Thursday, August 26, 2010

Astral Media Inc

I never owned this stock (TSX-ACM.A). This is a Canadian Media company that people buy for growth and some dividend income. They have raised their dividends in the past, but generally infrequently and they keep it to a low percentage of their cash flow. Their dividend growth is much better over the last 5 years at 27% average per year, compared to the last 10 years, which is at an average of 13% per year.

However, this stock has not raised their dividends since 2008 and they have not announced any increases for this financial year. (The company’s financial year end at 31 August each year.) Their yield is low, currently at 1.4% and has a 5 year average yield of just 1.2%. Dividend increases are substantial when they occur, in the 25% to 33% range.

In total returns, you can expect between 8% and 10% per year on a long term average. The 10 year average total return on this stock is just over 10%. This is a realistic and normal return for dividend paying stocks. The total returns on this stock tend to have more growth than dividends, as the dividends only make up about 1.2% of the annual return. You want to have a mix in your dividend portfolio of stocks that pay higher dividends, but increase them at lower levels and stock that pay lower dividends and give bigger increases. Please note that the 5 year total return is much lower, but this is common in today’s market.

This stock has had good growth in revenues and cash flows. The balance sheet is quite strong with the Asset/Liability Ratio current at 2.17 and an average of 2.67 over the last 5 years. The Liquidity ratio is a bit lower at 1.60 current and with a 5 year average of 1.53. The Return on Equity is also very good at 20.7% for last year, a current one at 14.9% and a 5 year average of 14.8%. The Leverage ratio is generally under 2.00, with a current one of 1.86 and this is also good. Leverage Ratio is Assets over Book Value.

I am following this stock, as it is one recommended by MPL Communications. I do not have it as I already have other consumer stock with the same dividend characteristics. However, I follow other stock because you never know when one you have can falter and you need a replacement.

Astral Media is a leading Canadian media company, reaching people through a combination of highly targeted media properties in television, radio, outdoor advertising, and interactive media. The company operates some 20 TV channels and 83 ratio stations across 8 provinces and 100 websites. They focus on specialty and pay television radio, outdoor advertising and interactive media. Ownership: 63% by Greenberg family. Substantial shares owned by Paul Bronfman. Its web site is here Astral Media. See my spreadsheet at acm.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.

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