Tuesday, April 5, 2011

Richelieu Hardware Ltd 3

I first bought this stock (TSX-RCH) in 2007 and then some more in 2009. I have made a total return to date of 23% per year (sorry yesterday I mistakenly said 2.3%) with about 1.2% attributable to dividend income. On this stock, the current dividend yield is 1.4% and it has a 5 year median yield of 1.35%. The dividends are low, but the dividend increases are good. The 5 and 10 year growth rate for dividends is 12.5% and 16% per year, respectively. The increase for 2011 was 22%.

In looking at the Insider Trading report, I find a minimum amount of insider buying and insider selling. I also find that only the CFO and Officers' of the company have more stock options than shares. Both the CEO and directors have more shares than stock options. In fact, the CEO owns almost 7% of this company.

I get 5 year median low Price/Earnings Ratio of 12.3 and a 5 year median high P/E Earnings of 17. I have a current P/E ratio of 15.6. Also, I get a 5 year median low Trailing P/E Ratio of 13.6 and a 5 year median high Trailing P/E of 18.7. I get a current Trailing P/E 17. When you look at sites that give you a P/E based on last years earnings, you need to compare the P/E ratio to trailing P/E ratios.

The current P/E ratio of is a little higher than the average 5 year median P/E ratio of 14.7 and the Trailing P/E ratios is a little lower than the average 5 year median P/E of 17.2. The Trailing P/E ratios are based on last year actual earnings. My current P/E ratio is based on earnings estimates for 2011.

I get a current Graham Price of $23.12 and the current stock price of $30.85 is some 33% higher. The 10 year median difference between the Graham Price and the stock price is 41%. So by this measure, the stock price is relatively closer to the Graham Price than usual. There has been few times when the stock price of this stock has been at or below the Graham Price. This is because the stock is a growth stock.

I get a current Price/Book Value Ratio of 2.57 and a 10 year median P/B Ratio of 2.86. The P/B ratio is only 90% of the 10 year median P/B ratio and this tends to point to a good current stock price. I get a current dividend yield of 1.43% and a 5 year median yield of 1.35%. These are close, but the current one is a bit better. The yield for this stock is rather low. The 10 year growth potential of this dividend is 5.5% based on yearly growth of 14.5%. So, if you bought this stock today, in 10 years time you could be earning 5.5% on your current investment.

When I look at analysts’ recommendations, I find Buy and Hold recommendations. The consensus would be a Hold recommendation. (See my site for information on analyst ratings.) One analyst said he is giving this a hold because the stock price has been moving up so much lately. Other analyst’s mention it virtually debt-free status. A 12 month stock price is given between $31 and $33 for those giving this stock a hold rating.

I bought this stock for both capital gains and increasing dividend income. I am pleased with my purchase and will keep this stock.

Another blog talks about his dividend increases at Frog of Finance.

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 here Richelieu. See my spreadsheet at 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 for stocks followed and investment notes. Follow me on twitter.

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