Monday, July 11, 2011

Progressive Waste Solutions Ltd 2

I own this stock (TSX-BIN, NYSE-BIN). I first bought this stock in November 2007 and then I bought more in December 2010. To date I have made a return of 1.61% per year. The dividend portion of this total return would be 3.43% per year.

When I look at insider trading over the past year, I find around $10M of insider selling, $1.7M of insider buying for a whopping $8.3M of net insider selling. Around $9.8M of the insider selling seems to be by one director who resigned in March 2011.

It would also appear that insiders had owned 36% of outstanding shares. However, all these entities creased to be insider in December 2010. At least one of these x-insiders has sold around 9% of these in March of this year. No one seems to mention these changes, so it is hard to say what the implications are.

When I look at the 5 year median Price/Earnings Ratios, I get a low of 22.26 and a high of 33.32. The current one at 21.67 on a stock price of $23.96 seems to be at the low end. However, on an absolute basis, this P/E is not particularly low.

I get a Graham Price of $18.08 and this is almost 33% lower than the stock price of $23.96. The median difference between the Graham Price and the stock price is 47%. So, by this measure the stock price is also a relatively reasonable price.

The 10 year median Price/Book Value Ratio is 1.79. The current one of 1.82 is slightly higher. A good price is one where the current P/B Ratio is lower than the 10 year median. However, both these ratios are close, so this points to a reasonable price. The thing with this ratio is that it is not based on estimates, which the comparison of the P/E Ratio and Graham Prices are.

The last thing to look at is the dividend yield. The 5 year median is 6.6% and the current one is 2.1%. The reason the current one is so much lower is that dividends where lowered in 2009 when this company changed from an income trust to a corporation.

When I look at analysts’ recommendations, I get Strong Buy, Buy and Hold. There are a lot of Strong Buy and Buy recommendations. The consensus would probably be a Buy (but almost in the Strong Buy range). With the Strong Buy recommendation comes a stock price of $33. This is quite a bit higher than the current price. With the Buy recommendations, the price is almost as high at $28.

What is of more interest to me is that some analysts feel that the company will want to grow the business rather than provide further dividend increases. Although others think that dividend increases will be on offer in the future. With the current year, the Payout Ratios for Earnings and Cash Flow are expected to be 45% and 17% respectively. These are good payout ratios, so I would expect a dividend raise soon.

However, if a dividend increase is not within offering this in the next year, it may be time for me to sell this stock. I would not care to hold it if it does not increase the dividends. There seems to be some change in who is running this company, so at the present time it is hard to see what might happen.

They are a full-service waste management company providing non-hazardous solid waste collection and landfill disposal services for municipal, commercial, industrial and residential customers in five provinces and ten US states. Two-thirds of their business is in US. The fund operates through its subsidiaries. Five companies control almost 53% of this company. Its web site is here Progressive Waste. See my spreadsheet at bin.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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