Tuesday, September 29, 2009

Consumers Waterheater Fund 2

I am continuing my review on this stock (TSX- CWI.UN) today as I have updated my spreadsheet with the December 2008 annual report and I have never blogged on this stock. It is a stock I follow, but I do not own it. I started following it when I started to look at income trust stock. However, I have never owned much in income trust stocks.

The interesting thing about Insider Buying and Insider Selling on this stock is that there is only Insider Buying. Buying occurred up until the end of August 2009. There is not an awful lot of Insider Buying, but the CFO, Directors and other officers were all buying. This is a widely held company, so insiders do not have a lot of stock.

The P/E I get is around 21 based on expected earnings. The P/E from other sites based on earnings over the past 12 months is around 9. Both these figures are lower than the 5 year low average of 27. The P/E ratio on this stock has often been quite high. When looking at yield, the current dividend will give one of just over 14%. This is after the dividend cut. This is also higher than the 5 year average of 8.5%. These make the current price look good.

However, went you get to the Graham Price, you see something different. The Graham Price is some 10% lower than the current price. When looking at the Price/Book Value ratio, the one for the end of 2008 was higher than the 10 year average. However, the current P/BV is only about 60% of this 10 year average. When the P/BV is less than 80% of the 10 year average, the price is considered to be a good one. Of course, the problem I see with the Book Value is that is has been decreasing since this company was formed.

Another ratio that is good is the accrual ratio, and this ratio is negative, which is good. However, for this ratio to be really good, it would have to be below -5%. This ratio at the end of June 2009 was only -4%. This is not bad, but not great either.

For all periods, this stock has done worse than the TSX Index. However, the dividends have added some 10% per year to the stock price return over the past 10 years. Even with this, the total return is rather modest at just over 3% per year for the last 5 years. This stock has totally missed the stock market rally that started in March 2009.

When I look at recommendations on this stock, I find that there are few people following this stock. There are appears to be only a Hold rating and an Underperform rating. This will probably be a consensus of Hold. (See my site for information on analyst ratings.)

The company seems to be acknowledging the fact that this company will not earn much in the short term because it has lowered it dividend. The company insiders seem to be saying that they expect the company to do fine in the long term. However, I can see why analysts are not recommending this stock; it seems to be going nowhere. The ratios that I looked at give a rather mixed picture, but give no comfort about the stock being a good buy.

Consumers' Waterheater Income Fund owns a portfolio of water-heaters and other portfolio assets, which they rent to primarily residential customers. They rent out water-heaters in the GTA and southern Ontario and it is considered a Business Trust. Its web site is www.consumerswaterheaters.com. See my spreadsheet at www.spbrunner.com/stocks/cwi.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.

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