Wednesday, February 8, 2012

Shaw Communications Inc

I do not own this stock (TSX-SJR.B, NYSE-SJR). I have followed this stock for a while. It was part of Investment Reporter list of stock published by MCL Communications. See their site. They on the dividend lists that I follow of Dividend Achievers (see resources) and Dividend Aristocrats (see indices).

The company has consistently raised their dividends since 2004. There was some dividend increases prior to this, but they were inconsistent. The 5 and 10 year growth in dividends is 30.5% and 43% per year. However, the big increases took place between 2004 and 2008. The most recent increase was for 4.5% and for 2011 was for 4.5% and for 2010 was 4.8%.

The 5 year Dividend Payout Ratios are 66% for earnings and 25.5% for Cash Flow. The ones for 2011 were 87% for earnings and 31.7% for Cash Flow. They are expected to be lower at 56% and 26.7%, respectively, in 2012. I would not expect big dividend increases in the near future.

Total return over the past 5 and 10 year was around 9.9% and 5.4% per year, with dividends contributing 4% and 2% per year to the total return. This means that dividends are contributing just under 40% of the return on this stock. The current dividend yield is quite good at 4.69%. Dividend yields have been increasing lately because the stock price has flattened recently.

The growth rates a generally good. The 5 and 10 year growth in revenues per shares is 13.6% and 12.3% per year, respectively. Earnings growth is not so good with the 5 and 10 year growth at 0% and 13% per year. However, earnings were low in 2011 and are expected to recover nicely in 2012.

Cash flow growth has been very good at 10.8% and 22% per year over the past 5 and 10 years. Book Value is missed with growth at 13.4% and 1% per year over the past 5 and 10 years. The Return on Equity has generally been very good, with 5 year median ROE at 19.5% and ROE for 2011 at 13.7%. The ROE based on comprehensive income is similar.

As far as debt ratios go, the Liquidity and Asset/Liability Ratios are lower than what I would like to see and the Leverage and Debt/Equity Ratios are a higher than what I would like to see. The current ratios are 0.71, 1.43, 3.35 and 2.35 respectively.

When I look at analysts’ recommendations I got ones all over the place from Strong Buy to Sell. The consensus recommendation would be a Hold. One analyst said to buy for long term share gains and rising dividends. Another thought it might be a takeover target. One analyst said buy for short term rise in stock price, but not a long term hold. A buy comes with a 12 months stock price of $24. So this is rather a mixed bag.

The insider trading report looks rather mixed also. There is some $5.7M of insider selling, but $24.9M of insider buying for a net of $19.2M of insider buying. Both the selling and the buying are by officers and directors. It is only the CFO that has more options than stocks. However, even though officers generally have more shares than options, some officers only have options.

There are 245 institutions that own some 57% of the shares. There has been lots of buying and selling over the past 3 months and the institutions have decreased their shares by 2.6%.

I get 5 year low and high median Price/Earnings Ratios of 15.13 and 19.02. The current P/E of 11.98 is a good one and it is relatively quite low. I get a Graham Price of $17.90 and the current stock price of $19.65 is about 10% higher. The 10 year median difference between the Graham Price and stock price is the stock price being some 53% higher. By this measure the current price is very good.

The current dividend yield of 4.93% is almost 24% above the 5 year median dividend yield of 4%. This dividend yield is also quite high by historical standards. I get a 10 year median Price/Book Value of 3.14 and the current one of 2.26 is only some 72% of this 10 year median value and also points to a very good relatively stock price.

The relatively stock price is very good. On an absolute basis the price is reasonable. That is P/E of 11.98 is reasonable as is the P/B Ratio of 2.26.

It would seem that this stock sold at premium prices in the past, but not so much at present. Personally I wonder about Telecommunications stocks in Canada. We have some of the highest cable and wireless prices anywhere. I do not think that this will continue indefinitely. So, I wonder about the future profitability of telecommunications companies.

I am not personally interested in companies in this sector as I feel that risks are too high against possible future rewards. I still have some investments in BCE and Manitoba Telecom that I have had for a while. I have not yet decided what to do about them.

Here is another bloggers’ take on this company at Dividend Heaven. And another Dividend Watchdog.

Shaw Communications Inc. is a diversified communications company whose core business is providing broadband cable television, Internet, digital phone and satellite direct-to-home services. Industry: Communications & Media (Cable). SJR.B shares are non-voting and the SJR.A shares are voting shares. J.R. Shaw owns 79%. Its web site is here Shaw. See my spreadsheet at sjr.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. I own Shaw and I think of my telcos. more like utilities. I think this company will be around for some time to come, and if not, it will be bought by the other big three - T, RCI.B or BCE; I would acquire more shares in those companies.

    This stock represents <1% of my total portfolio, so a small position is fine in my opinion given the strong yield.

    Thanks for another great review.