median, and high median Price/Graham Price Ratios are 0.73, 0.82 and 0.92. The current P/GP Ratio is 0.93 based on a stock price of $140.54. The current ratio is just above the high of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable but above the median.

I get a 10 year median Price/Book Value per Share Ratio of 1.38. The current P/B Ratio is 1.75 based on a stock price of $140.54, Book Value of $51,965M and Book Value per Share of $80.18. The current ratio is 27% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.

I get a 10 year median Price/Book Value per Share Ratio of 1.38. The current P/B Ratio is 1.75 based on a stock price of $140.54, Book Value of $51,965M and Book Value per Share of $80.18. The current ratio is 27% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.

I get a 10 year median Price/Book Value per Share Ratio of 1.38. The current P/B Ratio also could be 1.61 based on a stock price of $140.54, Book Value per Share estimate for 2022 of $87.20 and Book Value of $56,518M. The current ratio is 27% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.

I get a 10 year median Price/Cash Flow per Share Ratio of 2.67. The current P/CF Ratio is 2.07 based on last 12 months Cash Flow of $44,049M, Cash Flow per Share of $67.96 and a stock price of $140.54. The current ratio is 23% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.

I get an historical median dividend yield of 4.46%. The current dividend yield is 3.79% based on dividends of $5.32 and a stock price of $140.54. The current dividend yield is 15% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable but above the median.

I get a 10 year median dividend yield of 4.21%. The current dividend yield is 3.79% based on dividends of $5.32 and a stock price of $140.54. The current dividend yield is 10% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable but above the median.

The 10 year median Price/Sales (Revenue) Ratio is 2.50. The current P/S Ratio is 3.40 based on Revenue estimate for 2022 of $22,818M, Revenue per Share of $41.38 and a stock price of $140.54. The current ratio is 36% above the 10 year median ratio.

Results of stock price testing is that the stock price is? Well, it could be reasonable, but the stock price certainly is not cheap and it may be on the expensive side. The dividend yield tests are showing the stock price is reasonable, but above the median. The P/S Ratio test does not confirm this, but says the stock price is expensive. The current P/S Ratio is comparatively high. The P/B Ratio test, using the estimate for 2022 is showing the stock price as reasonable and above the median. The P/CF Ratio test is showing the stock price as cheap, but the problem is that most people think that cash flow is not important for financials, especially banks.

I look at the total return over a number of years. For P/S Ratio and P/E Ratio, the lower the ratio the cheaper the stock. For yield, the higher the yield, the cheaper the stock. In the chart below you can see that the current Dividend Yield and current P/E Ratios are fairly good compared to past years of good growth.

In the following chart the capital gains for the 10 years to December 31, 2021 is 9.32% per year. The beginning yield was at 4.75%, and the P/E Ratio and the P/S Ratio were at 10.62 and 2.74. Does this chart change my opinion of the stock price? Not really. The P/S Ratio is still out of line, but dividend yield is not.

# Years Cap Gain Beg P/E Beg P/S Beg Yield
5 7.12% 13.96 2.61 3.94%
10 9.32% 10.62 2.74 4.75%
15 4.64% 13.40 3.44 3.25%
20 6.89% 13.50 1.87 3.31%
25 7.60% 10.56 1.69 3.48%
30 8.77% 9.47 1.20 5.67%
35 8.31% 10.44 1.91 3.27%
38 8.17% 11.71 1.68 6.76%
current 10.81 3.29 3.91%

When I look at analysts’ recommendations, I find Strong Buy (4), Buy (4), and Hold (5). The Consensus would be a Buy. The 12 month stock price consensus is $155.10. this implies a total return of $14.15% with 10.36% from capital gains and 3.79% from dividends based on a current stock price of $140.54.

Not all the analysts on Stock Chase like this Canadian Bank, but some do. They are monetizing this site and so you have scroll down a long way to get to recent comments unless you pay the site. Adam Othman on Motley Fool likes the fact that this bank has acquired the Bank of the West in California. Ambrose O'Callaghan on Motley Fool thinks this is the best preforming Canadian Bank. The bank recently announced on Newswire that it is going to repurchase up to 22.5 Million shares. This article from Reuters on Yahoo Finance talks about Canadian Banks buying banks in the US.

Bank of Montreal is a diversified financial-services provider based in North America, operating four business segments: Canadian personal and commercial banking, U.S. P&C banking, wealth management, and capital markets. The bank's operations are primarily in Canada, with a material portion also in the U.S. Its web site is here Bank of Montreal.

The last stock I wrote about was about was Metro Inc (TSX-MRU, OTC-MTRAF) ... learn more. The next stock I will write about will be Royal Bank of Canada (TSX-RY, NYSE-RY) ... learn more on Friday, January 07, 2022 around 5 pm. Tomorrow on my other blog I will write about Something to Buy January 2022.... learn more on Thursday, January 06, 2022 around 5 pm.

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.

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