Wednesday, March 31, 2010

Canadian Oil Sands 2

I am continuing my review this stock (TSX-COS.UN) today as the annual reported for December 2009 has been published and when anyone talks about investing in Canadian Oil Sands, this is the stock that seems to be mentioned first.

The first good thing I see about this stock is that there is insider buying to the tune of .6M. There is also some insider selling, but it is about half of the buying. The latest buying was in late March, not long ago. The other thing is that dividends are expected to go up this year and next. If dividends stayed at the current $.35 per quarter, they would total $1.40 per share. However, analysts expect the dividends to be higher at $1.63. They also expect the dividends for 2011 to be higher still at $2.00. This is good news for this stock.

The next thing to consider is the old stand by of the P/E ratio and because this is a unit trust, the P/FFO. However, you slice and dice things, both these ratios are currently high. The 5 year average low P/E is 12.7 and the 5 year average high P/E 23.5. I get a current one of 18.2. It is not that bad, but it is a little high. The P/FFO is worse, as the 5 year average low is 9 and the 5 year average high is 17; and I get a current rate of 20. The P/FFO ratio is relatively worse than the P/E ratio. Of course, the other problem with using FFO (Funds from Operations) or Distributable Income is that the calculation of this figure has changed over the years.

I notice that on websites that give current P/E, they show one of 33.9. This is because they are using earnings of 2009, which were especially low. I also notice that the globe-investors site gives are forward P/E (i.e. one for 2010) of 17.5, but I must admit, I do not know what figures they are using or where they are from. A number of sites seem to confuse the earnings and the FFO figures.

Moving on to the Price/Book Value, I see that the current one is 3.62 and the 10 year average is 2.92. So, the current one is some 25% above the average. What you like to see for a good price is a current ratio below the 10 year average. The next thing is the Graham Price. The Graham Price for 2010 is $17.34 and the one for 2011 is $19.21. The current stock price of $29.68 is higher than both. It is some 71% above the 2010 Graham Price and 54% above the 2011 Graham Price.

I guess the last thing to look at is the yield. The 5 year average yield is 4.9% and the current one is 5.5%. This is good. However, the yield has been a lot better in the past. For example, the 10 year average yield on the low stock price is 7.4%. What you might gather from all this is that the stock price is relatively high, but not unreasonably so. The best thing you can say is the current stock price is below the high of 2008, as it reach $38.88 in that year.

So what do the analysts say? I find recommendations from Strong Buy to Underperform. However, the majority of the recommendations are Buys and the consensus recommendation is a Buy. (See my site for information on analyst ratings.) It seems that most expect 2010 to be better than 2009. It seems that the price of oil is expected to rise. Analysts mention that the distributions are strongly tied into the price of oil. Analysts also mention the strong balance sheet that this company has.

For a dividend loving stock buyer, I sometimes find this sort of stock interesting. You can make good money from such stocks over the long term. However, you cannot count on the dividends. And, just when you need dividends, they might be cut a lot. Oil prices tend to go down in recessions and therefore dividends on such stock will take a big hit in any recessions.

Canadian Oil Sands Trust provides a pure investment opportunity in the oil sands through its 36.74% interest in the Syncrude Project. Syncrude is an experienced oil sands operator, producing a high-quality crude oil for the past 30 years. With large, bitumen-rich leases located in the sweet spot of the Athabasca oil sands deposit and a fully integrated upgrading facility that produces 100% light, sweet crude oil, the quality of their Syncrude asset is very good. Its web site is www.cos-trust.com/. See my spreadsheet at www.spbrunner.com/stocks/cos.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 for stocks followed and investment notes. Follow me on twitter.

Tuesday, March 30, 2010

Canadian Oil Sands

I am reviewing this stock (TSX-COS.UN) today as the annual reported for December 2009 has been published and when anyone talks about investing in Canadian Oil Sands, this is the stock that seems to be mentioned first. As with any other investment in oil companies, if the dividend is good, then it will vary according to the price of oil. This makes the total returns growth figures on such investments very good.

For this company, 2009 was not a good year. Even with that, there are some very good growth figures for this company. For example, the Revenue growth per share figures for the last 5 and 10 years are 14% and 13% per year. The Total Returns growth figures for the last 5 and 10 years are 25% and 27% per year. Even the book value growth figures are not bad, being 7.3% per year and 12% per year for the last 5 and 10 years respectively. The 5 year figure is not great, but it is not bad either.

The growth in Cash Flow for the last 5 year is -3% per year. However, if you look at the 5 year running average for Cash Flow, you get a very different picture with the Cash Flow growth being 180% per year over the past 5 years. Growth in Distributable Income and Earnings were not great either, but this is because this company did not make much money in 2009.

Another good thing about this company is the strong balance sheet. The Liquidity Ratio and the Asset/Liability ratios are 2.05 and 2.33 respectively. What you look for are ratios of 1.50 or higher and the ratios for this company are very good. Also, the Leverage (Assets/Book Value) ratio is good being at 1.75 for the end of financial year of 2009. The last thing to mention is the Return on Equity. The 5 year average ROE is high at 22.5% and the 2009 one is not bad at 10.9%.

Some time in the future, I might invest in some oil companies. You can make some very good dividend income over time when investing in such oil companies. However, if you are a dividend investor; you have to be prepared to deal with fluctuating dividend income if you invest in this company. If you cannot handle this, this would not be a good company for an investment. Tomorrow, I will talk about what the analysts say about this company.

Canadian Oil Sands Trust provides a pure investment opportunity in the oil sands through its 36.74% interest in the Syncrude Project. Syncrude is an experienced oil sands operator, producing a high-quality crude oil for the past 30 years. With large, bitumen-rich leases located in the sweet spot of the Athabasca oil sands deposit and a fully integrated upgrading facility that produces 100% light, sweet crude oil, the quality of their Syncrude asset is very good. Its web site is www.cos-trust.com/. See my spreadsheet at www.spbrunner.com/stocks/cos.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 for stocks followed and investment notes. Follow me on twitter.

Monday, March 29, 2010

FirstService Corp 2

I am reviewing this stock (TSX-FSV) today as the annual reported for December 2009 has been published and I own some of this stock. I first bought this stock in June of 2002, when I was diversifying my portfolio into Real Estate stock. It is not a dividend paying stock, but I kept it because in August 2007, it issued to shareholders Preferred Shares with a 7% yield. I have just broken even on this stock including these dividends received.

When looking at the Insider Buying and Insider Selling report, I find that over the past year some $2.3M of the subordinate shares have been sold by insiders, especially by the CFO and officers. It is hard to tell if this means anything because you never know why people sell and it could just be that they need the money. However, this also does not tell us anything positive about the stock by insiders either.

When I look at the P/E ratio, I find that the 5 year average low is 13.4 and the 5 year average high is 22.4. I get a current P/E of 12.5 and so this is a good low P/E for this stock and a relatively low P/E to boot. Of course, this P/E is based on expected earnings for this year. The next thing is the Price/Book Value ratio. This ratio, at 1.97 is about 82% of the 10 year average of 2.39. So this also shows a relatively good current stock price.

The last thing to look at is the Graham Price. I get a Graham Price of $19.83 for 2009 and $22.06 for 2010. The current price of $23.13 is only about 5% above the Graham Price. Since this is generally a growth stock, this is not bad. In most years, even the low stock price is way above the Graham price. I cannot do a yield comparison, as this is not a dividend paying stock. It may seem that the dividends paid on the preferred stock fluctuates, but it is only because it is paid in US$ and the US$ fluctuates against the Canadian Dollar. Also, my dividends have only been increasing because the CDN$ is strengthening again the US$ and therefore I get higher dividends in CDN$.

When I look at look at analysts’ recommendations, what I find is Strong Buys, Buys and Hold. There are lots of Holds and lots of Strong Buys. The consensus recommendation, of course, would be a Buy. (See my site for information on analyst ratings.) Analysts call this a well-run diversified Real Estate company. The feeling was that this company has met expectations in 2009 and it will do better in 2010. The reason for the Hold ratings seem to be that the price of this stock is not expected to go much above $23.00 within the next 12 months. The stock is basically there.

Over the long term, this company has consistently done better than the TSX Real Estate Index. However, as I said yesterday, this is not a dividend paying company, so I will pick a good time to exit it, probably this spring or early summer.

This company is a global diversified leader in the rapidly growing real estate services sector, providing services in the following three areas: commercial real estate, residential property management, and property services. This is an international company, having business in North and South America, Europe, Asia, Australia and New Zealand. Controlling shareholder is Jay Hennick. He has 9% holding, but has 52.5% voting control. Its web site is www.firstservice.com/. See my spreadsheet at www.spbrunner.com/stocks/fsv.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 for stocks followed and investment notes. Follow me on twitter.

Friday, March 26, 2010

FirstService Corp

I am reviewing this stock (TSX-FSV) today as the annual reported for December 2009 has been published and I own some of this stock. I first bought this stock in June of 2002, when I was diversifying my portfolio into Real Estate stock. It is not a dividend paying stock, but I kept it because in August 2007, it issued to shareholders Preferred Shares with a 7% yield. However, on my original investment, I am making a dividend yield of just 1.16%.

For this stock, all the growth figures, except for total return, are good. This is a real estate stock, so its price is depressed. The 5 and 10 year growth for total return is -2.6% and 9.8%. The 10 year return is good. It is just the 5 year one that is not. The 5 and 10 year growth in revenue per share is 13% and 12% per year, respectively. The 5 and 10 year growth in Cash Flow is 18.6% and 14.3% per year, respectively. The revenue growth and cash flow growth is important for any company when you are looking for an investment.

Although this company lost money in 2009, it is giving an adjusted earnings figures of $1.49, as this is what it earned on its continuing business. The earnings loss for 2009 lowers their Return on Equity 5 year average to 9.4%, from their previous averages, which were all over 15%. The Liquidity Ratio and the Asset/Liability Ratio are not great. They are 1.19 and 1.49 respectively. The assets can cover the liabilities, but I would prefer both these ratios to be 1.50. The Asset/Liability Ratio almost makes this.

Because the Adjusted earnings are not the true earnings, I have put it into the uncertain purple colour. I have also done this for the number of shares outstanding and book value, both of which I was unsure of. The problem is that I am working off of unaudited statements published in a news bulletin, rather than the real annual statements.

The last thing to mention is that I will probably sell these shares. It is not a really dividend paying company and I would rather put my money into a dividend paying stock. I will probably look for a good time to sell and may only sell the stock and not the preferred shares. The preferred shares have a good return of over 7%, but they can be recalled at anytime and this might just happen. On Monday, I will review what the analysts say about this stock.

This company is a global diversified leader in the rapidly growing real estate services sector, providing services in the following three areas: commercial real estate, residential property management, and property services. This is an international company, having business in North and South America, Europe, Asia, Australia and New Zealand. Controlling shareholder is Jay Hennick. He has 9% holding, but has 52.5% voting control. Its web site is www.firstservice.com/. See my spreadsheet at www.spbrunner.com/stocks/fsv.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 for stocks followed and investment notes. Follow me on twitter.

Thursday, March 25, 2010

Fort Chicago Energy 2

I am reviewing this stock (TSX-FCE.UN) today as the annual reported for December 2009 has been published and I own some of this stock. This dividend stock was recommended by a newsletter I like. I bought only a small amount of this stock in December 2008 and March 2009 and my return has been some 56%. This is because I bought this stock at a good price and the dividends are good. There were some aspects of this company I did not like, so I made a small purchase.

In this second part of my report, I like to start with Insider Buying and Insider Selling. There was a small amount of selling in the early part of this year. This means nothing. There has also been some buying of stock under the company’s employee buying plan, and is positive. There has been no dividend increases lately as this company will be going to a corporation and plans, at the moment, to retail the current dividend. This dividend is good as it is over 9%.

The next thing is the P/E ratios. The 5 year low is 17.3 and the 5 year high is 24.7. I get a current one of 21.4. The P/E ratio is high on this stock. For those that want to check the Price/FFO ratios, they are on my spreadsheet. You can check relative values, but do not mistake P/E and P/FFO ratios as being interchangeable. However, P/FFO ratios of different companies can be compared.

The next thing I want to look at is the dividend yield. The current yield of 9.4% is slightly below the 5 year average of 9.5%. However, the yield for this stock was more like 8%, until the recent recession. I get a current Graham Price of $7.51 and the stock price is $10.69. However, I should point out that this Graham Price (which takes into consideration the earnings and book value) has fluctuated over the years. This is because both the earnings and book value has fluctuated over the years. Also, there is little or no increase in the Book Value, but this figure is affected by depreciation of assets, so it may not fairly reflect the company’s break up value.

We are not going to get much value out of the Price/Book Value ratio either. This is because of the decreasing book value and problems shown above. Probably the most effective measure of the current stock price is the dividend yield and it seems to be saying stock price is reasonable or slightly low. The one real Buy signal is the negative Accrual Ratio, and this is quite close to a negative 5%.

So, what do the analysts recommend to do with stock? When I look at the recommendations, there are lots and lots of Hold recommendations, some Buy and the odd Sell recommendations. (See my site for information on analyst ratings.) No analysts with Hold recommendations expect any rise in the stock price, or maybe a slight decline in the stock price, over the next year. Any buy recommendation comes with talk about the great yield. It is called a boring company that has great assets. Some feel that it is only a good buy under $10.

I plan to hold on to the shares I have. The yield is great and I might reconsider and get more if the price drops below $10.

Fort Chicago owns and operates energy infrastructure assets across North America with three principal businesses of Pipeline Transportation, natural gas liquids and power. The company operates in Canada and US. Its web site is www.fortchicago.com/. See my spreadsheet at www.spbrunner.com/stocks/fce.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 and my investing notes at www.spbrunner.com/investing.html. Follow me on twitter.

Wednesday, March 24, 2010

Fort Chicago Energy

I am reviewing this stock (TSX-FCE.UN) today as the annual reported for December 2009 has been published and I own some of this stock. This dividend stock was recommended by a newsletter I like. I bought only a small amount of this stock in December 2008 and March 2009 and my return has been some 56%. This is because I bought this stock at a good price and the dividends are good. There were some aspects of this company I did not like, so I made a small purchase.

The reason for my great return is that the price of this stock has increased since I bought it. This stocks increase since the March 2009 low is over 60% and it still as a dividend yield over 9%. However, it is not likely that the distributions will increase over the short term. It will be changing to a corporation and I do not expect any changes in the distribution before 2011.

The one thing that hits you after reviewing the 2009 annual report is that this company has had a bad year. Although, a lot of the losses are do to write-offs. Because of the bad year it has had, the growth figures are from mediocre to really bad. The only good growth figures is the growth in distributions, and the 5 and 10 year growth figures are 3.7% and 5% per year. However, do not expect any growth from the current distributions, which is, and has been $1.00 per share since 2008.

The one thing that I have not liked about this stock is the lack of growth in the Book Value. The growth in Book Value was bad last year and the Book Value is currently dropping at the rate of 2 to 3% per year. The Total Return on this stock has been increasing. The 5 and 10 year growth figures are 6.2% and 11.8% per year respectively. A lot of this total return is because of the distributions paid. The 5 year growth for just stock price is a negative 2.6%.

Another negative for this stock is the Liquidity Ratio and no matter how you look at it, it is low at 0.49. This means that the current assets cannot cover the current liabilities. The Asset /Liability Ratio is also low at 1.32. However, the assets do cover the liabilities in this last ratio. When you look at the Return on Equity, the ROE for 2009 is just ok at 5.4% and the 5 year average is better at 8.7%. The one good ratio is the Accrual Ratio and it is a negative 4.7%.

I plan to continue to hold my shares. I do not have much invested and the yield is good and most analysts feel the distributions are safe. This stock is also being followed on another blog called Think Dividends.

Fort Chicago owns and operates energy infrastructure assets across North America with three principal businesses of Pipeline Transportation, natural gas liquids and power. The company operates in Canada and US. Its web site is www.fortchicago.com/. See my spreadsheet at www.spbrunner.com/stocks/fce.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 and my investing notes at www.spbrunner.com/investing.html. Follow me on twitter.

Tuesday, March 23, 2010

Enbridge Inc 2

I am reviewing this stock (TSX-ENB) today as the annual reported for December 2009 has been published and this is a stock that I own. I bought shares in this company in for the first time July 2005 and I purchases more stock in November 2008 and January 2009. To date I have made a return of 11.3% per year. I am making a current yield of 4.4% on my investment.

When I look at Insider Buying and Insider Selling, I see that there is some $25M of insider selling. However, the executives of this company have more stock options than actual shares. What they are selling are their stock options. This is not great, but it really does not tell you much. What the company thinks of their shares is more clearly stated in the recent increase in dividends. The recent dividend increase says the company thinks it will be doing well over the next little while.

The next thing to look at is the P/E ratio. Since all the estimates I can find are based on adjusted earnings, I will look at the associated P/E with adjusted EPS. Ratios are often relative. The 5 year low P/E is 18 and the current P/E is 18.9. The 5 year average high is 23.3. All these P/Es are on the high side for P/E ratios. However, on a relative basis, the P/E on this stock is on the low side. Then again, if you look at the P/E based on the real earnings, the P/E is just 11.6 and this is on the low side.

I get a Graham Price for 2009 of $42.86. The current stock price is $48.66. The current stock price is 15% above the Graham Price. For this stock, the stock price has been consistently above the Graham Price. Even the low stock price for a year has been mostly been 30% above the Graham Price. I get a 5 year average of the Stock Price being above the Graham Price by some 7%, but this is because we have been in a recession and the stock price has been quite low.

For the dividend yield, the current yield of 3.4% is slightly above the 5 year average of 3.2%. The last thing to look at is the Price/Book Value ratio. The currently Price/Book Value of 2.57 is just above the 10 year average of 2.49. Looking at all these things, it would seem that the stock price is probably a fair one.

So what do the analysts say? Their recommendations go from Strong Buy to Buy to Hold. I cannot find any other ratings. The ones giving Hold recommendations do not see the price of this stock appreciating much more in the next 12 months. The ones with the Strong Buy or Buy recommendations mention the recent increase in dividends. (See my site for information on analyst ratings.) The consensus recommendation is probably a Buy. I should point out that there are lots of analysts following this stock and a lot of them do have a Hold recommendation. All the analysts seem to think that this is a safe stock to have.

I am pleased with my investment in this company and I plan to continue to hold what shares I have.

Enbridge is focused on three core businesses of crude oil and liquids pipelines, natural gas pipelines, and natural gas distribution. They operate in Canada and US. Its web site is www.enbridge.com/. See my spreadsheet at www.spbrunner.com/stocks/enb.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 and my investing notes at www.spbrunner.com/investing.html. Follow me on twitter.

Monday, March 22, 2010

Enbridge Inc

I am reviewing this stock (TSX-ENB) today as the annual reported for December 2009 has been published and this is a stock that I own. I bought shares in this company in for the first time July 2005 and I purchases more stock in November 2008 and January 2009. To date I have made a return of 11.3% per year. I am making a yield of 4.4% on my investment. About 3% per year of the return on this investment is in dividends and the rest being in capital gain.

All the growth figures on this stock are very good. The odd thing about this stock is that the company provides two earnings figures, one the regular one required re GAAP and also an adjusted earnings figure. Most analysts that follow this company give earnings estimates based on adjusted earnings. According to the company, to get the adjusted earnings, they adjust their earnings for non-recurring or non-operating factors. My spreadsheet gives the full definition of these adjusted earnings.

This company is on dividend lists that I follow of Dividend Achievers and Dividend Aristocrats (see indices). The great thing about this company is that they give a decent dividend yield of just over 3% per year and the dividend has been increasing at around 10% per year. Even during the recent recession, they increase their dividends. They have also increased their dividends for the current year by some 14.9%. The Return on Equity for this company is also very good at 21.4% for the year ending in 2009 and the 5 year average is 17%.

On the negative side, the Liquidity ratio is a bit low at 0.95; however, the current assets can be covered by the cash flow generated by the company. The Asset/Liability ratio is also a bit low at 1.35. I like to see this ratio at 1.50. The other negative is the high accrual ratio of 10%. With high accrual ratio, you wonder if the earnings are a proper reflection of what a company is actually earning. However, this company seems to deflect this concerning in giving an adjust earnings which many analysts rely on.

Needless to say, I am pleased with my investment in this company and I plan to continue to hold what shares I have.

Enbridge is focused on three core businesses of crude oil and liquids pipelines, natural gas pipelines, and natural gas distribution. They operate in Canada and US. Its web site is www.enbridge.com/. See my spreadsheet at www.spbrunner.com/stocks/enb.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. Also, look at other investing notes on my website at www.spbrunner.com/investing.html. Follow me on twitter.

Friday, March 19, 2010

Canadian Real Estate Inv 2

I am continuing my reviewing this stock (TSX-REF.UN) today as the annual reported for December 2009 has been published and this is a stock that I own. I bought shares in this company in September 2006 and my total return to date has been 7% per year. Dividends are good and it is a diversification away from banks and utility stock.

When I look at the Insider Buying and Insider Selling report, I find that over the past year there has been Insider Buying of around $1.1M. All this buying occurred in the early part of 2009 when the stock price was a bit lower at about $20 to $24. There recently has been a very small amount of Insider Selling by a director. The dividend was increase last year by a fairly normal 1.5% so this shows the management of the company feels confident enough to raise dividends.

When looking at the P/E ratio, the 5 average low is 16.8 and the 5 year average high is 23.6. The current P/E is higher than this at 25.3. The problem is that Earnings are expected to be much lower in 2010 than they were in 2009. If you look at the P/Funds from Operations ratio, the 5 year low average of 10.6 is much closer to the current P/FFO of 12 and this is lower than the 5 year high average of 14.8. This is because the company’s FFO is expected to be about the same as last year.

If you look at the dividend yield, the current one at 5% is just a bit lower than the 5 year average of 5.3%. However, a good current stock price for buying would have a higher yield than the 5 year average. Because the Book Value is not growing much, the Graham Price is above the current stock price. For 2010, I get a Graham Price of $16.91. The Graham Price for 2009 was higher at $19.29. The current price is only some 44% above the 2009 Graham Price. It is much farther away from the 2010 Graham Price. The other thing is that it is April and you do not tend to get the best stock prices in April. It’s that seasonality thing with the stock market.

So, what do the analysts recommend? When I look at the recommendations, I find lots of Strong Buys, some Buys and lots of Holds. I also find one Sell recommendation. The consensus recommendation will be a Buy. (See my site for information on analyst ratings.) The most common remark on this stock is that the dividend is good and it is secure.

I intend to continue to hold my shares, as the dividends are good and this stock is to diversify my portfolio.

This company is on the dividend lists that I follow of Dividend Achievers and Dividend Aristocrats (see indices) because they consistently raise their dividend every year. I also noted that the blog Think Dividends has recently mentioned this stock.

Canadian Real Estate Investment Trust is an equity real estate trust, which acquires and owns a portfolio of income-producing properties. It specializes in the acquisition and ownership of community shopping centers, industrial and office properties across Canada. This company owns office, industrial, retail properties and some miscellaneous items such as apartment buildings. This stock is rated STA-3M by DBRS. Its web site is www.creit.ca/. See my spreadsheet at www.spbrunner.com/stocks/ref.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. Also, look at other investing notes on my website at www.spbrunner.com/investing.html. Follow me on twitter.

Thursday, March 18, 2010

Canadian Real Estate Investment

I am reviewing this stock (TSX-REF.UN) today as the annual reported for December 2009 has been published and this is a stock that I own. I bought shares in this company in September 2006 and my total return to date has been 7% per year. I noticed that this company usually raises their dividend every year, and this it did also in 2009. The increase was not great as it was just 1.5%, but inflation is very low at present.

Some of the growth figures are good and others not great. Most of the 10 year growth figures are better than the 5 year figures and some visa versa. For example, the earnings growth for the last 5 and 10 years are 10% per year and 6.8% per year, respectively. If you look at the revenue growth for the last 5 and 10 years, they are 8.3% per year and 12% per year. However, when you look at revenue per share, the growth is not nearly as good with the 5 and 10 year growth at 4.8% per year and 4.6% per year. The much lower revenue per share is because the increase in the number of shares over the past 5 and 10 years has averaged 3.4% per year and 7.3% per year, respectively.

The worse growth figures are for the Book Value and this growth has been, over the last 5 and 10 years, 1.4% per year and 1.1% per year. Part of the distributions each year has been assigned to return of capital. Some of the best growth figures are for Total Return. The 5 and 10 year figures for this have been 15.2% per year and 17.7% per year, respectively. The Distributable Income growth has been increasing much faster than distribution growth. For example, the DI growth for the last 5 year has been at 10% per year. However, the problem with DI figures is that it has not been consistently calculated and it is a non-GAAP item.

On this stock, the Asset/Liability ratio is good at 1.55 and has a 5 year average of 1.51. What you want this ratio to be at is 1.50 and it usually is around there, but has, at times dipped a bit lower. The last item to mention is the Return on Equity and this has been good. The ROE for 2009 was 15.3% and the 5 year average is 12.1%. These are both good figures.

I am happy with my investment in this stock and plan to continue to hold my shares. The reason my return has been at 7% per year is that this stock has not done much over the last couple of years. The market has not done much over the last couple of years either. A lot of my money is in financials and utilities, so I have some invested in REITs to give some balance to my portfolio.

This is an equity real estate trust, which acquires and owns a portfolio of income-producing properties.
It specializes in the acquisition and ownership of community shopping centers, industrial and office properties across Canada. This company owns office, industrial, retail properties and some miscellaneous items such as apartment buildings. This stock is rated STA-3M by DBRS. Its web site is www.creit.ca/. See my spreadsheet at www.spbrunner.com/stocks/ref.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. Also, look at other investing notes on my website at www.spbrunner.com/investing.html. Follow me on twitter.

Wednesday, March 17, 2010

Emera Inc 2

I am continuing my review of this stock (TSX-EMA) today as the annual reported for December 2009 has been published and this is a stock that I own. I bought some shares in this company in 2005 and my total return to date has been 10% per year. This is a utility stock that pays a good dividend that averages around 4.5%.

The first thing I like to look at in my second part on a stock is the Insider Buying and Insider Selling reports. At the end of 2009, the CEO exercised his stock options; that is he sold them. This amounted to just over $.5M. This is the only action in the past year. This does not really tell us much. However, the company has shown confidence in this company by raising the dividends by just over 9%.

When I look at the 5 year average P/E low and 5 year average P/E high, I find the range narrow, with the low P/E at 14.6 and the high at 18.5. Based on earnings estimates for 2010, I get a current P/E of 15.9. The sites that use the last 12 months earnings for a current P/E get a P/E of 17. The next thing to look at is the Graham Price. I get a Graham Price for 2010 of $21.54. The current stock price of $24.64 is some 14.4% above this Graham Price. When looking at these measurements, I must point out that they are based on estimates (earnings estimates).

When I look at the dividend yield, the current yield is 4.55%. The 5 year average dividend yield is 4.51%. These are almost identical. The last thing to look at is the Price/Book Value ratio. The current one is 1.85. The 10 year average P/BV is 1.61. This makes the current one some 15% higher than the long term average. What I like to see, is the current P/BV ratio below the long term average. What all this shows is that the price is a reasonable one.

When I look at the analyst recommendations, I find ones from Strong Buy to Buy to Hold. However, there are few of the Buys recommendations and lots of the Hold recommendations. The consensus recommendation would be a Hold. (See my site for information on analyst ratings.)

Looking at reports, the main reason for the Hold recommendation is that the stock price is not expected to raise much, if at all, over the next year. Others mention that this stock is a safe haven in a volatile market and has a very good dividend. The ones that say the stock is a buy mention the recent good increase in their dividends and the high dividend yield of this stock. They also think that utilities are defensive stocks with safe, predictable dividends and cash flow. They feel that this is a very good thing in a volatile market.

As I said yesterday, I am happy with my shares in this company and plan to hold them.

Emera Inc. is an energy and services company that has two wholly-owned regulated electric utility subsidiaries, of Nova Scotia Power Inc. and Bangor Hydro-Electric Company. Emera also owns 19% of St. Lucia Electricity Services Limited, and 25% of Grand Bahamas Power Company that serves 19,000 customers on the Caribbean island of Grand Bahamas. Emera also owns the Brunswick Pipeline; Bayside Power, in Saint John, New Brunswick; Emera Energy Services; a joint venture interest in Bear Swamp northern Massachusetts; a 12.9% interest in the Maritimes & Northeast Pipeline; and an 8.2% interest in Open Hydro. Its web site is www.emera.com/. See my spreadsheet at www.spbrunner.com/stocks/ema.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. Also, look at other investing notes on my website at www.spbrunner.com/investing.html. Follow me on twitter.

Tuesday, March 16, 2010

Emera Inc

I am reviewing this stock (TSX-EMA) today as the annual reported for December 2009 has been published and this is a stock that I own. I bought some shares in this company in 2005 and my total return to date has been 10% per year. This is a utility stock that pays a good dividend that averages around 4.5%. They have just declared a dividend increase of over 9%.

When you look at the growth figures to date, they are mixed bag. The 5 and 10 year growth figures are rather low at 3.7% per year and 6% per year respectively. However, for the year ending in 2009, the revenue increased some 10%. The earnings growth shows the same sort of results with the 5 and 10 year growth figures being 5.5% per year and 2.7% per year respectively, but for the year ending in 2009, the earnings increase a very healthy 20%.

The dividend increases are rather low and sort of keep up with inflation. The 5 and 10 year growth figures are 3.2% per year and 1.7% per year. Generally speaking, higher the dividend yield, the lower the dividend increases are. When you get a nice yield like 4.5% like on this stock, you expect the increases to keep level approximately with inflation. The very good figures on this stock are the 5 and 10 year growth figures for total return and they are 9.8% per year and 10.6% per year, respectively.

Moving on to the balance sheet, I find that the asset/liability ratios are a bit low. The Liquidity Ratio is just 0.89 and the Asset/Liability Ratio is 1.40. However, in the case of current liabilities, they do have enough cash flow to pay for them. When I look at the Return on Equity, this company’s results are good with the 5 year average ROE being at 10.2% and the ROE for 2009 being at 11.7%.

I am happy with my current investment in this stock and I intend to hold what shares I have. Tomorrow I will look and see what the analyst say about this stock.

Emera Inc. is an energy and services company that has two wholly-owned regulated electric utility subsidiaries, of Nova Scotia Power Inc. and Bangor Hydro-Electric Company. Emera also owns 19% of St. Lucia Electricity Services Limited, and 25% of Grand Bahamas Power Company that serves 19,000 customers on the Caribbean island of Grand Bahamas. Emera also owns the Brunswick Pipeline; Bayside Power, in Saint John, New Brunswick; Emera Energy Services; a joint venture interest in Bear Swamp northern Massachusetts; a 12.9% interest in the Maritimes & Northeast Pipeline; and an 8.2% interest in Open Hydro. Its web site is www.emera.com/. See my spreadsheet at www.spbrunner.com/stocks/ema.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. Also, look at other investing notes on my website at www.spbrunner.com/investing.html. Follow me on twitter.

Monday, March 15, 2010

Richelieu Hardware Ltd 2

I am continuing my review this stock (TSX-RCH) today as I received the annual reported dated November 30, 2009 and I own this stock. I bought it because this stock is well liked by some investor newsletters I like and follow sometimes. I first bought this stock in 2007 and my return on this stock is, including dividends, 16.7% per year. The reason for the good return is the follow up purchases I did at very good prices.

The first thing I like to look at is Insider Buying and Insider Selling. There was some very minor selling at the end of 2009. Other than that, there has been no activity in this area. The other thing to mention is the increase in dividends because this show confidence in the company by the management.

When I look at P/E ratios, I find the 5 year average low is 13 and the 5 year average high is 17.9. I get a current P/E of 14.3 based on estimate of earnings for 2010. The sites that show a P/E based on last 12 months earnings get a P/E of 16. The P/E is not bad, but it is not particularly low. The next thing is the Price/Book Value. Here the ratio is favorable to a low price as the current P/BV of 2.01 is about 73% of the 10 year average of 2.74. This ratio shows a good price if the current P/BV is 80% or less of the 10 year average.

The next thing to look at is the Graham Price. I get a current Graham Price of $19.62. This is 12% less than the current price of $22. However, the stock price of this company is seldom near the Graham Price, so on a relative basis the current price is good. This is a growth company and that is why the stock price is usually always higher than the Graham Price. The last thing I want to look at is the dividend yield. The current yield is 1.6% and the 5 year average is 1.3%. On this basis, the current price is relatively good.

When I look at analysts recommendations, I find a few Buys and lots of Holds. The consensus recommendation would be a Hold. (See my site for information on analyst ratings.) The Holds seem to be because no one expects the price of this stock to go up anytime soon. The analysts that say this stock is a buy mention the recent dividend increase and the very strong balance sheet this company has. They feel it should be bought for long term gains and rising dividends.

I plan to hold on to the shares I have and continue to earn their rising dividends.

This company is a distributor, importer and manufacturer of specialty hardware and complementary products. Its products are kitchen and bathroom cabinets, furniture, and window and door. It is also involved with residential and commercial woodworking industry. It has a large customer base of hardware retailers. This stock is widely held, but QV Investors hold about 10% of outstanding shares. They are Institutional Investors looking after Mutual Funds, Pension Funds and Foundation Funds. Its web site is www.richelieu.com/. See my spreadsheet at www.spbrunner.com/stocks/rch.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. Also, look at other investing notes on my website at www.spbrunner.com/investing.html. Follow me on twitter.

Friday, March 12, 2010

Richelieu Hardware Ltd

I am reviewing this stock (TSX-RCH) today as I received the annual reported dated November 30, 2009 and I own this stock. I bought it because this stock is well liked by some investor new letters I like and follow sometimes. I first bought this stock in 2007 and then made two purchases in 2009. My return on this stock is, including dividends, 16.7% per year. I have no made any money on my original purchase. The reason for the good return is the follow up purchases at very good prices.

2009 was not a good year for Richelieu Hardware. The 5 year growth figures for Revenues, Earnings, Total Return and Cash Flow are acceptable, with the 10 year figures being good. For example, the Earnings growth figures for the last 5 and 10 years was 4.3% per year and 13.5% per year. As you can see, the 10 year figures are quite good, with the 5 year figures not so great.

The good growth figures were for Dividends and Book Value. The 5 and 10 year growth figures for Dividends were 14.9% per year and 16.5% per year respectively. The 5 and 10 year growth figures for Book Value were 12.9% per year and 15.8% per year. I would like to note that the dividends were not increase for 2009. However, the dividends have been increase by 12.5% for 2010. This last increase is quite a health one.

Generally, in a stock I like to see total return divided between dividends and capital gain, with 4% dividend income and 4% capital gains for total return of 8%. However, this, of course, is not possible. Some companies that pay dividends are growth companies, and the return is more heavily to the capital gains part. This is the case with this company. It is a dividend paying growth company and as such, dividend yield is generally low, but dividends increase strongly.

The good thing about this stock is the strong balance sheet. The Liquidity ratio for 2009 is 4.66 and the 5 year average is 3.95. The Asset/Liability Ratio for 2009 was 6.23 and this ratio has a 5 year average of 5.33. When looking at these ratios, what you want is ones of 1.50 or above, so you can see why I consider these strong ratios. This company has virtually no debt and lots of cash. The next thing to talk about is the Return on Equity. This is also strong for this company and the ROE for 2009 is 16.9%, with the ROE 5 year average at 16.6%.

I guess the last thing to mention is the Accrual Ratio and this is at -8.25%. This usually signals a buy, so on Monday I will look to see what the analysts recommend. I intend to continue to hold my shares in this company.

This company is a distributor, importer and manufacturer of specialty hardware and complementary products. Its products are kitchen and bathroom cabinets, furniture, and window and door. It is also involved with residential and commercial woodworking industry. It has a large customer base of hardware retailers. This stock is widely held, but QV Investors hold about 10% of outstanding shares. They are Institutional Investors looking after Mutual Funds, Pension Funds and Foundation Funds. Its web site is www.richelieu.com/. See my spreadsheet at www.spbrunner.com/stocks/rch.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. Also, look at other investing notes on my website at www.spbrunner.com/investing.html. Follow me on twitter.

Thursday, March 11, 2010

AltaGas Income Trust 2

I bought this stock (TSX-ALA.UN) in February of 2009 after reviewing it, as it was on the dividend lists that I follow. I purchases more in November 2009 with the money I got from selling EnCana. Since buying this stock, I have made a return of 26% per year. I got the stock for a reasonable, but not great price. Note that this company is changing to a corporation in mid-2010 and they will cut their dividend.

The first thing I like to look at is Insider Buying and Insider Selling. It is interesting that there is quite a bit of insider buying (over $4M in the past year), with no insider selling, but analysts are negative on this stock. Most think that earnings for 2010 and 2011 will just go down. So, what do the insiders feel or know about this company that the analyst cannot see? The company says their objective is to build a portfolio of energy assets and services that are capable of generating long-term, stable cash flow.

Now, I will go on to talk about the ratios. First, the P/E ratio I get for 2010 is 12.3. The 5 year average low P/E is 9.9 and the 5 year average high is 12.2. The problem is that earnings (and cash flow) are expected to go down in 2010 and 2011. The trailing P/E is a more reasonable 10.3. For the Price/Book Value Ratio, I get a current one of 1.38. This is about 73% of the long term average of 1.89. This ratio’s value points to a good current price. The value of the Price/Book Value ratio is that it is based on current values, not on estimates.

The next thing I want to talk about is the Graham Price. This is an attempt to come up with what the shares (and therefore), the company is worth. For the end of 2009, I get a Graham Price of $22.94. The Graham Price goes down in 2010 and 2011 to $21.20 and $18.15 respectively. This is because earnings are expected to go down. In their annual report, this company admits that earnings in 2010 will be lower than for 2009. The theory is that you buy stocks that are close to or at the Graham Price and you will prosper in the investment.

The last thing to look at is yield. The distributions for 2010 are expected to be set at the new rate in mid 2010. Even with this, the yield on this stock for 2010 will be 9.7% compared to a 5 year average of 9.3%. This shows a relatively good current price. However, when the full effect of the dividend decrease occurs in 2011, the yield, at the current price will only be 7.6%.

When I look at analysts recommendations, I find that they range from Strong Buy to Buy to Hold. I also find one Sell recommendations. The consensus recommendation appears to be a Hold. (See my site for information on analyst ratings.) The main problem seems to be that the analysts do not see the share price of this stock increasing in the near future. The analysts that like this stock seem to like the dividends that it pays.

I plan to holding on to the shares I have. I am interested in dividends, so having good dividend payments while you wait for some capital gains is a good idea for me. For me, the dividend return is why I will continue to hold my shares. I bought my shares for just under $18, so I find the current price reasonable. I also find it encouraging that insiders are buying.

AltaGas operates physical assets and provides essential services to customers who produce and consume natural gas and power. Their gas business provides gathering, processing, transportation, storage and marketing of natural gas and natural gas liquids. Their power business generates and delivers power in Alberta and British Columbia and is developing a significant portfolio of renewable power projects. Its web site is www.altagas.ca/. See my spreadsheet at www.spbrunner.com/stocks/ala.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. Also, look at other investing notes on my website at www.spbrunner.com/investing.html. Follow me on twitter.

Wednesday, March 10, 2010

AltaGas Income Trust

I bought this stock (TSX-ALA.UN) in February of 2009 after reviewing it, as it was on the dividend lists that I follow. I purchases more in November 2009 with the money I got from selling EnCana. Since buying this stock, I have made a return of 26% per year. I got the stock for a reasonable, but not great price. This company is on the dividend lists that I follow of Dividend Achievers and Dividend Aristocrats (see indices). Although this might change as they will cut their dividend when they convert to a corporation in 2011.

I buy stocks to earn dividend income. This stock has done well in increasing their dividends over the last 5 and 10 years at the rate of 10% per year and 36% per year respectively. The current good dividend will stop when they change to a corporation, but there is no reason to believe that they will not restart increasing their dividend later. In the meantime, I have getting a 10% return on my investment and in 2011, this return will decrease to just over 8%. This is still a good return.

In looking at growth figures, their 10 year figures are much better than their 5 year figures. They did not have a good year in 2009, especially as far as Cash Flow and Book Value were concerned as both these items when down. Another problem is that this company deals in gas and the price of gas is going nowhere. This company’s results are expected to worse in 2010 and 2011 in regards to both earnings and cash flow. Also, no one expects the price of this stock to go anywhere either. The bright point is that the company is getting into renewable power generation. The company expects in the future to have stable and sustainable cash flow to generate future dividend payments.

The Liquidity Ratio is very low at 0.39, but this is because a portion of their long term debt came due this year. However, this debt is covered by their credit facilities, so I am not concerned. Also, their Asset/Liability Ratio is much healthier at 1.66. If you look at the return on equity, this stock is doing very well with 13.5% ROE for 2009 and a 5 year average of 17.2%.

Although I did not make a sizable purchase of this stock, I am happy with what I have and will continue to hold the shares I have. For another view on this stock, see Think Dividends blog.

AltaGas operates physical assets and provides essential services to customers who produce and consume natural gas and power. Their gas business provides gathering, processing, transportation, storage and marketing of natural gas and natural gas liquids. Their power business generates and delivers power in Alberta and British Columbia and is developing a significant portfolio of renewable power projects. Its web site is www.altagas.ca/. See my spreadsheet at www.spbrunner.com/stocks/ala.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. Also, look at other investing notes on my website at www.spbrunner.com/investing.html. Follow me on twitter.

Tuesday, March 9, 2010

Davis & Henderson Income Fund 2

I bought this stock DHF.UN)in March of 2009 after reading a favorable report on it. The stock at that time had a very good dividend and was undervalued. Since then I have made a return of 48% per year. This is because I bought it cheaply.

The first thing I like to look at is Insider Buying and Insider Selling. For this stock there was a bit of insider buying in 2009 at around $14 a share. The other thing of note is that this company will change to a corporation in 2011 with a lower dividend rate. At the current stock price, the yield in 2011 will be just over 7%. This is still a very good yield.

What I want to look at next is the ratios. The 5 year average low for P/E ratio is 8 and the high is 12. The current P/E is just over 8. However, the forward P/E is higher at just over 10. The problem is that all the analyst estimates for both earnings and cash flow are lower for 2011 than they are for 2010. When I look at the Price/Book Value ratio, I get one of 1.57. This is just over 80% of the 10 year average P/BV. The stock price is considered low when the current P/BV is at 80% or less than the long term average.

The dividend yield at 10.8% is higher than the 5 year average of 9.6%. However, when the yield is reduced in 2011, the yield on the current price would be just over 7%. The last thing to look at is the Graham Price. I get a Graham Price of $21.95 for the financial year ending in 2009 and one for 2010 of $22.49. The current stock price at $17 is over 20% lower than these Graham Prices.

When I look at analysts’ recommendations, I find a lot of Holds. There was also one Underperform and one Buy. The main concern is the decline in use of cheques. Also, a lot of analysts seem to feel that this company will not fully recover from the current recessionary problems until at least 2012. Some seem to feel that this company’s stock price is not going to change much over the next year as it is fully priced. There might be some problems with them integrating Resolve Business Outsourcing Income Fund they have purchased. Others feel that this company, even after the dividend trim in 2011 will have a good yield that is sustainable.

I am happy with my purchase of this and I will continue to hold my shares. I live off my dividends, so a good, sustainable yield is what I like. Whether this is a good buy or not probably depends on why you want to buy shares. This stock will probably provide a good, sustainable yield going forward, but probably not much in the way of capital gain for a while.

Davis & Henderson is a leading solutions provider to the financial services marketplace. Founded in 1875, the company today provides innovative programs, technology products and technology based business services to customers who offer chequing accounts, credit card accounts and personal, commercial, and other lending and leasing products. Its web site is www.dhltd.com/. See my spreadsheet 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. Also, look at other investing notes on my website at www.spbrunner.com/investing.html. Follow me on twitter.

Monday, March 8, 2010

Davis & Henderson Income Fund

I bought this stock(DHF.UN) in March of 2009 after reading a favorable report on it. The stock at that time had a very good dividend and was undervalued. Since then I have made a return of 48% per year. This is because I bought it cheaply. This company is on the dividend lists that I follow of Dividend Achievers and Dividend Aristocrats (see indices). Although this might change as they will cut their dividend when they convert to a corporation in 2011.

When looking at growth values, they are not great. This company had a difficult year in 2008, but it is recovering by having a solid financial performance in 2009. The best growth is for dividends, where they have grown by some 5.6% per year for the last 5 years. However, this will change in 2011 when they expect to lower dividends to $1.20. Dividend will be lower than when this company started out. At that time, my income yield on this stock will be 9.3% on my original investment. So, I will continue to be rewarded by my investment in this company.

Do not forget that distributions from 2011 will be taxed as dividends, not other income, so your net income from this stock will not be as low as it first appears. However, I think what is the most important in connection with this stock is their return to growth in Revenue, Earnings and Book Value. They seem to be having more difficulty in growing their cash flow, but a good start is the increase in revenue. The other thing to note is the increase in Trust Units in 2006 and 2009. Since the increase in Trust Units was to help finance the purchase of other businesses, it was a valid reason for issuing shares.

If you had held this stock since it was first issued in 2001, you could have potentially made a return of some 18% per year. This is excellent. The return for the last 5 years is only some 2.5%, but we have just come out of a recession and over the long term, the total return on this stock should be good.

The other thing I should talk about is the Asset/Liability Ratios. The liquidity ratio using current assets and current liability is low at 0.88. However, there is more than one way of looking at liquidity and, this company has enough cash flow to cover their current liabilities. The Asset/Liability ratio is very good at 2.57. The last thing to talk about is the Return on Equity. This is good for both the 5 year average and the ROE at the end of 2009. The 5 year average ROE is 17% and the ROE at the end of 2009 is 16.5%.

I found another blogger who wrote about this stock at Dividend Girl. On this site, a French Canadian New Brunswicker is setting out to get an income from a stream of dividends from various companies, include Davis and Henderson. Having streams of income from a variety of companies in different industries is a great way to provide for future financial stability.

Although I did not make a sizable purchase of this stock, I am happy with what I have and will continue to hold the shares I have.

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 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. Also, look at other investing notes on my website at www.spbrunner.com/investing.html. Follow me on twitter.

Friday, March 5, 2010

Canadian Pacific Railway 2

I am today reviewing this stock, (TSX-CP) because it has published its fourth quarterly results and I own this stock. I have owned this stock since October 2006 and I have made a return of 0% per year on my shares. The reason is the current recession and this will not last forever. The main difference between CNR and CP is that CP has kept their dividends flat since 2008.

The first good thing about CP stock is that there has been some insider buying. There was not much, just some 200K, and it was all done in 2009, but it was there. This is too small of an amount to be significant. The negative that I see is that insiders have far more stock options than share.

If you look at the 5 year average P/E low, it is just 9.6 and the 5 year average high is 15.4. The current P/E that I get is 16.7. The sites that use the last 12 months of earnings to get a P/E get one just above 15, but no one seems to think that this company will earn as much in 2010 as it did in 2009. The other thing is that even using the last 12 month earnings in the P/E calculation, you still get a P/E that is at the 5 year average high.

When you look at the Graham Price, I get one for 2009 that is $57.38 and one for 2010 that is $55.23. The Graham Price also uses an estimate of earnings to come up with a value. However, the current stock price is approximately at the Graham Price. This is usually a good price, but besides using absolute values when valuing stock prices, you need to also use relative values. The stock price on this stock has often been below the Graham Price. The low stock price over the past 10 years has been some 28% lower than the Graham Price. If you look at an average of the high and low stock prices, even here, the average high/low stock price has been some 10% lower than the corresponding Graham Price.

It is only looking at the Price/Book Value ratio where the current price might be shown to be good. The current Price/Book Value Ratio of 1.42 is lower than the long term average by 10%. (Although, for a price is be good, you want to have a current Price/Book Value ratio 20% lower than the long term average.) The last thing to look at is the dividend yield. The current dividend yield of 1.75% is higher than the long term average of 1.57%. However, to show a very good stock price, you would want the dividend yield to be higher than the long term high. The long term high is 1.99% and this is higher than the current dividend yield.

When I look at analysts recommendations, I find that this stock has recommendations from Strong Buy to Sell and everything in between. However, everywhere I look there are far more Hold recommendations than anything else. Although there are a number of Buy recommendations, I can find only one of each of the Strong Buy, Underperform and Sell ratings. The consensus recommendation is a Hold. (See my site for information on analyst ratings.) Some analysts feel this stock is a buy even though the P/E is higher than historical values because of its future earnings potential. Others do not find it attractive because of the lack of recent dividend increases.

As I said yesterday, I plan to continue to hold on to the shares I own. I feel that over the long term I will make a reasonable return on this stock. However, I would not be interested in buying more at the moment as I think the stock price is too high.

This company is a transcontinental railway operating in Canada and the U.S. Its rail network serves the principal centers of Canada, from Montreal to Vancouver and the U.S. north-east and mid-west regions. Alliances with other carriers extend its market reach throughout the U.S. and into Mexico. Canadian Pacific Solutions provides logistics and supply chain expertise. Its web site is www.cpr.ca/. See my spreadsheet at www.spbrunner.com/stocks/cp.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. Also, look at other investing notes on my website at www.spbrunner.com/investing.html. Follow me on twitter.

Thursday, March 4, 2010

Canadian Pacific Railway

I am today reviewing this stock, (TSX-CP) because it has published its fourth quarterly results and I own this stock. I have owned this stock since October 2006 and I have made a return of 0% per year on my shares. Since I bought them for basically the same price as they are today, I am earning a dividend yield of 1.8%, which is the current yield.

First, I should mention that both this stock and CNR are on the dividend lists that I follow of Dividend Achievers and Dividend Aristocrats (see indices). However, CP has not raised their dividend since early in 2008, while CNR has consistently raised their dividends each year over the last 10 years.

The growth figures for this company are a bit mixed. The best would be for Total Return, which for the last 5 and 10 years is just over 14% per year for each period. The worse figures are for Cash Flow from Operations, and for the last 5 and 10 year periods, Cash Flow as declined 8% per year and 3% per year over these periods. The other things to mention is that revenues only grew by 2% per year for the last 5 years and the earnings only grew by 7% per year over the last 5 years.

The Liquidity Ratio is up recently to 1.03. This is ok, but not great. The asset/liability ratio is much better at 1.76. The return on equity at 9.1% for the year ending in 2009 is fine, with the 5 year average being better at 12.8%. Also, the accrual ratio is ok at 3.35, but what I do not like to see is the net income being higher than the Cash Flow from Operations. You have to question the quality of the earnings when this occurs and also, when the cash flow from operations drops over 50%, which it did between 2008 and 2009.

I will continue to hold my shares. I have only had them for 3 years, and we have gone into a recession since I bought them, so not making money on this purchase is not unreasonable. Tomorrow, I will talk about whether the current price is good or not and what the analysts are saying about this stock.

This company is a transcontinental railway operating in Canada and the U.S. Its rail network serves the principal centers of Canada, from Montreal to Vancouver and the U.S. north-east and mid-west regions. Alliances with other carriers extend its market reach throughout the U.S. and into Mexico. Canadian Pacific Solutions provides logistics and supply chain expertise. Its web site is www.cpr.ca/. See my spreadsheet at www.spbrunner.com/stocks/cp.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. Also, look at other investing notes on my website at www.spbrunner.com/investing.html. Follow me on twitter.

Wednesday, March 3, 2010

Superfusion by Zachary Karabell

Chimerica was first coined by Niall Ferguson (one of my favorite authors). He was first to remark on the closeness of US & China’s economies. Our problem (i.e. the rest of the world’s problem) is how USA and China will deal with this. What no one seems to mention is that these countries can destroy themselves and their economies by going to war.

Before WWI, Germany’s and France’s economies where heavily integrated and it certainly did not stop them from war. Mankind has shown himself to be, at times, highly destructive, no matter what the costs. Will China’s rise in power without war? I certainly hope so.

I think that the economic rise of Asia and parts of South American is great. We in the West are rich. Yes, we have problems, and yes, we have poor. However, this has nothing to do with the economic rise of the rest of the world. We have problems in spite of our wealth. This is because it takes more than money to solve human problems.

The full title of this book is Superfusion: How China and America became One Economy and Why the World’s Prosperity Depends on It. Karabell talks about how States try to control commerce for their own benefit. America is no different. They believed passionately in free trade and open markets because in the 20th Century it has served them well. However, the very success of open markets has now undermined America’s power. Karabell talks about how America now faces a new challenge. (See page 292.)

Can America adjust to a world of greater affluence in which it is one of several important pillars? They seem unsure of how to deal with this. But the USA has muddled their way through lots of other problems. There is a quote of “Gods protects fools, drunks and the United States of America”. There are lots of debates on who said this and the exact wording, but you probably have heard of versions of this before. Another quote I like is my Winston Churchill, who said, “America always does the right thing after it exhausts all other possibilities”.

We think of America being heavily involved in the 2 WW’s. However, they did not start them; they just finished them. Yes, the Americans can be aggressive at times, but they do have a short attention span. I think that as long as China doesn’t do anything over stupid, we will get through the rise of China just fine. The Chinese can be overly sensitive and defensive, but I do not think that they are stupid.

In 1946, America ended British supremacy and the British Empire. Britain had asked USA for an interest-free loan of $5B, repayable over a 50 year period. The British were certain that their friend and ally would say yes without so much as a question. Astonishingly, the Americans said no. In the end, America loaned Britain $3.7B at 2% interest. Britain had to terminate any tariffs and duties that privileged its colonies. It had to also abide by the Bretton Woods Agreement of 1944 and make the dollar the reference point for global exchange rates rather than the English pound. (See page 302.)

Will China do this same sort of thing to America? Who knows? However, we are sometimes treated better by our enemies than our friends. See a book review at National Committee on United States and China Relations.

See and hear Zachary Karabell talk about this subject on Carnegie Council’s website. This is a long video of some 60 minutes. You can also see excerpts on YouTube. Is Chimerica coming to an end? See a blog by Niall Ferguson at Chimerica is Heading for Divorce.

On my website is how to find this book on Amazon if you care to purchase it. See Karabell. Also, this book review and other books I have reviewed are on my website at Book Reviews.

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. Also, look at other investing notes on my website at www.spbrunner.com/investing.html. Follow me on twitter.

Tuesday, March 2, 2010

Canadian National Railway 2

I am today continuing my review this stock, (TSX-CNR) because it has published its fourth quarterly results and I own this stock. I have owned this stock since 2005 and I have made a return of 12.2% per year on my shares. I have not had this stock for long, so I am only earning 2.8% return on my original investment.

The first thing I look at is the Insider Buying and Insider Selling information. For this stock, there is an eye popping $85.9M sale of stock by officers of the company in 2009. Since the beginning of this year, there has been a bit of buying and a bit of selling. The one recent change that shows some faith in this company by insiders is the recent increase in dividends. Dividends were increased by almost 10%.

The next thing is the P/E ratio. The 5 year average low is 10.9 and the 5 year average high is 15. It would therefore appear that the current P/E of 15.3 would show the current stock price to be high. If you look at the Price/Book Value Ratio, you will see that the current ratio is almost 15% higher than the long term average. This also suggests a current high stock price.

If you look at the Graham Price, the stock price is almost 25% above this Graham Price. I get a Graham Price of $45.86 for 2009 and $43.20 for 2010. The problem is that most analysts feel that the earnings for 2010 will be less than for 2009. Earnings are expected to pick up in 2011 and for that year, I get a Graham Price of $46.68. If you look at the spreadsheet, you will find that at sometime during a year, the stock price was very close to or lower than the Graham Price. So, it would appear that if you are patient and keep an eye on this stock, you could get it for a value at or very close to the Graham Price.

The only thing that suggests a current good price is the dividend yield. The current yield is 1.9% and the 5 year average is 1.6%. Getting back to the Graham Price, the spreadsheet shows that the best 5 and 10 year dividend yields are when the average price used to determine these yields is close to the Graham Price. I know that some people like just using the dividend yield to see if the stock price is good. However, for this stock, all but this shows the current stock price too high.

When I look at the analysts recommendations, I find that they range from Strong Buy to Hold. The consensus recommendation is a Buy. (See my site for information on analyst ratings.) What analysts like about this stock is the low percentage of Dividends to Earnings and Cash Flow. This is the Payout Ratio, and the Payout Ratio in connection with earnings is 25% and in connection with cash flow is 21%. This means the dividend is safe.
The other thing that is liked about this stock is the current liquidity. There are a number of ways of looking at this and if you look at the ratio of current debt to cash flow, the ratio is a health 1.84.

What makes investing so interesting is the various opinions about the stocks and the various ways people look at the same stock. I intend to hold on the stock I have in this company, and I am not currently in the market to buy more. There is seasonality to the market and the market tends to be at the highest in the spring and seems to come down in the fall. I tend to do purchases in the fall, unless there is a very good reason to do otherwise.

Canadian National Railway Company and its operating railway subsidiaries, spans Canada and mid-America, from the Atlantic and Pacific oceans to the Gulf of Mexico, serving the ports of Vancouver, Prince Rupert, B.C., Montreal, Halifax, New Orleans, and Mobile, Ala., and the key metropolitan areas of Toronto, Buffalo, Chicago, Detroit, Duluth, Minn./Superior, Wis., Green Bay, Wis., Minneapolis/St. Paul, Memphis, St. Louis, and Jackson, Miss., with connections to all points in North America. Its web site is www.cn.ca/. See my spreadsheet at www.spbrunner.com/stocks/cnr.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. Also, look at other investing notes on my website at www.spbrunner.com/investing.html. Follow me on twitter.

Monday, March 1, 2010

Canadian National Railway

I am today reviewing this stock, (TSX-CNR) because it has published its fourth quarterly results and I own this stock. I have owned this stock since 2005 and I have made a return of 12.2% per year on my shares. I have not had this stock for long, so I am only earning 2.8% return on my original investment. However, when you hold this stock for something like 10 years, you could be earning around 8% on your original investment.

One of the nice things about this stock is that the dividends have also been increased during the recent recession. The increases for the last few years have been just under 10%. The 5 year increase in dividends has been just over 20% per year. So, this stock has been rewarding people who invest for the long term. The 10 year growth in dividends is almost as good, coming in at 17.6% per year.

The growth figures on this stock for the financial year ending in 2009 are a mixed bag. Most of the 10 years growth figures are better than the 5 year growth figures. This is because we are just coming out of a recession, so it is not unusual. For example, the growth in cash flow from operations has increased only 1.5% per year over the last 5 years, but it has increased by 8.7% per year over the last 10 years.

Earnings on this stock have been much better. The growth in earnings for the last 5 and 10 years has been over 12% per year. The growth in Total Returns has also been very good. For the last 5 years, it has been 10.9% per year. For the last 10 years, it has been even better at 17.9% per year.

The next thing to talk about is the Asset/Liability Ratios. First, the Liquidity ratio has improved lately and is now higher than either the 5 year or 10 year average. This ratio for the financial year ending in 2009 is 1.20. The 5 and 10 year averages were 0.80 and 0.72. The Asset/Liability Ratios have always been higher and much better. The current ratio is 1.81. This is also higher than the 5 and 10 year averages. The last thing to talk about is the Return on Equity. This has been quite good, even lately. The 5 year average is 18.6%. The ROE for 2009 is a bit lower, but is still good at 16.5%.

I have been pleased with my investment in this stock and will continue to how what stock I own. Tomorrow I will talk about what the analyst say and whether or not the current stock price is good.

Canadian National Railway Company and its operating railway subsidiaries, spans Canada and mid-America, from the Atlantic and Pacific oceans to the Gulf of Mexico, serving the ports of Vancouver, Prince Rupert, B.C., Montreal, Halifax, New Orleans, and Mobile, Ala., and the key metropolitan areas of Toronto, Buffalo, Chicago, Detroit, Duluth, Minn./Superior, Wis., Green Bay, Wis., Minneapolis/St. Paul, Memphis, St. Louis, and Jackson, Miss., with connections to all points in North America. Its web site is www.cn.ca/. See my spreadsheet at www.spbrunner.com/stocks/cnr.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. Also, look at other investing notes on my website at www.spbrunner.com/investing.html. Follow me on twitter.

I have also updated my index spreadsheet and it is at index portfolio.