Rogers Sugar Inc

I do not own this stock (TSX-RSI). This stock was brought to my attention by Dividend Ninja. This company used to be a Unit Trust (TSX-RSI.UN) but it has recently converted to corporation. On change to a corporation, it lowered its dividend.

Lowering the dividend was the right thing to do as corporation cannot pay the same dividend rates as Unit Trusts. The dividend yield is still good on this stock at 6.93%, but not as good the 5 year median dividend yield of 10.18%. And, please note that a lot of people feel that, in the end, old unit trust stock will have dividend yields in the 4 to 5% range. They will get to this level because of a combination of decreasing dividends and stock price increase.

This stock has a habit of not only raising dividends, but lowering them. The company says their dividends will be subject to periodic review by the company’s board. This would imply that their past dividend policy has not changed. The other thing to note is that the company said the new distribution amount, taxed as dividend, would leave their shareholders with the same after tax amount. The old distribution was tax as interest.

The 5 year median Payout Ratio on earnings is 96% and the 5 year median Payout Ratio on Cash Flow is 58%. The expected Payout Ratio on earnings by the financial year September 2012 is expected to be a more reasonable value of 76%. The Payout Ratio on Cash Flow hasn’t been as bad as that for earnings. However, by the financial year September 2012, it is expected to be 52%. Please note that both these ratios had been overt 100% in the past.

Another feature of old income trust stock is that Book Value growth was lousy. This is because when you buy out higher distributions than earnings, a book value deficit is created. This stock is no different and 5 and 10 year book value growth is 2% and negative 8% per year, respectively. However, the Book Value grew at 4% between September 2010 financial year end and the end of the second quarter at April 2011.

The best growth for this stock has been in total return. The 5 and 10 year total return has been at 14% and 9.2% respectively. The portion of this total return coming from dividends has been 10% and 9%, respectively. Going forward the portion of the total return from dividends would probably be lower.

Other growth figures are not as good. The main problem with Revenues, Earnings and Cash Flow is that they tend to go up and down a lot. The 5 and 10 year revenue per share growth is 6.9% and 5% per year, respectively. The 5 and 10 year earnings growth is 2.7% and 5.9% per year, respectively. The 5 and 10 year growth in Cash Flow per share is 3.9% and 0% per year, respectively.

In looking at debt ratios, these also tend to fluctuate. The current Liquidity Ratio is 1.29, but the 10 year median ratio is just 1.08. This is just ok. The Asset/Liability Ratio is much better at 1.87 and a 10 year median of 1.92. Both the Leverage Ratio and Debt/Equity Ratio are fine with current ratios at 2.15 and 1.15, respectively.

The Return on Equity has been good for the last 5 years. This was not true prior to 5 years ago. The ROE for September 30, 2010 was 16.6%, with a 5 year median of 16.6%. Both these are very good. The ROE for the 12 months ending in April 2011 is even better at 23.5%.

You would characterize this stock as one to buy for income and modest capital gains. However, income might fluctuate. It would be of median risk.

Rogers Sugar Inc. was established to hold all of the common shares and notes of Lantic Inc. Lantic Inc. is a refiner, processor, distributor and marketer of sugar products in Canada. Its web site is here Rogers Sugar. See my spreadsheet at rsi.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.