BFI Income Fund

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 have a spreadsheet for this stock (TSX-BFC.UN). I note that a number of people have a buy rating on it.

The following figures are based on 5 year averages to December 31 2007, the last Annual Report date. Revenues are increasing at 43.5% per year and money available for distribution increasing at almost 16% per year. The distributions have been increasing at the rate of 10% per year, but I note that no increase has so far been made since the end year of 2006. Prior to that, there were increases every year, even though they were rather random. The payout ratio is currently in the low 70s.

The cash flow is increasing at a health rate of 20% per year. The closing price is up on average, 27% per year. However, note that there have been no increases since 2005. It is expected that increases will start again as the stock has been affected by the Canadian/US currency exchange since some two-thirds of their business is in the US.

The Current asset/Current liability ratio is at .85. This means that the current assets cannot cover the current liabilities. However, the Asset/Liability ratio is at a health 1.81. The current Return on Equity (ROE) is not bad at 5%. I do not like the Accrual Ratio at 17%, as it could mean the cash flow is not as good as it appears. However, if you include the Financial Cash Flow into this Ratio it is better at 1.5%

The distributions are expected to increase this year to $1.91, a 5% increase. Distribution Income available for dividends is expected to increase to $2.57, a 3.6% increase. Cash flow per share is expected to increase to $3.09 and 6.8% increase. Do not forget that these are estimates, so they may or may not be right. The Graham Price based on Distribution Income is at $25.31 and the stock price is at $21.14, so it shows good value.

I have compared this stock, over the last year with the S&P/TSX composite index and the industrials (of which it is part) and this stock has done worse than both these indexes. I can only find two stocks that are in the same business. They are Waster-Connections (WCN-N, NYSE) and Newalta Income Fund (TSX-NAL.UN). This stock has done worse than WCN, and slightly better than NAL.UN.

Is it a good buy? This is hard to say. It has a good yield, which at the present price has distributions at 8%. The stock will probably not fall anymore, so you can get a good yield. The taxes on the distributions in 2007 are good. 19% of the distributions was considered to be return of capital and therefore not taxed. It also had 19% to Dividends, which are taxed more lightly than other types of income. The risk level on this stock is probably medium, so only buy if you can afford to take this level of risk.

See my spreadsheet on this company at http://www.spbrunner.com/stocks/bfc.htm. See my website at http://www.spbrunner.com/stocks.html for a list of the stocks for which I have put up spreadsheets on web site.

They are a full-service waste management company providing non-hazardous solid waste collection and landfill disposal services for municipal, commercial, industrial and residential customers in five provinces and ten U.S. States. Note that two-thirds of their business in US. Its web site is www.bficanada.com.