Melcor Developments Inc 2

I first bought this stock (TSX-MRD) in July 2008 and some more in August 2008 and April 2009 and July 2009. I have made a total return on this stock of 16%. The return occurred mainly because I got this stock very cheap in 2009. Probably just over 2% of my return is in dividends. I originally bought this stock as it was pointed out as a good one by Mike Higgs when he ran a website on dividend paying growth stocks. This stock is considered often with REITs, as it is a real estate company.

There is a minimum amount of insider buying (just less than $.5M). Insiders have more shares than stock options. Recently the insider’s that received options seem to be retaining them and this is a good sign. The company has recently raised their dividend by a third. This shows managements faith in future earnings and cash flows to cover the increased dividend. Also, the Melton family owns just over half of this company. Also, Melcor has also been buying back shares and they have been reduced by just over 1% per year of the outstanding shares over the past 3 years.

When I look at the 5 year median Price/Earnings Ratios, I get a low P/E of 6.3 and a high P/E of 14.9. I also get an average of 9.2. So the current P/E Ratio of 10 is just over the average for this stock. However, a P/E ratio of 10 is a good one. I get a Graham Price of $20.70. This is some 22% higher than the current stock price of $16.15. The high median difference between the Graham Price and the stock price is 22%. So by this measure, the stock price is relatively high. However, buying a stock at a price less than the Graham Price is considered a good price.

I get a 10 year median Price/Book Value Ratio of 1.04 and a current P/B Ratio of 1.36 and also by this measure, the stock price is relatively high. However, a P/B Ratio of 1.36 is a good ratio. I get a 5 year median yield of 2.78% and a current yield of 2.48%. This also does not show a current good stock price. However, the 10 year median low yield is just 2.2%, so the yield is better than it has sometime been.

The next thing to look at is the analysts’ recommendations. There seems to be two analysts following this stock and they both give a Buy recommendation. Melcor has just recently issued some convertible debentures of $40M. One analyst is impressed that KingSett Capital bought some $18M of these debentures. There are two articles on this issuance of debentures, one at Yahoo Finance and one at KingSett Capital’s site.

I plan to keep the shares I have in this company. I think that this has been a good investment for me.

This company is primarily engaged in the acquisition of land for development and sale of residential communities, multi-family sites and commercial sites. It operates mostly in B.C. and Alberta. The company also develops, owns and manages commercial income properties, as well as two golf courses. Its web site is here Melcor. See my spreadsheet at mrd.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.