Thursday, November 3, 2011

Astral Media Inc

First of all, I should mention that I have an investment in Sun Life (TSX-SLF). It posted their first quarterly loss since 2009. The stock price was hit was a 5% plus decline. I am not selling. Insurance companies do poorly in fall markets and interest rates. Nothing is going to improve on this stock, nor on the Manulife (TSX-MFC) stock I hold until markets improve. I still believe that both companies will do fine in the longer term.

I do not own this stock (TSX-ACM.A). This stock has a low dividend yield, but a very good history of increasing dividends. However, they do not increase the dividends every year. The 5 year median dividend yield is just 1.5%. The dividend growth over the past 5 and 10 years is 20% and 17.5%.

If you hold this stock for say, 10 years, you might expect to be making around a 4% yield on your initial investment. Although since the dividend yield is rather high current, if you purchased it today, your 10 year yield could be twice that.

Their financial year ends at the end of August each year. It is not surprising that the total return for the 5 years ending in August 2011 was basically zero as the market was down around this time. What is more disappointing is that the 10 year total return, to August 2011, is also low at around 6%. Dividends only contributed 1.2% of this total return.

Dividends on this company are currently running at around 2.2% which is rather high for this stock. Most of the time dividends have been under 2% and often under 1%. Dividend Payout Ratios are corresponding low. The 5 year median DPR is around 16% for both earnings and cash flow.

This media stock has hit hard by the 2008 bear market and resulting recession and has yet to recover. The fact that they increased their dividends by 50% for this year is a hopeful sign. This increase was after two years of no dividend increases.

Most of their growth is solid and good. The worse growth is for earnings and book value. The 5 and 10 year growth for earnings was 7% and 16% per year, respectively. Both revenue growth and cash flow grow has been quite good. The 5 and 10 years growth in revenue per share is 10% per year. The 5 and 10 year growth in cash flow is 10% and 16% per year, respectively. You need growth in both revenue and cash flow to push future growth in this stock, so these figures are good in deed.

Debt Ratios on this stock are fine. The current Liquidity Ratio at 1.38 is a little low. The current Asset/Liability Ratio at 2.33 is very good. Both the Leverage and Debt/Equity Ratios are fine at 1.75 and 0.75, respectively. Return on Equity is also quite good, with the ROE for 2011 at 17.2% and the 5 year median ROE at 17.7%

This would be stock to buy to diversify your portfolio after having some solid utility and bank stocks. You would buy it for future increasing dividends and capital gains.

Astral Media is a leading Canadian media company. It operates several of the country's most popular pay and specialty television, radio, out-of-home advertising and digital media properties interactive media. This company is 63% owned by Greenberg family. Its web site is here Astral. See my spreadsheet at acm.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.

1 comment:

  1. Susan,

    Thank you for commenting on SLF. Some people are worrying that SLF may cut its dividend. If it does, the stock price would go down more, maybe a lot more. Of course, your dividend income from this stock would decrease. Is it better to sell it and use the money to buy something with a high potential that its dividend rate would stay the same or even increase?