Tuesday, March 24, 2009

Davis Henderson Income Fund 2

I am continuing my reviewing of this stock (DHF.UN) today from yesterday. I purchased some of this yesterday and if the price goes down any, perhaps I will purchase some more. This is an income Trust stock and it has been recommended a number of times by the Investment Reporter.

I am first looking at Insider Buying and Selling. There is little of this and but there was some in September 2008 at prices under $16.00. This buying was by a director. There has been no activity since then. So, this action tells us little.

The next thing to look at is what the ratios tell us about the current price of this stock. The current yield is over 14% and this is quite a bit above the 5 year average of 8%. The P/E is currently running at around 7 and this is lower than the 5 year average of 12. Also, the Graham Price is at $20.36 and this is over 36% above the current price. These things all point to the price of this stock at about $13 to be a very good price.

I have updated my spreadsheet today with estimates. Looking at what analysts are saying there is a big difference in their expectations on earnings and cash flows for 2009 and 2010. Along with this, analysts seem to see this stock either as a Strong Buy or as a Hold. This makes the consensus a Buy. When there is such a polarization of opinion, the consensus does not tell you much. However, even if you go with the lowest estimates, this stock’s Graham Price is still over 30% higher than the current price. You will also still have a good P/E ratio and a high yield.

This is, of course, a Unit Trust stock and will be taxable from 2011. It is expected that their distributions will be cut after 2011. However, in the mean time, you can earn a great yield.

Davis & Henderson provides programs to customers who offer chequing account and lending services within Canada. It manages the cheque supply programs for virtually all of the financial institutions in Canada, including the Big Six banks. Its web site is www.dhltd.com. See my spreadsheet on this company at www.spbrunner.com/stocks/dhf.htm.

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. See my website at www.spbrunner.com/stocks.html for a list of the stocks for which I have put up spreadsheets on my web site.

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