Wednesday, December 29, 2010

Transcontinental Inc

This is a stock (TSX-TCL.A) that I follow, but for which I have yet to blog about. It is fairly well followed company that is into print media. They have a financial year end of October 31st of each year. They on the dividend lists that I follow of Dividend Achievers and Dividend Aristocrats (see indices). They have a fairly good record of increasing their dividends.

The 5 year average dividend yield of just over 2% is not a bad rate and the yield has been steadily increasing from under 1% to the current one of 2.2%. The recent dividend increase in 2010 was 12.5% and this is a healthy increase after no dividend increases in 2009. The 5 and 10 year growth rate for dividends is 10.8% and 13% per year, respectively. Considering the current 2.2% dividend yield, the dividend potential on this stock would be 3.7% dividend yield in 5 years and a 6.2% dividend yield in 10 years on money invested today if they kept to the average 5 year increase of 10.8% per year.

If you had held this stock for the last 10 years, you would have made a total return of around 7% with about 1.8% of that return in dividends. Considering that most industrial and retail stocks get hit hard during recessions, this is good return. Unfortunately, if you had held this stock for just the last 5 years, your total return would be in negative territory, with a loss of around 4% per year, with an average dividend of around 1.6%. This stock is still not back to the highs it achieved in 2004 and 2007.

I think that the 10 year total return on this stock is what you should look at. This would mean that you could make good money on this stock over the long term. In the short term, you are going to have such problems as recessions. The Leverage (Asset/Book Value) is rather average at around 2.15. The Liquidity Ratio has been low because of high Accounts Payable. This ratio has a 5 year average of 0.91. The latest one is better at 1.42. The Asset/Liability Ratio has always been better with a 5 year average of 1.89 and a current one of 1.93.

The revenue has grown over the past 5 and 10 years run around 1% and 2% per year, respectively. This is because of a fall revenue in 2009 and 2010 and they should start to do better next year. The growth in Cash Flow is ok running at about 6% per year. The growth in Book Value is better over the last 10 years, with a growth rate of over 9% per year compared to the last 5 years at a growth rate of 4.5% per year.

The Return on Equity is mixed. The 5 year average is just 6% because of low ROE for 2008 and 2009. However, the ROE was much better for 2010 at 13.4%. However, no one expects that this company will have great year in 2011, but this is expected to improve in 2012.
Tomorrow, I will talk about what the analysts’ says about this stock and what my spreadsheets say about its current stock price.

Transcontinental, one of Canada's top media groups, is the largest printer in Canada and Mexico and the fourth-largest in North America. In addition to commercial printing, it operates 150 websites and is a leading publisher of consumer magazines, French-language educational resources and community newspapers in Quebec and the Atlantic provinces. Its web site is here Transcontinental. See my spreadsheet at tcl.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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