Home Capital Group 2

I am reviewing this stock (TSX-HCG) today as I was just reading about how it is a good dividend growth stock. It was mentioned because of its good combination of dividend yield and dividend growth over the past 5 years. This company is on the dividend lists that I follow of Dividend Achievers and Dividend Aristocrats (see indices).

As usual, I first looked at the Insider Trading report. The thing to note is that there was some $12.6M of Insider Selling over the past year. It was spread out over the year and spread out over the insiders. That is there was selling by CEO, CFO, Officers and Directors. There was a tiny bit, too small to almost mention, of Insider Buying by a Director over the past year. Home Capital Group has been busy buying back its shares. The other thing is that employees have been buying small number of shares through their employees’ company plan.

At least for this company, insiders own more shares than they have of stock options. None of this tells us much about how insiders feel about the future of the company. I guess the one clue we have is the recent increase in dividends shows some confidence in the company. The dividend increase was at 12.5%, which is a decent increase. The last thing to note is that of the studies I read about company buy backs of shares is that no one has ever accused a company of buying back shares when they are underpriced (which you would think would be the time to do so). That is why I think buy backs do not tell us very much, except perhaps that, the company has some money to spend.

The 5 year median low P/E ratio for this stock is 12.6 and the 5 year median high P/E is 16.2. For this stock, I get a current P/E of 9.5. Sites that look at the P/E ratio based on the last 12 months of earnings get the same P/E ratio of 9.5. This would point to a current good stock price. For the Graham Price, I get a current one of $47.03. The stock price is just slightly lower than this. This also points to a good current stock price.

I get a Price/Book Value ratio of 2.32 and a 10 year P/B ratio of 3.60. This makes the current P/B ratio only 65% of the 10 year ratio. This shows a good relatively P/B ratio and so a relatively good stock price. The last thing to look at is the yield. I get a current one of 1.4% with a 5 year average yield of just 1.2%. However, the yield has been better as this stock has a 10 year average high of 1.8%. This is mainly due to the yield reaching up to over 3% in 2008 and 2009.

So what do the analysts recommend? What I find are lots of Strong Buy and Buy recommendations. There is also a Hold recommendation, which seems to be quite a recent one. The consensus would be a Buy. (See my site for information on analyst ratings.) Every one seems to feel that this is a well managed company. Analysts quote a 12 month stock price between $58 and $65. It is obvious that analysts think that you should buy this stock for future capital gains. However, one did mention the recent 12.5% dividend increase.

I am not currently buying anything at the moment. I had been hoping for a fall in the markets this fall and with today’s rally, this is looking increasing unlikely. I will continue to follow this stock.

Home Capital Group Inc. operates through one subsidiary, Home Trust Company, to provide mortgage lending, deposit, retail credit and credit card issuing services. They have subprime mortgages.
Its stock is widely held. Its web site is here Home Capital. See my spreadsheet at hcg.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.