Tuesday, May 31, 2011

Shoppers Drug Mart

I am talking about this stock (TSX-SC) again as I got in annual statements since last review. I have also updated by spreadsheet for the first quarterly report of 2011. I had bought this for my TFSA account. I had tracked this stock for a number of years, but had not bought it until I opened my TFSA account. Unfortunately, it has not done well since Ontario Government changed the rules on generic drugs.

I bought this stock in 2009 and again in 2010 and 2011. I have made a negative 1.2% return on my stock in this company. I recently sold 100 shares to buy into Calian Tech (TSX-CTY), mainly because I liked an investment in Calian better than the current investment in SC. See my blog entries on Calian Tech of May 2011, by clicking here or here.

As far as most growth figures go, this had done quite well. Growth in Revenue is ok, but growth in earnings, cash flow, and book value is good. The 5 and 10 year growth in revenue is 7.3% and 10.4% per year, respectively. The 5 and 10 year growth in cash flow is 10.7% and 11.5% per year, respectively.

The place where growth is not so great is total return. The 5 and 10 year growth in total return is 0% and 10.9% per year, respectively. The portion of this total return that is attributable to dividends is 1.7% and 2.7% per year, respectively. Dividend increases after 2009 was not anywhere near as high as before 2009. However, the last dividend increase was 11% and this stock has a 5 year growth in dividend at 17.4%. Dividends only started in 2005, so there is no statistics for dividend growth beyond 5 years.

The thing that has happened is that the Price/Earnings Ratios on this stock have come down a lot from earlier P/E Ratios. For example, the 5 year median P/E ratio from 2003 to 2008 was 27. However, the current 5 year median P/E ratio is 22and the median P/E ratio for the last couple of year is 17.

P/E Ratios changes can make a lot of difference in capital gains under a stock. The main reason that this stock has preformed poorly over the last 5 years is because P/E ratios have moved lower. Investors in this stock are just not willing to give this stock a P/E ratio of a growth company. Basically, P/E ratios show what investors are willing to pay for x dollars of earnings. That is, if the P/E ratio is 20, investors are willing to pay $20 for each $1 of annual earnings.

Debt ratios on this stock are good. For example, the Liquidity Ratio is currently at 1.62 and the Debt/Equity ratio is 0.66. For the first ratio, higher is better and for the second, lower is better. Return on Equity is also good, with a 5 year median ROE of 15.5.

For Insider Trading, there is a minimal amount of Insider buying and no Insider selling. Management has shown faith in the future by the recent 11% increase in Dividends. There are 165 institutions that own about 47% of this company. There have been buys and sells over the last 3 months, but there is a net increase of 6 buyers and a net increase of just over 4.7M shares.

When I look at analysts recommendations, I find Strong Buy, Buy and Hold recommendations. There are a lot of Hold recommendations, but the consensus recommendation would be a Buy. There are quite a number of analysts following this stock. (See my site for information on analyst ratings.)

Analysts remark on the current slower growth of this company at this time and into the near future. The lower P/E ratios, noted above, points to investors feeling this way also. They also remark on the fact that this company is looking for a new CEO. Some analysts feel that nothing will happen with this stock until a new CEO is appointed.

I will retain the current stock I hold on this company. At present, I will not be purchasing any more. This stock is a very small portion of my portfolio. At some point, I will either buy more to increase its portion in my portfolio, or sell off what I have. I see no point is holding small amounts of stocks for the long term. It remains to be seen whether or not this will be a good investment for me.

Dividend Ninja talked about this stock under Bad News Investing in October 2010.

Shoppers Drug Mart Corp. is a licensor of Shoppers Drug Mart in Canada and Pharmaprix in Quebec. The company owns and operates Shoppers Home Health Care stores. It also owns MediSystem Technologies Inc. and the new Murale Stores. This is a widely held company. Its web site is here Shoppers. See my spreadsheet at sc.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.

Monday, May 30, 2011

McCoy Corp

I recently updated my spreadsheet on this stock (TSX-MCB) as I bought some more of this stock for my TFSA. I had recently sold some Shoppers Drug Mart (TSX-SC) stock to buy some Calian Tech (TSX-CTY) stock and had some money left over. I spent part of this left over money on 100 shares of McCoy Corp (TSX-MCB). I recently paid $4.03 per share for this stock.

The problem with a thinly traded small cap such as McCoy is that there can be a big difference between the Bid and Ask prices (or Buy and Sell prices). That is what people are willing to sell that stock at and what others are willing to buy this stock at. Today, I note that there is a bid price of $4.07 and an ask price of $4.14, a 1.7% difference.

When buying such stock, you need to have an idea of what you are willing to pay for a share and then be patient. On small caps, I often put in a price I am willing to pay (good to the end of the day); and just walk away and only check back the next morning to see what has happen. In doing this, you must be willing to walk away if you do not get the deal you want and try another day. I often get what I want, but not always. You do have to put in a reasonable amount.

I have updated my spreadsheet fully for the financial year ending in December 2010. I have also updated it for the first quarter in 2011. The company paid a special dividend $.04 in March of this year. Note that all dividends were cut in 2010 because the company felt it could not afford to pay any. Dividends have been restored, but at $.04 per year and therefore lower than for 2008, which were at the rate of $.12 per year.

The company has not yet recovered from the last recession. However, revenues, earnings and cash flow were positive for 2010 and were higher than for 2009, even though they showed no gains over the past 5 years. When looking at Insider Trading, although there was not much of either there is net insider buying over insider selling. Also, insiders have been retaining stock options recently issued.

Looking at institutional buyers of this stock, there are 5 holding just under 5% of the company. There has been a small net increase in institutional ownership over the past 3 months with no sales. The company’s management is positive about the future earnings and cash flow by their reinstatement of dividends in 2011.

When looking at the 5 year median Price/Earnings Ratio, I get a low of 6.8 and a high of 17.6. The current P/E ratio, based on $4.14 price is 10.6 and is lower than the 5 year median of 13.0. I get a Graham Price of $4.45 and the current price is 7% lower. The 10 year median difference is a stock price 15% above the Graham Price, so this stock price is relatively good.

I get a 10 year median Price/Book Value ratio of 1.72 and a current one of 1.84. This puts the current P/B Ratio at 30% higher than the 10 year median and therefore shows a rather pricey stock price. The last thing is the Dividend yield. The current dividend yield is 1% and the 5 year median dividend yield is 1.9%. I must admit that both the dividend yield and the P/B Ratio have bounced around quite a bit on this stock. (This makes you wonder how valid the median comparison is.)

When I look at analysts’ recommendations, there appears to be only 3 and all 3 given a Buy recommendation. The consensus recommendation would therefore be a Buy. This Buy recommendation comes with a 12 month stock price of $5.38. This gives a potential 30% return on this stock over the next 12 months. The thing that analysts seem to mention about this company is that it is debt free. Certainly, the Debt/Equity Ratio of 0.50 is very good as are all debt ratios on this stock.

McCoy provides innovative products and services to the global energy industry. McCoy's two segments, Energy Products & Services and Mobile Solutions, operate internationally through direct sales and distributors with its operations based out of the Western Canadian Sedimentary Basin and the US Gulf Coast. McCoy's corporate office is located in Edmonton, Alberta, Canada with offices in Alberta, British Columbia, Louisiana, and Texas. Its web site is here McCoy. See my spreadsheet at mcb.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.

Friday, May 27, 2011

Manulife Financial Corp 2

I first bought this stock (TSX-MFC) in 2005 and more in 2006 and 2009. My latest purchase was in October 2010. I have an average amount of this stock relative to other stocks in my portfolio. To date, my total return is a negative 7% per year. I, however, do expect that this stock will improve in due course. The portion of this total return due to dividends would be 3%.

I know that I reviewed this stock briefly in October 2010 because I was considering buying more at that time. I am reviewing it today, as it is one of the stocks I own and I have updated my spreadsheet for the financial year end of December 2010 for this stock. I have also updated my spreadsheet for the first quarter of 2011.

The first thing to look at is Insider Trading. Over the past year, there has not been much of either, but more insider buying and insider selling. The net buying is $.4M. All is being done my directors. When I look at this stock last year, there was also very minimal insider buying and insider selling.

However, as with most large companies, the insiders, except for directors, have lots more stock options than shares. The current CEO has over 3.28M stock options worth around $55.4M.

When I look at 5 year median Price/Earnings Ratios, I get a low P/E of 13.65 and a high P/E of 15.90. By this measure, the current P/E on this stock at 10.71 is relatively low. I get a Graham Price of $21.36 and the current stock price at $16.92 is some 20% lower. The 10 year median low difference between the Graham Price and Stock price is 3.3%. So a difference of $20 shows a relatively low current stock price.

I get a 10 year median Price/Book Value Ratio of 1.94 and a current P/B Ratio of 1.32. That means that the current P/B Ratio is some 68% lower than the 10 year median ratio and again points to a relatively low current stock price. The current dividend yield is 3.1% and the 5 year median yield is 3.2%. A good stock price is when the current yield is greater than the 5 year median yield. This is the only indicator to show a current stock price that is not low. They have just half their stock dividend.

First of all, on analysts’ recommendations for this stock, they are all over the place. I find recommendations of Strong Buy, Buy, Hold, Underperform and Sell. However, the majority of the recommendations are with Buy or Hold. The consensus recommendation is probably a Buy. (See my site for information on analyst ratings.)

All the analysts think that this company will recover. They have a tendency to talk about how long it will take. Some say it will continue to do badly for the next 3 or 4 months and some say it may take as long as 3 to 5 years to recover. Some think that the market is currently being far too negative about this stock.

Analysts’ recommendations sometimes have a lot to do with the particular analysts’ time horizon. Some will only recommend stocks that will do well over the next while. Other analysts have a much longer view when investing. I tend towards to long view, so I will continue to hold my shares in this company. I will not be buying more as I have enough invested in this stock. If you remember my review in October 2010, I was wondering if I should buy more at that time. I did.

See blog of Stock Trade Review which gives this stock a Hold recommendation. The article gives the reasons for this rating. Another blogger Dave’s stock picks talks about why he thinks this stock is a buy. Another blog talks about the effects that the new accounting rules of IFRS will have on insurance companies.

This is a life insurance company in the financial services business. It offers financial protection products (e.g. Life Insurance) and wealth management services (i.e. segregated funds, mutual funds and pension products). They sell products to individuals and business. They are an international company, selling in Canada, US and Asia. This company is listed on Canadian, US, Hong Kong and Philippines Stock Exchanges. Its web site is here Manulife. See my spreadsheet at mfc.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.

Thursday, May 26, 2011

Manulife Financial Corp

I am reviewing this stock (TSX-MFC) because I have updated my spreadsheets for the year ending in December 2010. I have also updated my spreadsheet for the first quarterly report of 2011. There is no doubt that this insurance company has been one of the hardest hit Canadian insurance companies in the recent recession.

I first bought this stock in 2005 and more in 2006 and 2009. My latest purchase was in October 2010. I have an average amount of this stock relative to other stocks in my portfolio. To date, my total return is a negative 7% per year. I, however, do expect that this stock will improve in due course. The portion of this total return due to dividends would be 3%. This would imply that I have lost 10% per year on the share price of this stock.

Manulife finished the year with better earnings that I had in my spreadsheet, but within the range given by various analysts. I had earnings for the year at negative $1.26 and the earnings were negative $.26. The earnings for the first quarter at $.54 were better than any analysts expected. The average earnings estimate for the 1st quarter was $.31.

The only growth that this company has had over the past 5 years is growth in cash flow. The 5 and 10 year growth in cash flow is 8% and 9.4% per year respectively. Also, even though they decreased their dividend by 50% in 2009, over the past 10 years the dividends have grown at the rate of 9.5% per year. Dividends were $.0525 per share in 2000 and are now $0.13 per share. This company’s shares were also split on a 2 for 1 basis in 2006.

No one would have made any money on this stock over the past 5 years. The current share prices are back to the lows of 2006. If you have held this stock for 10 years, you might have broken even or perhaps gained the dividends paid.

There has been small moderate growth in Revenues over the past 5 and 10 years, with 5 and 10 year growth at 3.3% and 8.8%. If earnings estimates are correct for 2011, there will be also a modest growth in earnings over the last 10 years, and no growth over the past 5 years.

Book Value growth over the past 5 and 10 years is 0% and 6.7% per year, respectively. Growth has not been great. Shares have also grown over the past 10 years at the rate of 8% per year. This is because this company has been growing by acquiring other firms.

As far as debt ratios goes, this company is just ok. As with other insurance companies and banks, Asset/Liability ratios are lower and Leverage and Debt/Equity Ratios are higher than for other companies. It is hard to get a fix on the Liquidity Ratio as this is a financial services company, but it is fine. The Asset/Liability is lower than normal for this company. The 10 year median ratio is 1.08 and the current ratio is 1.06.

For the Leverage Ratio and Debt/Equity Ratio, they are also a bit higher than the 10 year median Ratios. The Leverage Ratio is 18.49 compared to a 10 year median of 14.69. The Debt/Equity Ratio is 17.40 compared to a 10 year median of 13.64.

When looking at the Return on Equity, the 5 year median is just 5.2%. This is because this company has not made much money over the past 3 years and lost money in 2010. However, the ROE for the 1st quarter of 2011 is 16.9%, and this is good. It is also better than the ROE prior to 2008, when the median was in the 14% to 15% range.

The Globe and Mail had an interesting article on this stock on May 7th, 2011.

I will be holding on to the shares in this company that I have. I certainly believe this company will recover. Tomorrow, I will look to see what analysts are saying about it. I will also look at what my spreadsheet shows about the current stock price.

This is a life insurance company in the financial services business. It offers financial protection products (e.g. Life Insurance) and wealth management services (i.e. segregated funds, mutual funds and pension products). They sell products to individuals and business. They are an international company, selling in Canada, US and Asia. This company is listed on Canadian, US, Hong Kong and Philippines Stock Exchanges. Its web site is here Manulife. See my spreadsheet at mfc.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.

Wednesday, May 25, 2011

Fortis Inc 2

I first bought this stock (TSX-FTS) in 1987. I bought more in 1995 and 1998. I sold some in 2005, as this stock was relatively too much for my portfolio. My total return on this stock is 13.4% per year. For the shares I bought in 1987, my total return is 13.5% per year. Dividend yield would be in the 4 to5% range over this period of time.

When I look at the Insider Trading, I find some $5.4M of selling. Just over half of the selling is by the CFO. There is some buying, but it is too minor to mention. As with a lot of companies with stock options, all but the directors have lots more stock options than shares.

The CEO has some $14.5M in stock and some$28.7M in options, currently. The CFO has some $3.5M in shares and $8.9M in options, currently. However, in my reviews of 2009 and 2010 I found very small amounts of buying and selling. So, we are not really seeing a pattern here. However, I still do like it that large companies have insiders with more stock options than shares.

According to Reuters, there are 114 institutions that own 22.8% of Fortis stock. Over the past 3 months, there has been net buying of 136,000 shares, but 3 less buyers. So there are net institutional buyers of $4.5M of this stock, which is a $5.8B company. We are talking about less than 1% of this company, so this is a small change compared to the amount owned by institutions.

When I look at 5 year median Price/Earnings Ratios, I get a low of 15.5 and a high of 20.8. I get a current P/E Ratio of 19.1, which would be just over the median P/E towards to high side. I get a Graham Price of $27.62 and the current stock price of $33.24 is 20% higher. The 10 year median difference between the Graham Price and the stock price is 16%, so this would point to a rather high current price.

The 10 year median Price/Book Value Ratio is 1.73 and the current P/B Ratio is slightly lower at 1.71. This current ratio points to a reasonable, but not great current stock price. The 5 year median dividend yield is 3.74% and the current dividend yield is 3.49%. This current dividend yield does point to a higher than median stock price.

Another thing to look at is what the future dividend increases would be on this stock. I find that it is hard to judge. Yes, the dividend increase for the last 5 and 10 years are 13.7% and 9.3%, but ones for 2006, 2007 and 2008 at 14%, 22% and 22% are high by historical increases as far as I can see.

I only have increases back to 1988. For my spreadsheet, I picked 5% per year increases. Humans, I am told are bad on judging what the future holds, so who knows. Read “The Black Swan” by Nassim Nicholas Taleb for an interesting take on future telling by humans.

When I look at analysts’ recommendations, they are all over the place, including Strong Buy, Buy, Hold, Underperform and Sell recommendations. However, the vast majority give a Hold recommendation. The consensus would be a Hold. (See my site for information on analyst ratings.) My spreadsheet points to a relatively high current stock price.

Analysts mentioned the good first quarter of 2011 and think it is a very good start for this year for Fortis. A buy comes with a $36, 12 month stock price and a hold comes with a $34, 12 month stock price. Some Holds just think the current price and P/E Ratio are too high. Another Hold says that we are going to have inflation and this will be a problem for Fortis as most of their operations are regulated.

There is mention that this company has consistently raised their dividend for each of the past 38 years. This is a great record. Fortis is thought of as a low risk, well-managed utility.

I am certainly holding on to what shares I own in this company. This has been a very good investment for me. I will not be buying any more as I simply have enough. I do not let any single investment get to large relative to my portfolio.

The Daily Buy Sell Advisor talks about Fortis at the bottom of this Buy Sell Advisor page. This advisor thinks that Fortis is a good stock and likes it for it diversity of investments. Oilweek Magazine talks about Fortis having a good first quarter in 2011.

Fortis is a diversified, international distribution utility holding company. Its regulated holdings include electric distribution utilities in five Canadian provinces and three Caribbean countries and a natural gas utility in British Columbia. Fortis owns and operates non-regulated generation assets across Canada and in Belize and Upper New York State. It also owns hotels, commercial office, and retail space primarily in Atlantic Canada. Its web site is here Fortis. See my spreadsheet at fts.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.

Tuesday, May 24, 2011

Fortis Inc

I first bought this stock (TSX-FTS) in 1987. I bought more in 1995 and 1998. I sold some in 2005, as this stock was relatively too much for my portfolio. My total return on this stock is 13.4% per year. For the shares I bought in 1987, my total return is 13.5% per year. Dividend yield would be in the 4 to5% range over this period of time.

According to my spreadsheet, the total return over the past 5 years is around 10% per year, with dividends accounting for around 3.3% per year. Over the past 10 years, the total return has been around 18% per year, with dividends account for around 4.25% per year.

Dividend growth has been great on this stock even though the dividend yield has also been good. The 5 and 10 year dividend growth has been 13.8% and 9.3% per year, respectively. The 5 year median dividend yield is 3.7%. Payout ratios are also good, with the Payout Ratio for earnings at around 65% and the Payout Ratio for Cash Flow around 26%.

This has been a great investment for me. On the money I originally invested, I am currently earning a dividend yield of 16.2%. If you lower than for long term inflation of 3%, that still gives me a 13.2% dividend yield on my original investment 24 years ago. The recent dividend increases have been more meager at 7.7% and 3.6% being the last 2 dividend increases. Dividend increases on this stock have declined during market crisis before.

Revenues, earnings and cash flows are growing at reasonable, but unspectacular rate. Revenues, over the past 5 and 10 years have grown by 5.8% and 7% per year, respectively. Earnings, over the past 5 and 10 years have grown by 5.5% and 9% per year, respectively. Cash Flow, over the past 5 and 10 years has grown by 7% and 11.4% per year, respectively.

The best growth is probably in book value at 10% and 9.5% per year. The Return on Equity is also fine; ending 2010 at 9.8% and ROE has a 5 year median rate of 8.2%. This has also slowed down during the recent market crisis, but is again picking up.

The last thing to discuss is debt ratios. This is a utility and as such, you expect debt ratios that are not great. First, the Liquidity Ratio at 0.79 is low. However, they also have a good cash flow to make up for this. The Asset/Liability Ratio is also a bit low at 1.46. Ideally, you want to see is these ratios at 1.50, but this does not occur on utility stocks. Ratios lower than 1.00 implies that assets cannot cover liabilities.

The Leverage Ratio at 3.90 is high as is the Debt/Equity Ratio at 2.68. However, these are the sort of ratios you get for utilities, like Enbridge, Transalta, Emera, etc.

I note that My Own Advisor blogger has this stock. Also, blogger The Loonie Bin has this stock.

This has been a good investment for me. If you want to start a portfolio off slowly and with little risk, this may not be a bad place to start. Most utilities are considered to be low risk. See my blog on setting up a portfolio in the investment notes section of my website.

Fortis is a diversified, international distribution utility holding company. Its regulated holdings include electric distribution utilities in five Canadian provinces and three Caribbean countries and a natural gas utility in British Columbia. Fortis owns and operates non-regulated generation assets across Canada and in Belize and Upper New York State. It also owns hotels, commercial office, and retail space primarily in Atlantic Canada. Its web site is here Fortis. See my spreadsheet at fts.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.

Friday, May 20, 2011

Pembina Pipelines Corp 2

I bought this stock (TSX-PPL) in December 2001 for my Trading Account and for my RRSP Account. I have made a return of 17.4% per year on this stock. Pembina used to be an Income Trust (TSX PIF.UN), but changed to a corporation in mid-2010. They did not change their dividend at conversion, but this is a possibility in 2014 if they do not have sufficient earnings and cash flows. It is in 2014 that they will run out of the tax pool, and will have to start paying taxes.

When I look at the Insider Trading report, I find $1.5M net insider buying. There is a very small amount of insider selling by CEO. Insiders do not have a substantial percentage of shares in this, however, a number of insider do own shares worth in the $1M range. For example, the CEO owns shares worth $8.5M. Pembina does have a company share buying plan and a number of insiders are using this to buy shares. Insiders also hold convertible debentures. All this shows that insiders do have confidence in this company.

There are 74 institutions that hold just over 15% of the shares of this company. Over the past 3 months, there have been 13 net institutional buyers for a net increase in shares of 1.6M. This also shows confidence in this stock. However, you cannot assume that institutional buyers make better choices than individual buyers do.

When I look at 5 year median Price/Earnings Ratios, I find a low of 12.6 and a high of 16.9. The current P/E of 28 would appear to be high. The main reason for this high P/E is that earnings are expected drop almost 30% in 2011. When I look at Trailing 5 year median P/E Ratios, I get a low of 15.6 and a high of 20.9. The current Trailing P/E is 20.3. So, this is also towards the high side. (Trailing P/E is using last year’s earnings and this year’s price.)

I get a 10 year median Price/Book Value Ratio of 2.23 and a current one of 3.27. The current one is some 40% above the 10 year median. The reason for this is Pembina’s Book Value has not grown over the years.

I get a current Graham Price of $11.42. The Current stock price of $23.14 is some 104% higher than the Graham price. The stock price has often been above the Graham Price, but the 10 year median high difference is 45%. Even if you use the higher Graham Price of 2010 of $13.47, the current stock price is still about 72% higher than the Graham Price.

The current yield is 6.7% and the 5 year median yield is 8.8%. The main reason for this is that the dividend has not increased since 2009. However, all these ratios do point to a rather high current stock price. The reason for the lower estimate earnings for 2011 and 2012 seems to be because of the company’s gas servicing business unit where marketing margins are expected to decline because of increased competition.

When I look at analyst’s recommendations, they are all over the place. I find recommendations of Strong Buy, Buy, Hold, Underperform (or reduce) and Sell. The consensus recommendation would be a Hold. There are far more Hold recommendations than all the others combined. (See my site for information on analyst ratings.)

It would seem that some think it is wise to reduce your investment in this firm or sell outright. The reason seems to be that the stock is thought to be overpriced. That is the stock price is too high and that they give a 12 month stock price lower than the current stock price. A number also expect that this should be only bought for income and it will have low growth going forward. One analyst calls this stock, boring but steady and gives it a Strong Buy.

I like utility stock for income and I will continue to hold the shares that I have in this company. I will not be buying any more because I have enough. However, I may change my mind on this stock if they cannot grow their dividends beyond 2013 or 2014.

Pembina transports crude oil and natural gas liquids produced in Western Canada. It owns and operates oil sands pipelines and has a growing presence in midstream and natural gas services sectors. Pembina holds a 50% interest in the Fort Saskatchewan Ethylene Storage Facility. Its web site is here Pembina. See my spreadsheet at ppl.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.

Thursday, May 19, 2011

Pembina Pipelines Corp

I know it is early for me to publish today, but it now or never. I have a very busy afternoon, but first I have to go out to lunch with a friend. This is sometime I always love to do. The only thing better than going out to lunch with friends, is going to out to dinner with friends.

I bought this stock (TSX-PPL) in December 2001 for my Trading Account and for my RRSP Account. I have made a return of 17.4% per year on this stock. Pembina used to be an Income Trust (TSX PIF.UN), but changed to a corporation in mid-2010. They did not change their dividend at conversion, but this is a possibility in 2014 if they do not have sufficient earnings and cash flows.

They are paying a dividend that is higher than both the earnings and cash flow. The reason they can do this is because they have tax pool that will pay taxes until 2014. By that time, they will have to increase earnings and cash flow or they will have to reduce dividends to get their payout ratios to normal levels.

Increases in Dividends should not be expected anytime soon. They are still paying a healthy 6.7% dividend yield. It should be expected, that over time, dividend yield would decrease into the 4% to 5% range. Either stock price will rise or dividends will decrease to get there. The company says that it can maintain the current dividend until the end of 2013.

According to some analysts, earnings and cash flow will not even be close to covering the current dividend by 2012. Others think that earnings will improve in 2013. The earnings estimate for 2010 were $1.08 and they came in at $1.14. Average earnings estimates for 2011 and 2012 are $.82 and $.90. However, cash flow estimates in 2010 were fairly accurate, where estimate was for $1.56 and it came in at $1.52. Dividends are currently at $1.54.

Most of the growth figures are good to very good, expect for Book Value. As for most unit trust type companies, book value has not grown over the past 5 and 10 years. First, let’s talk about Revenue, which has the best growth rates. Over the past 5 and 10 years, revenues per share have growth at the rate of 24% and 15% per year, respectively. Next, we can talk about total return; over the past 5 and 10 years, total return has been at 14% and 19% per year, respectively. About 7.8% to 9.8% of these total returns would be in dividends.

Earnings have grown over the past 5 and 10 years at 12% and 4% per year, respectively. Cash flow has grown over the past 5 and 10 years at 8% and 5% per year, respectively. As you can see, the growth in this company was quite good, except for book value. Once this company has been a corporation for a while, this should grow also. I should also point out that this company has paid a lot out in distributions to its policyholders since it went public in 1997.

Until recently, the Liquidity Ratio was low with a median ratio of around 0.66. However, for the year ending in 2010, the Liquidity ratio was very good 2.02. The Asset/Liability Ratio has always been good and was at 1.73 at the end of 2010. It has a median ratio of 1.78 over the past 5 years. Both the Leverage Ratio at 2.38 and the Debt/Equity Ratio at 1.38 are ok.

The last thing to talk about is the Return on Equity. The ROE at the end of 2010 was 15.8% and the 5 year median ROE was 15.7%. Both these ratios are good.

I have been pleased with my investment in this company and I will continue to hold the shares that I have. I will not be buying anymore as I have enough. So far, this has been a very good investment for me. However, I would expect the return to be lower in the future than the 17% per year total return I have made in the past.

I note that blogger Dividend Girl has Pembina stock.

This is the biggest Pipeline Income Fund in Canada. It is a utility. It is engaged in the transportation of light conventional and synthetic crude oil, condensate and natural gas liquids in Western Canada. Its web site is here Pembina. See my spreadsheet at ppl.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.

Wednesday, May 18, 2011

Davis & Henderson Corp 2

I first bought this stock (TSX-DH) in 2009 and I have since bought more in 2010 and 2011. I have made a total return of 31% per year on this stock. Dividend payments probably are around 11% per year of this total return. The reason I have done so well is because I bought this stock at a very good price in 2009.

The Insider Trading report will only cover this stock from the beginning of the year when it because a corporation. Since the beginning of the year, there has been $1.2M insider buying by CFO, officers and directors. There has been no insider selling. This is positive. Also, insiders do not hold any stock options. It would appear that 53% of this company is owned by 38 institutions. Over the past 3 months, there have been 8 institutional buyers and 7 institutional sellers for a small net gain in shares owned by institutions.

When I look at the 5 year median Price/Earnings Ratios, I have a low P/E ratio of 8 and a high of 11.9. I get a current P/E ratio of 10, which is just higher than the 5 year median. Also, a P/E of 10 is rather low. I get a Graham Price of $22.37 and this is about 9% above the current stock price of $20.30. The current range of differences between the Graham Price and Stock price, is from -24% to 6%. So a difference of -9% is just below the median range. These both point to a rather average current price.

I get a 10 year median Price/Book Value Ratio of 1.90 and a current one of 1.89. Here there is not much difference between the 10 year P/B Ratio and the current one. The current dividend yield of 5.9% is lower than the 5 year median of 10.2%. The company just lowered the dividends by 35%, but there is more than a 35% difference between the 5 year median and current dividend yield. So, on a dividend basis, the stock price is not a great one. However, none of this shows a particularly high stock price. In investing, all you can hope for is getting the stock at a relatively decent price and this stock seems to be there.

When I look at analysts recommendations, I find Buy, Hold and Underperform recommendations. The consensus would be a Hold recommendation. (See my site for information on analyst ratings.) Analysts seem upset because the company did not meet the earning estimates for the 4th quarter of 2010. However, the earnings were higher than expected in the 1st quarter of 2011.

Most analysts give a 12 month stock price at or slightly below the current stock price. However, the one buy recommendation give a 12 month stock price at $30. A number of analysts comment on the current good yield of almost 6%. No one thinks that this is a growth stock.

A number of people have mentioned the recent purchase of MortgageBot by Davis and Henderson. While it is felt the price was high for this company, it is also felt to be good buy. It was purchased by a combination of shares and debt.

In the Globe and Mail’s Money Cruncher column, on March 8th, 2011, this is a stock that came up in the screen called “In Search of Wealth Creators”. However, I should point out that stock screening can only point out certain aspects of a stock. You really need to investigate a stock further after the screening to see if the company is really what you are looking for.

As I said yesterday, I think that this was a good investment for me and I intend to hold this stock in my portfolio.

Davis & Henderson is a leading solutions provider to the financial services marketplace. Founded in 1875, the company today provides innovative programs, technology products and technology based business services to customers who offer chequing accounts, credit card accounts and personal, commercial, and other lending and leasing products. Its web site is here Davis & Henderson. See my spreadsheet at dh.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.

Tuesday, May 17, 2011

Davis & Henderson Corp

I first bought this stock (TSX-DH) in 2009 and I have since bought more in 2010 and 2011. I have made a total return of 31% per year on this stock. Dividend payments probably are around 11% per year of this total return. The reason I have done so well is because I bought this stock at a very good price in 2009.

This stock started out as a Unit Trust company and as such, it paid a dividend yield of around 10% per year. However, it has converted to a corporation and has cut its dividend by 35% and the yield is now at 5.9%. This was a necessary change so that the Payout Ratios as a corporation would be sustainable. As an income trust, they had a fairly good record of increasing dividends, as they were increase by 4.9% per year over the past 5 years. They have stated that they intend to grow dividends in the future as their business grows.

Total return over the past 5 and 10 years was lower than mine was. This stock hit highs in 2005 that they have not yet managed again; however, they are getting close. The high for 2005 was $23.84. The high so far for 2011 the high is $22.04. The 5 and 10 year total returns were 5% and 18.5% per year, respectively. The portion of this total return that was dividends was around 8% and 11% per year, respectively.

The best growth figures for this stock were for revenue. The 5 and 10 year growth in revenue per share was 10.5% and 8.8% per year, respectively. Cash flow growth was the next best, but lower, at 4.7% and 5% per year over the past 5 and 10 years. Earnings growth is poor to non-existent as 2010 was not a good year for this company. Book Value is the same, but then most Unit Trust companies did poorly in this regard.

The next thing to talk about is debt ratios. The Liquidity Ratio is the only poor one. The company has very high Accounts Receivables and Accounts Payables. The current Liquidity Ratio is 0.91. This means that current assets cannot cover current liabilities. However, they do a good enough cash flow to make up the difference.

Beyond the Liquidity Ratio, the other debt ratios are quite good, as they do not have much in the way of debt. The Asset/Liability Ratio is very good at a current 2.33. The Leverage ratio is rather average at 1.75 and the Debt/Equity Ratio is quite good at 0.75.

The last item is the Return on Equity. The ROE has always been quite good on this stock. The one for the end of 2010 was 14.7% and the one for the last 12 months is 16.4%. The 5 year median ROE is 16.5%.

I am pleased with my investment in this company and I think it was a good investment for me. I plan to hold on to what stocks I now own. I have a reasonable investment in this company and may not buy anymore because of this.

Davis & Henderson is a leading solutions provider to the financial services marketplace. Founded in 1875, the company today provides innovative programs, technology products and technology based business services to customers who offer chequing accounts, credit card accounts and personal, commercial, and other lending and leasing products. Its web site is here Davis & Henderson. See my spreadsheet at dh.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.

Monday, May 16, 2011

Power Financial Corp 2

I first bought this stock (TSX-PWF) in 2001 and then some more in 2004. My total return has been 8.14% per year. The dividend portion of this total return would around 4%. This company used to have a good record of increasing it dividend each year and it used to be on the dividend lists that I follow. They were taken off the dividend lists because dividends have not been raised since 2009.

When I looked at the Insider Trading report, I find that there is some $12.2M of net selling that seems to be all from one director. The director still has substantial shares in this company. When insiders buy, you know because they feel good about the future of a company. However, insider selling can be done for a lot of reasons, and the most common is that money is needed. Institutions own 11.8% of this company. In the last 3 months, there has been a net of 8 new buys and a net of just over 10M shares bought, by institutions.

When I look at the 5 year Median Price/Earnings ratios, I get a low of 11.9 and a high of 16. The current P/E Ratio of 12.14 is close to the low P/E Ratio above and better than average. I get a Graham Price of $30.14, so the current price of $31.33 is just 4% above this. The 10 year median difference between the Graham Price and the stock price ranges from 0% to 35%. So again, this shows a better than average current stock price.

The 10 year median Price/Book Value Ratio is 2.50 and the current P/B Ratio is 2.00. This makes the current ratio just 80% of the 10 year median ratio and points to a good current stock price. Because some analysts are now referring to the Price/Sales (or Price/Revenue) Ratios, I will mention this ratio also. I have a 10 year average P/S Ratio of 0.82 and a current one of 0.62. This also shows a good current price.

The 5 year median yield is 4.3% and the current one is higher at 4.5%. This also points to a good current stock price. This might be surprising since the dividend has not changed since 2009. The thing is that the current stock price is the same or lower than the stock price was from 2005 to 2007. As far as my dividend yield on my original cost of this stock, the stock I bought in 2001 is currently earning 7.4% and the stock I bought in 2004 is earnings 4.7%.

It is hard to know what the dividend growth potential of this stock is. In good times, this stock increased its dividends around 20%. It is hard to know when they will again raise dividends, but the current Payout Ratio on Earnings for 2011 is expected to be 54% and the Payout on Cash Flow is expected to be 16%. The Payout on Cash Flow is good, but when this company was raising dividends before, the Payout Ratio on Earnings was below 40%. One analyst thought there might be a small raise this year.

When I look at analysts recommendations, I find Strong Buy, Buy and Hold recommendations. The consensus recommendation would be a Buy. (See my site for information on analyst ratings.) Analyst talk about this stock being a low risk and that it is attractively priced. Most analysts expect that that total return will be very decent for this stock in 2011.

I think that this has been a good investment for me and I will continue to hold my shares. I will not be buying any more as I have enough of my portfolio invested in the insurance and financial sectors.

I note that the Passive Income Earner blogger has recently written about this company.

I have sold some of my Shoppers Drug Mart (TSX-SC) stock and bought some Calian Technologies Ltd (TSX-CTY) stock. I had thought of buying both Calian and Enghouse Systems (TSX-ESL) as they both are good stocks. The concern was over diversification or having too many stocks in my portfolio, so I decided to just pick one of these good stocks to buy.

This company is a holding and management company. Its operations provide a range of individual and corporate financial and fiduciary services in North America and Europe. It holds interest in the following companies: Great-West Lifeco, Great-West Life, London Life, Canada Life, Great-West Life & Annuity, Putnam Investments, IGM Financial, Investors Group Mackenzie Financial, and Pargesa Group. Controlling shareholder of Power Corp of Canada is Paul Desmarais. They have 30.1%, but have 64.6% voting control. Its web site is here Power Financial. See my spreadsheet at pwf.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.

Friday, May 13, 2011

Power Financial Corp

I first bought this stock (TSX-PWF) in 2001 and then some more in 2004. My total return has been 8.14% per year. The dividend portion of this total return would around 4%. This company used to have a good record of increasing it dividend each year and it used to be on the dividend lists that I follow.

However, as with other Canadian Life Insurance companies, this company has not raised their dividends since 2009. The growth in dividends over the past 5 and 10 years is still high at 10% and 14.5%. I can find no indication when they might raise dividends again. Their Payout ratios based on earnings and cash flow are coming back down to levels that are more reasonable.

The total return for this company over the past 5 and 10 years has been at 2.2% and 9.8% per year. The dividend portion of this total return would be around 3.9% per year. The 5 year total return has been lousy, but all Canadian Life Insurance companies have had a rough time of it during this past recession. The best that can be said is that at least the 5 year return is positive.

The growth figures for this company have not been great over the past 5 years but the 10 year growth figures have mostly been fine. Take the cash flow; the growth over the past 5 years is at 4.7% per year. My spreadsheet shows the 10 year growth at 30% per year, but that is only because 10 year ago was a poor year. The real growth is closer to 19% per year, which is still a very good growth rate.

Growth in revenues over the past 5 and 10 year is quite low at 4.3% and 6.8% per year. However, analysts seem to feel that there will be much better revenue growth for 2011 and 2012. As far as I can see, revenues for the first quarter of 2011 are down from those of the first quarter of 2010.

The Asset/Liability Ratio is lower for the first quarter of 2011 at 1.10 than it has been for sometime. What is complicating matters is that this company is now reporting using the IFRS accounting rules, in place of the Canadian GAAP accounting rules. Under these new rules, Leverage Ratio has doubled between 2010 and the 1st quarter of 2011, from 12.81 to 22.89. The same thing has happened to Debt/Equity Ratio, which has gone from 10.83 to 20.31. This is quite a change and it is hard to know the real effect of these accounting rule changes being made.

I am pleased with my investment in this company and believe it will be a good long term investment for me.

This company is a holding and management company. Its operations provide a range of individual and corporate financial and fiduciary services in North America and Europe. It holds interest in the following companies: Great-West Lifeco, Great-West Life, London Life, Canada Life, Great-West Life & Annuity, Putnam Investments, IGM Financial, Investors Group Mackenzie Financial, and Pargesa Group. Controlling shareholder of Power Corp of Canada is Paul Desmarais. They have 30.1%, but have 64.6% voting control. Its web site is here Power Financial. See my spreadsheet at pwf.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.

Sun Life Financial Inc 2

This is yesterday post. I will do today's post shortly.

I first bought this stock (TSX-SLF) in 2000 and then some more 2001, 2003 and 2006. I have made a total return to date of 4.4% per year on this stock. Of this total return, probably 3% per year is from dividends. Most Canadian insurance companies have been hit hard by this recent recession and they have yet to fully recover.

As with a lot of stocks today that give out stock options freely, the insiders of this company have lots more stock options than shares, and there is lots of insider selling. The CEO has sold $7M of shares and the officers of the company have sold $12M shares. This totals $18M of shares sold and this selling has all occurred since the beginning of this year.

It is only the directors that have more shares than options and there has been some minimal buying by directors, but this is too small to even bother with. There are 353 Institutions that own some 55% of this stock. Over the past 3 months there has been net buyers of just over 5M shares by institutions. (See my site for information on Insider Trading.)

When I look at 5 year median Price/Earnings ratios, I find the low at 12.4 and the high at 14.4. The current P/E at 11 is therefore at a relative low and is also absolutely at a relative low. P/Es at 10 or below are generally considered low. I get a Graham Price for this stock of $39.12 and a stock price of $30.46. The stock price is some 22% below the Graham Price. When looking at the median difference between the Graham price and low stock price over the past 10 years, I get a difference of 20%. So this also points to a low stock price.

I get a 10 year median Price/Book Value Ratio of 1.52 and a current P/B Ratio 1.25. The current P/B Ratio is some 82% of the 10 year median P/B Ratio and points to a current low stock price. The last thing is the dividend yield. The dividend yield at 4.7% is higher than the 5 year median dividend yield of 3.9%. So, in summary, every thing is pointing to a low current price.

A low current relative stock price, of course, can mean a lot of different things. It can be low because it is not expected to do well in the near future. And, this would appear to be the case here looking at what the analysts are recommending.

There are quite a number of analysts following this stock. The recommendations vary from Strong Buy, Buy, Hold and Underperform. The consensus recommendations would be a Hold. (See my site for information on analyst ratings.) Analysts’ recommendations can vary also because some look at short term investing and some long term investing.

Many analysts talk about the dividend being safe. It is not expected to raise it dividend in the short term, but it is expected to be a good investment in the long term. Analysts with buy recommendations say that it is a good company at a cheap price. Buy recommendations come with a 12 month stock price of around $35.00 and Hold recommendations come with a 12 month stock price of around $33.00.

I plan to hold on to what stock I have in this company. I will not be buying more because I have enough invested in this company. If you are a long term investor like me, you do not sell good companies because they are going through a rough patch.

I note that bloggers My Own Advisor and The Loonie Bin both have Sun Life stock.

Sun Life Financial is a leading international financial services organization providing a diverse range of protection and wealth accumulation products and services to individuals and corporate customers. Chartered in 1865, Sun Life Financial and its partners today have operations in key markets worldwide, including Canada, the United States, the United Kingdom, Ireland, Hong Kong, the Philippines, Japan, Indonesia, India, China and Bermuda. Its web site is here Sun Life. See my spreadsheet at slf.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.

Wednesday, May 11, 2011

Sun Life Financial Inc

I first bought this stock (TSX-SLF) in 2000 and then some more 2001, 2003 and 2006. I have made a total return to date of 4.4% per year on this stock. Of this total return, probably 3% per year is from dividends. Of course, part of the reason I have done so well, comparatively, is because I bought in 2000 before the price rose that year. Most insurance companies have been hit hard by this recent recession and they have yet to fully recover.

The only growth figures that are any good are for dividend increases, with the 5 and 10 year growth at 7.8% and 11.6% per year, respectively. The other thing to mention, of course, is that this company has not raised it dividend rates since 2008. Their payout ratios are getting much better and it is expected that they will start to raise their dividends again over the next few years.

Most of the other growth figures are low or non-existent. However, some of the 10 year growth figures are low, but not terrible. For example, the growth in earnings over the past 10 years is 6.4% per year and the growth in book value over the past 10 years is 6% per year. Also, the growth in revenue over the past 10 years is 4.3%. The 5 year growth for both revenue and book value is around 2%, and therefore very low. The growth in earnings is negative over the past 5 years.

The growth in cash flow for both the last 5 years and 10 years is negative. Also, total return growth is negative for the past 5 years and just under 2% (less than the dividend payments) over the past 10 years. This has not been a very profitable company recently. However, I am a long term investor, and it is expected that insurance company, and in particular, this one, will recover over the next few years.

I plan to continue to how the stock I have in this company at the present time. As I had said, the last recession hit insurance companies quite hard, but they will recover. I think that this will be a good long term investment for me. It just will take sometime before I make some decent money from it. In the meantime, I am collecting dividends, with a yield of 4.7%.

Sun Life Financial is a leading international financial services organization providing a diverse range of protection and wealth accumulation products and services to individuals and corporate customers. Chartered in 1865, Sun Life Financial and its partners today have operations in key markets worldwide, including Canada, the United States, the United Kingdom, Ireland, Hong Kong, the Philippines, Japan, Indonesia, India, China and Bermuda. Its web site is here Sun Life. See my spreadsheet at slf.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.

Tuesday, May 10, 2011

Enghouse Systems Ltd 2

This company (TSX-ESL) is another small tech firm. This stock has been recommended by Keystone Financial Publishing as a good Small Cap tech stock with dividend. For their website, see Keystone Publishing. As far as I can see, Keystone Publishing tends to recommend stocks for the short term, rather than for long term buy and hold investors.

What I see in the Insider Trading report is some $.84M of net Insider Buying. There is a minimum of Insider Selling. There seems to be a number of insiders who has 2-3% of the company’s outstanding shares in stock options. Also, a couple of insider own almost 35% of this company. Insiders seem to be holding on to their stock options recently and this is a good sign.

The company has just raised their dividend by 25%. This is also a sign that the management is confident in the future earnings and cash flow of the company. There are also some 8 institutions that own just over 25% of this company. Over the past 3 months, there have been 2 institutional buyers and 2 institutional sellers with a net increase in shares owned. (See my site for information on Insider Trading.)

When I look at 5 year median Price/Earnings Ratios, I find the low P/E to be 18 and the high to be 28.5. That puts 19.4 closer to the low, relatively speaking. However, the P/E ratios of this stock are on the high side. I get a current Graham Price of $7.53. The current stock price of $10.09 is some 34% higher. The median difference between the Graham Price and stock price is 21% and the high difference is 54%. So the current difference is towards the high side. (See my site for information on calculating Graham Price.)

I get a 10 year median Price/Book Value Ratio of 1.76. The current P/B Ratio is 2.08, which is some 18% higher and this points to a relatively high stock price. The last thing to look at is yield. The current yield is 1.98% and the 5 year median yield is 1.87%. This points a relatively low stock price. If you take everything together, you get a price that is pretty average on a relative basis for this stock.

It is hard to know if there is one or two analysts following this stock. However, the only recommendation I can find is a Buy recommendation for this stock. So, the consensus recommendation would be a buy. (See my site for information on analyst ratings.) The 12 month stock price given is $11, so the 12 month total return on this stock would be around 12%. This company is thought to be well-run and the CEO, Stephen Sadler, is well-respected.

I find a blog entry about small cap stocks talking about this stock, Enghouse. This stock seems to be a well managed tech small cap stock and might be a good investment for those who can afford the risk of investing in a small cap.

Enghouse Systems Limited is a global provider of enterprise software solutions serving a variety of distinct vertical markets. Its strategy is to build a large diverse enterprise software company through strategic acquisitions and managed growth. Its web site is here Enghouse. See my spreadsheet at esl.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.

Monday, May 9, 2011

Enghouse Systems Ltd

This company (TSX-ESL) is another small tech firm. This stock has been recommended by Keystone Financial Publishing as a good Small Cap tech stock with dividend. For their website, see Keystone Publishing. As far as I can see, Keystone Publishing tends to recommend stocks for the short term, rather than for long term buy and hold investors.

This company has just started to pay dividends in 2008 and the yield is quite low at 1.98%. This is the highest yield so far for this stock. The other thing to say about the dividends is that they have increased them quite nicely so far. The latest increase, which was in 2011, was for 25%. The other good thing about the dividends is the payout ratios. The Payout Ratio on Earnings has been around 37.5% and the Payout Ratio on Cash Flow has been around 17.3%. Both these ratios are low and therefore quite good.

The best growth for this company is in revenues and cash flow. The 5 and 10 year growth in revenue per share is 14.5% and 11% per year, respectively. The 5 and 10 year growth in cash flow has been 13% and 8% per year, respectively. Both these are important for the company’s long term growth.

However, other growth has not been as good. The 5 and 10 year growth in EPS is 13% and 2.6%. The 5 year growth is good, but the 10 year growth is quite low. The 5 and 10 year growth in Book Value is 3.2% and 6.7%. Most importantly, this stock has not earned its investors much money. The 5 and 10 year growth in total return is 2.4% and 5% per year, respectively. I do not expect much for the last 5 years, but I would think that over the past 10 years the return would be better than 5% per year. Dividends would be less than 1% of the total return, so they do not factor into this much.

The one area that this stock shines is in debt ratios. The current Liquidity Ratio and Asset/Liability Ratio are very good at 2.28 and 2.92 respectively. For these ratios, a good ratio is 1.50 and above. The other debt ratios of Leverage and Debt/Equity are also good, and currently are at 1.52 and 0.52. The company does not have much debt.

I guess the last thing to talk about is the Return on Equity. The ROE has been quite low over the past few years and has recently increased to a decent 8.5% at the end of the last financial year end at October 2010. The ROE over the past 12 months, ending in the first quarter of 2011 in January 2011, is a bit better at 8.7%. The 5 year median ROE is rather low at 5.8%.

This also looks like an interesting stock. Tomorrow, I will look and see what the analysts say about it.

Enghouse Systems Limited is a global provider of enterprise software solutions serving a variety of distinct vertical markets. Its strategy is to build a large diverse enterprise software company through strategic acquisitions and managed growth. Its web site is here Enghouse. See my spreadsheet at esl.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.

Friday, May 6, 2011

Leon's Furniture Ltd 2

This is a company (TSX-LNF) that I own. I first bought Leon’s in 2006 and have bought more in 2008, 2009 and 2010. My total return is 7.7% to April 30, 2011. The portion of my return from dividends is probably around 3%. Therefore, the portion from capital gains would be around 4.7%.

On the Insider Trading report, there is a bit of Insider Buying and $1.1M of Insider Selling. The Net Insider Selling is just under $1M. However, this selling does not materially affect the number of shares owned by insiders. Insiders do not have options. However, it would seem that the Leon family owns just under 75% of the shares. According to Reuters, 10 institutions hold just over 12% of the outstanding shares. Over the past 3 months, there have been 3 institutional buyers and 2 institutional sellers. There was a net decrease in shares of around 110,000. In other words, not much is happening.

The company raised the dividend in 2010 by 28%, so this shows management’s faith in the company to produce earnings and cash flow to cover the dividend increase. The Payout from earnings has a 5 year median of 44% and the Payout from cash flow has a 5 year median of 32%. Both these payout ratios were lower in 2010.

When I look at the 5 year median Price/Earnings Ratios, I find a low P/E of 12 and a high P/E of 17. The current P/E of 15 is close, but just above, average for this stock. I get a Graham Price of $10.95 and the current stock price of $13.63 is some 24.5% above this. However, this company’s stock price has seldom been at or below the Graham Price. It is on average some 20% above the Graham Price and the 10 year median difference between the Graham Price and Stock Price is 37.5%.

I get a 10 year median Price/Book Value Ratio of 2.49 and a current P/B Ratio of 2.33. The current Ratio is some 93% of the 10 year median ratio. The Dividend Yield is currently at 2.64% and the 5 year median dividend yield is 2.53%. So, all this shows a good, but not great currently price. Also, the current price is lower because the company did not meet the EPS estimates. When this happens, you often get a good buying period for a stock.

When I look at analysts’ recommendations, there appears to be only one analyst that follows this stock. The current recommendation is a Hold. (See my site for information on analyst ratings.) I know a number of people like this stock because of the low debt and decent dividends. However, this stock is heavily owned by the Leon family. This stock has often been pushed by the Investment Reporter of MPL Communications. Their website is at Leons. They like this stock for its growth and income potential.

I certainly plan to hold on to the shares I have. I believe this is a good investment for me.

This company sells home furnishings, appliances and electronics through a chain of retail facilities and franchises located in Canada. Leon family owns 68% of this company. Its web site is here Leons. See my spreadsheet at lnf.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.

Thursday, May 5, 2011

Leon's Furniture Ltd

This is a company (TSX-LNF) that I own. I first bought Leon’s in 2006 and have bought more in 2008, 2009 and 2010. My total return is 7.7% to April 30, 2011. The portion of my return from dividends is probably around 3%. Therefore, the portion from capital gains would be around 4.7%. This is not a great performance, but the 5 year performance of the TSX over the 5 years to the end of April 30, 2011 is just 2.7%.

This is a small, family owned company with little debt and a reasonable dividend. The current dividend yeidl is 2.64% and the 5 year average yeild is 2.53%. The company also gives out special dividends as they can afford to. The 5 and 10 year growth in dividends is 9.8% and 12% per year, respectively. They have a fairly good record of raising their dividend. The last time they did not raise the dividend was 2009, but instead they gave out a special dividend that year.

I noticed on the chart for Leon’s that the stock price fell just after the annual report came out. This is probably because revenues fell for the second year in a row. Leon’s had already said that they expected head winds in the later part of 2010 because of the HST. They also did not make the earnings estimate of $.90 and EPS came in at $.87. Companies tend to be punished for missing estimates.

However, estimates can be a real crap shoot. Estimates are future predictions and humans are really bad at predicting the future. I know I use estimates, but you have to use something. People tend to think that what when on in the past will continue. Not a particularly bad idea, and there is a certainly amount of inertia occurring. Things tend to go on as they have until things change. The stock market seems to punish companies that do not meet the estimates or do not surprise on this upside. This is just the way things are.

For this company, growth is mainly good but not great. Earnings growth over the past 5 and 10 year was 6% and 7% per year, respectively. Cash Flow growth over the past 5 and 10 year was 6% and 8% per year, respectively. The best growth was for the Book Value over the past 5 and 10 years at 9.75% and 8.9% per year, respectively. The Return on Equity has also been good, with ROE at the end of 2010 at 15.4% and the 5 year median at 17.9%.

We should also talk about debt ratios. The best are the Liquidity Ratio and Asset/Liability Ratio currently at 2.62 and 3.62. It is good if these ratios are at 1.50 and above. For other two ratios of Leverage and Debt/Equity lower is better; and it is best to compare with companies in the same business. However, they are both low at 1.38 and 0.38, respectively. The last one of Debt/Equity is especially low and being below 0.50 is very good.

I am pleased with my investment and I will continue to have an investment in this company. I believe Leon’s has been a good investment for me.

This company sells home furnishings, appliances and electronics through a chain of retail facilities and franchises located in Canada. Leon family owns 68% of this company. Its web site is here Leons. See my spreadsheet at lnf.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.

Wednesday, May 4, 2011

Calian Technologies Ltd 2

This is an interesting small cap company (TSX-CTY) with a very nice dividend. As I said yesterday, this stock was on a Globe Investor Number Cruncher is an investment column. See column called Where ‘debt’ is a dirty word . The Financial Blogger has this stock on his Top Ten Canadian Dividend Stocks list.

On the Insider Trading report, you can see several things. First, there has been, over the past year some $3.5M of insider selling. Most of the selling is by one officer who holds just under 3% of the shares of this company. No other insider holds anywhere near this amount of shares. Recent stock options granted have been retained mostly. The company is buying back shares and over the past 3 years has reduced outstanding shares by just under 8% and just under 3% per year.

In looking at this report, I see that insiders have more shares than options and I like this. Another interesting thing is that just under 40% of the shares of this company are held by 7 institutions. Over the past 3 months, institutions have been net buyers of just over 3,000 shares. See Reuters.

When I look at the 5 year median Price/Earnings Ratios, I find them in a very narrow band. The 5 year low median P/E is 9.5 and the 5 year median high is 10.9. The current P/E Ratio at 11 is relatively high, but is not high in absolute terms. The 5 year median trailing P/E Ratios are from a low of 8.8 to a high of 12.2. The current trailing P/E Ratio is 10.8.

I get a current Graham Price of $17.43. The stock price of $18.86 is some 8.2% above this. Over the past 10 years, the median difference between the Graham Price and the stock price is the stock price being from 21% below the Graham Price to 11.1% above. The current difference is a bit closer to the high difference.

I get a 10 year median Price/Book Value Ratio of 2.21 and a current one of 2.27. The current one is almost 9% higher than the median ratio. The best indicator is the dividend yield. The current dividend yield is 5.3% and the 5 year median yield is 4.24. This is the one indicator that shows a relatively good current price. However, the company has just raised the dividend to get it above 5%.

As far as I can tell there is only one analyst that is following this stock and this analyst has a Buy recommendation on it and has had a Buy recommendation on it for sometime. The expected stock price in one year is $22.00. (See my site for information on analyst ratings.) Calian is considered a solid, stable, high-quality company that will grow slowly. This company has a lot of government contracts.

The TSI Network blog talks about Calian on April 11th 2011. This article points out that this company has lots of cash and no debt. There is also a discussion on this stock at Canadian Money Form. In the forum, people mainly talk about how illiquid the stock is. That is there are few buyers and sellers. And, there is an article on this company at Ottawa Business Journal. This article noted that government cost cutting could affect the company’s future revenue. Even Wikipedia has an entry for Calian.

This would be the sort of company you would buy for a decent dividend and decent future growth.

Calian sells technology services to industry and government in Canada and around the world. Calian provides customers with ready access to an exceptional team of engineers, telecommunications and technology professionals, health care professionals and other highly qualified staff. Its web site is here Calian. See my spreadsheet at cty.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.

Tuesday, May 3, 2011

Calian Technologies Ltd

This is an interesting small cap company (TSX-CTY) with a very nice dividend. This stock came up on a Globe Investor site. The Globe Investor Number Cruncher is an investment column about screening for stocks and funds. They did one on companies with little to no debt. See column called Where ‘debt’ is a dirty word . I also noted that the Financial Blogger has this stock on his Top Ten Canadian Dividend Stocks list. These are certainly good reasons to investigate this stock further and do a spreadsheet on it.

First, let’s talk about dividends. This company just started to pay dividends in 2003. The growth in dividends since then, over some 7 years, is a great 25% per year. The growth is a little lower for the last 5 years, but still at a great 20% per year. The last increase came just recently at 13% this year. Some years they have raised the dividends twice. (Also note that this companies financial year runs to September 30th each year, so when I am talking about years, I am talking about a year ending at September 30th.)

I can only find one analyst looking at this company and he gives a potential EPS at $1.72 in 2011. The company says that they expect to earn between $1.50 and $1.80. However, you slice and dice these figures, they still put the dividend at a potential payout from earnings a little high, from 65% to 56% to 54%. The payout from cash flow could also be quite high with a potential of being around 52%.

This is what the CEO says about the increase in dividends. "Based on our earnings to date, our future outlook and our healthy cash position we have increased our quarterly dividend to $0.25 per share; an increase of over 13%. Our annualized dividend of $1.00 per share represents a yield in excess of 5% relative to recent share prices. We continue to maintain a strong balance sheet that provides not only the basis for future growth and the ability to weather any future downturns, but also the added customer confidence in our ability to execute". He certainly seems confident in the company’s ability to pay the increase dividend.

The total return on this stock has certainly been very good over the past 5 and 10 years. The compounded growth for the last 5 and 10 years has been at 12% and 15% per year, respectively. The compounded growth in stock price for the last 5 and 10 years has been at 7.5% and 12% per year. Compare this to the compounded growth of the TSX index at for the last 5 and 10 years a 4% per year and this company does look very good.

I like to see good growth in revenue, because good growth in revenue bodes well for future gains in earnings and cash flow. However, the 5 and 10 year growth in revenue is ok rather than great at 6% and 8% per year, respectively. Part of the reason is that revenue fell about 5% in 2010 from revenues earned in 2009. Cash flow, excluding changes to current Assets and Liabilities, is the cash flow now thought to be the one to track. This company has done quite well in this category as the growth in this cash flow for the last 5 and 10 years is at 9% and 10% per year, respectively.

The growth in earnings is great for the last 5 years, but low for the last 10 years. However, 10 years ago takes us to 2000, when a lot of tech companies made money. For this company, the earnings crashed in 2001 and have been gradually improving since. The 5 and 10 year growth in earnings is at 11% and 4% per year, respectively. Growth in Book Value is ok. Over the past 5 and 10 years, book value has grown at 5.7% and 5.9% per year.

Now we get to the debt ratios and they are indeed good, especially the Liquidity Ratio and the Asset/Liability Ratio. These ratios are 2.75 and 3.45 at the end of 2010. The 5 year median ratios are 2.23 and 2.81. Any ratios at or above 1.50 are good. The other ratios are good without being great. The Leverage ratio is good at 1.55 and the Debt/Equity Ratio at 0.55 is good at the end of September 2010. A D/E Ratio is considered very good at 0.50 and below. This ratio has been low for a number of years and the current one (1st quarter of 2011) is very low at 0.41.

I find this a very interesting company and worthy of further investigation and possible investment.

Calian sells technology services to industry and government in Canada and around the world. Calian provides customers with ready access to an exceptional team of engineers, telecommunications and technology professionals, health care professionals and other highly qualified staff. Its web site is here Calian. See my spreadsheet at cty.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.

Monday, May 2, 2011

Insider Trading

The only clear message on insider trading is lots of insider buying. This can tell you that insiders really feel that their company is undervalued in the market. There can be many reasons for this. Insiders could feel that a company is being unjustly punished for a recent bad quarter or year. For insiders to buy, they much also feel that the company has a bright future.

However, do not take a company’s repurchase of their shares the same way. Companies repurchase shares for lots of reasons, and from what I have read, they do not do their repurchasing at low stock prices. However, I do take increases in dividends as Management believes in the ability of the company to provide future earnings and cash flow to cover the increase in dividends.

Insiders with options probably sell because they feel that options are part of their pay. Also, they may not want to hold lots of stock in the company in which they work. Look at what happened to Enron Corp. I understand that lots of employees had stock in this company and also had lots of their pension money in this company. When it when bankrupt, they lost their jobs, their savings and their pensions. Enron showed that you should not be too dependent on the company in which you work. If the company goes bankrupt, you can lose a lot. In bear, markets there are always companies that go bankrupt.

Looking at Insider Trading Reports shows how much company’s officers own in both shares and options. I must admit, I do not much care for companies where insiders have masses amount of options and few shares. The push to give options to company’s insiders was to align insiders interest with the shareholders. But this is not what occurred. At some companies, insiders are cashing in options in the 8 figures. Look at my recent review on BCE where I found that the CEO sold off $43.7M shares. He was cashing in on his options.

I look at reports to see what is happening. Is there a lot of insider selling or insider buying? I do not like it when there are massive amounts of Insider selling. I recently reviewed BCE and found that the CEO has sold off some $43.7M in shares (from Options). See my blog entry at BCE. Insider buying is a good indication of the insider’s faith in the company as is when insider retain the options they are given. (I also consider management has faith in the company when they increase the dividends.)

Some of the big companies I owned seem to lately have an orgy of insider selling and not only BCE (TSX-BCE). Enbridge (TSX-ENB) insiders have recently sold almost $50M. See my blog entry at Enbridge. Also, Canadian National Railway (TSX-CNR) insiders have sold some $27M. See my blog entry at CNR. Compare this to some smaller insider ownership companies like AltaGas Ltd (TSX-ALA) where the CEO owns some 1.5% of the company and there is some insider buying. See my blog entry at AltaGas. Also, take a look at TECSYS Inc (TSX-TCS) where insiders own 60% of the company. Here there is a bit of insider buying and no insider selling. See my blog entry at TECSYS.

I also like to know if there are large portions of the shares owned by someone or some company. I do not mind companies with a large family ownership position. However, not everyone feels this way though. Look at recent money spend to get rid of Stronach from Magna and related companies. There are pros and cons to family ownership of companies. The best pro is that these companies tend to have very low debt and good debt ratios. A con would be that family secessions could be tricky.

Wikipedia does a have are large item on this subject of Insider Trading. Reuters gives interesting information on institutional buyers of companies. See Reuter. Note that for Canadian companies you have to follow the stock symbol with “.to”. For example, for BCE use “BCE.to” to get information on this stock.

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.