I have only Transcontinental (TSX-TCL.A) and Valener (TSX-VNR) to review to finish my list of stocks that I cover. After I do this today and tomorrow, I will slow the pace and start reviewing the stocks I follow who have published their December 2011 year-end statements. The first of these will be Canadian National Railway (TSX-CNR) on Wednesday.
I do not own Transcontinental Inc. (TSX-TCL.A). They on the dividend lists that I follow of Dividend Achievers (see resources) and Dividend Aristocrats (see indices). They have a good record over the past 10 years of rising dividends. However, prior to 2002, their record was spotty.
The 5 and 10 year growth in dividend is 14.4% and 17% per year. However, increases can vary greatly, with increases from 2009 to 2011 being 3.2%, 9.4% and 40%. Their dividend yield has generally been relatively low (under 2%) so the Dividend Payout Ratios have in the past been quite low with 5 year median DPRs of 19% for EPS and 13% for CF. Relatively speaking DPR for EPS for 2011 was high at 51%. The ones for CF were normal at 13%. The corresponding DPRs for 2012 are expected to be around 27% for EPS and 16% for CF.
The company has had a rough time with the latest recession and their stock price was hit hard. The stock price fell over 40% in 2008. This would affect total returns which are down 6% per year over the past 5 years. The total return was better for the last 10 years, but still was not great with a total return of only 3.5% per year. The dividends contributed to total returns by just over 2% per year.
Growth in Cash Flow was been mediocre over the past 5 and 10 years, with growth at 4.3% and 5% per year respectively. Growth in revenues and revenues per share over the past 5 years is non-existent. Growth in revenues and revenues per share over the past 10 years is at 1.4% and 1.6% per year. Growth in Book Value is at 2.8% and 8.4% per year over the past 5 and 10 years.
As far as debt ratios goes, the Liquidity Ratios have always been low, but was better than usual in 2011 at 1.00. The Asset/Liability has always been very good and the current one is 2.18. The current Leverage and Debt/Equity Ratios are good as expected with as an owner controlled company at 1.99 and 0.91, respectively.
The Return on Equity ratio has been good in the past, but it rather low at 6.3% for 2011. However, the Return on Equity based on comprehensive income is much better at 10.4%.
When I look at insider trading, I find a minimal amount of insider buying and no insider selling. Insiders of CEO, CFO and Officers (with one exception) have more stock options and restricted participation units than shares. About 81% of the shares are owned by 50 institutions. They have bought and sold shares over the past 3 months and they have reduced their outstanding shares marginally (less than 1%) over the past 3 months.
When I look for analysts’ recommendations, I find Strong Buy, Buy, Hold and Underperform recommendations. There are a lot of Buy recommendations and the consensus recommendation would be a buy. One Buy recommendation came with a 12 months stock price of $15.00.
One blogger talks about buying this stock at Walking with God. There is an article in Media Canada where the CEO talks about rebrand the company. Pat McKeough talks about buying this blue chip stock at TSI Network.
I get a 5 year low and high median Price/Earnings Ratios of 10.83 and 16.02. The current P/E at 6.56 is both relatively low and absolutely low as far as P/E Ratios go. I get a current Graham price of $26.07 and the current stock price of $12.98 is some 50% lower. The 10 year median low difference is with the stock price being 13% lower than the Graham price. By this measure the stock price is low.
I get a 10 year median Price/Book Value Ratio of 1.49 and the current Price/Book Ratio is at 0.85 is just 57% of the 10 year median. This shows a relatively low stock price and an absolutely low stock price as the stock price is below the book value. The current dividend yield at 4.16% is some 61% higher than the 5 year median dividend yield of 2.58%. This is also shows a very low stock price. Historically, the dividend yield on this stock has been below 2%.
I wish I had some extra money to buy some of these shares. The company is certainly signaling they expect better times with their recent dividend increases.
Transcontinental, one of Canada's top media groups, is the largest printer in Canada and Mexico and the fourth-largest in North America. In addition to commercial printing, it operates 150 websites and is a leading publisher of consumer magazines, French-language educational resources and community newspapers in Quebec and the Atlantic provinces. Its web site is here Telus. See my spreadsheet at tcl.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.
Susan,
ReplyDeleteThank you for the write-up on TCL.A. I think you have spotted a potential winner here for the longer term. I will be taking a closer look at it.
MML
Hi Susan,
ReplyDeleteI think that this is a higher quality dog. It is a better version of Yellow Media, with a much better balance sheet and Management as its strengths.
It faces similar secular challenges:
1- Poor textbook sale in Q3: Apple vows to destoy the textbook market, and TCL would loose if Apple is right
2- Newspaper readers moving online. Globe And Mail is its biggest customer. A Montreal newspaper (LaPresse) is considering giving away an ereader/tablet to its subscribers who sign for long term on-line version of their paper.
3- I used to sign on for Hockey News and Money Sense but new just read similar info online. Magazine is also decreasing.
It will fare better than Yellow Media, but I lost money in this one in 2011, cut my loses and moved on. I would not recommend it going forward.
Jon
I know that this company is into printing, a very old business. However, I worked in IT and people have been talking about a paperless office for at least 20 years and this still seems to be in the future. Of course these sorts of changes take a lot time, but when the change comes, it does so very quickly (tipping point idea).
ReplyDeleteI knew about Yellow Media and I was not interested because no one was picking up the yellow phone books in my apartment building. They just stayed in the Lobby. People were saying what a great stock it was, but I was not interested. I did take a look at, but I did not think that it had staying power. However, it was at least 3 years after that before it went belly up.
I go to Starbucks on a regular basis and a lot of people are still reading newspapers. There have always been people with laptops there, but they are not reading newspapers on-line but generally doing work. I have just gone to a tablet to read newspapers at Starbucks, but I see no one else doing this.
I know that newspapers are trying to make money on-line, but not very successfully. Also, the free papers, like Metro, are very popular. An incredible number of people are reading them on the subway.
How this will all work out is not easy to determine. Transcontinental seems better positioned than Yellow Media was, at least that what I think. However, if you buy such a stock, you certainly would need to keep an eye on it. However, the company certainly thinks that they are going to do fine with their recent dividend increase, which was substantial.
I ended up closing my position on TCL.A, I decided that having margin was a bad idea, so I closed some of my positions, and it didn't make the cut.
ReplyDeleteThanks for the link all the same.