I own this stock (TSX-LNF). I first bought this stock in 2006, and then some more in 2008 and 2009. I have made a total return of 4.5% per year. The Dividend portion of this return is 3.3% per year with a capital gain portion of 1.2% per year. Dividends make up 74% of my return.
There was a small amount of insider buying late last year when the stock price was below $12.00. There was no insider selling. Insiders do not have any stock options of any variety. Some 13% of the company is owned by institutions. Over the past 3 months they very marginally reduced their holdings. This company has two levels of shares of voting shares and non-voting shares. The Leon family controls about 68% of the votes.
The 5 year median low and high Price/Earnings Ratios are 11.99 and 17.13. The current P/E ratio of 14.58 is the median for the last 5 years and would suggest a reasonable stock price.
I get a Graham Price of $10.67. The 10 year median low and high difference between the Graham Price and stock price is the stock price being 6% and 42% higher than the Graham Price. Currently, the stock price is 13% higher than the Graham Price. This would suggest a reasonable stock price.
I get a 10 year median Price/Book Value Ratio of 2.49. The current P/B Ratio at 1.99 is only 80% of the 10 year median. This suggests a good stock price. The 5 year median dividend yield is 2.65% and the current yield at 3.31% is some 25% higher. This also suggests a good stock price.
My tests suggest that the stock price is from reasonable to good. The Problem with estimates on this stock is that few people follow it. Generally, estimates are from 1 analyst. This problem affects both the P/E Ratio and the Graham Price. These tests suggest a reasonable stock price. The other tests suggest a good stock price.
There is only one analyst giving a recommendation on this stock and that recommendation is a Hold. However, there are 3 separate analysts talking about this company. All three give it a Buy rating. Two mention the fact that the company has no debt. Two mention that it is fairly illiquid as far as stock trading goes. All three think that the management team is great.
Two analysts mention that this company gives out special dividends. One mentions that the company owns a lot of the real estate their stores are on and that this makes up almost all the market cap.
I happen to like this company and personally feel that it is selling at a good price. I do not have money to spend on stocks at the moment, but I am certainly holding on to what I have.
There is a recent article in the Financial Post about this company talking how great a stock it has. See article. An article on the Canadian News site talks about Leon opening 4 more superstores on their site.
This company sells home furnishings, appliances and electronics through a chain of retail facilities and franchises located in Canada. Leon family owns 68% of this company. Its web site is here Leon. See my spreadsheet at lnf.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.
Monday, April 30, 2012
Friday, April 27, 2012
Leon's Furniture Ltd
I own this stock (TSX-LNF). I first bought this stock in 2006, and then some more in 2008 and 2009. I have made a total return of 4.5% per year. The Dividend portion of this return is 3.3% per year with a capital gain portion of 1.2% per year. Dividends make up 74% of my return.
The 5 year median dividend yield is 2.65% which is quite high for this stock as dividend yield has often been lower than 2%. This stock has a good reputation for dividend increases. The 5 and 10 year dividend growth is at 7.6% and 13.7% per year. When the company is able to, it has given out special dividends. For example in 2012 they have given out a special dividend of $.15 per share.
The Dividend Payout Ratios are good on this stock with the DPR based on earnings at 46% and the DPR based on Cash Flow at 39% for 2011. The 5 year median figures are 44% and 39%, respectively. (See my site for information on Dividend Payout Ratios).
This stock has not done well over the past 5 years. It is in the consumer discretionary section of the stock market and a lot of these companies have struggled, as has this one. It is also a small company, which is little traded. The Leon family own 68% of the outstanding shares of this company. There seems to be only one analyst that follows this stock.
The total return on this stock over the past 5 years is around 2.3%. Since dividends are around 2.86% of the return, there is a small capital loss. The 10 year return is better with return at 11.5% per year with dividends at 3.5% per year. The capital gain over the past 10 years is around 8% per year. Dividends made up 30% of the return.
One of the best growth rates for this stock is for book value. Book Value has grown at 8.5% and 8.2% per year over the past 5 and 10 years. For growth in revenues, earnings and cash flow, the 10 year growth is better than the 5 year growth. This is typical of a lot of companies I have.
For example revenue has grown at 3.2% and 6% per year over the past 5 and 10 years. Cash flow has not grown over the past 5 years and has grown only at 6% per year over the past 10 years.
The debt ratios are very good for this company. This is typical of family owned companies. The current Liquidity ratio is 2.47. This is slightly better than the 5 year median Liquidity Ratio of 2.34. The current Debt Ratio is 3.50. This is also slightly better than the 5 year median Debt Ratio of 3.44. The current Leverage and Debt/Equity Ratios are also very good at 1.40 and 0.40.
The Return on Equity Ratio is good for 2011 at 13.3% and the 5 year median is better at 15.3%. The ROE based on the comprehensive income is similar at 13.2% with a 5 year median ratio of 15.8%. You want the ROE based on the net income and on the comprehensive income to be similar as it generally means that the quality of the net income is good.
I got interested in this stock reading about it in an MPL Communications newsletter. They still follow this stock and still like it. Their web site is called Advice for Investors. I know that I have not done great in this stock, but I feel that it will be a very good long term investment.
This stock is never going to be a high flyer and it will have trouble in any recessionary period. However, over the long term you can expect to earn between 8% and 10% per year, with 3% to 3.5% of the return from dividends.
This company sells home furnishings, appliances and electronics through a chain of retail facilities and franchises located in Canada. Leon family owns 68% of this company. Its web site is here Leons. See my spreadsheet at lnf.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.
The 5 year median dividend yield is 2.65% which is quite high for this stock as dividend yield has often been lower than 2%. This stock has a good reputation for dividend increases. The 5 and 10 year dividend growth is at 7.6% and 13.7% per year. When the company is able to, it has given out special dividends. For example in 2012 they have given out a special dividend of $.15 per share.
The Dividend Payout Ratios are good on this stock with the DPR based on earnings at 46% and the DPR based on Cash Flow at 39% for 2011. The 5 year median figures are 44% and 39%, respectively. (See my site for information on Dividend Payout Ratios).
This stock has not done well over the past 5 years. It is in the consumer discretionary section of the stock market and a lot of these companies have struggled, as has this one. It is also a small company, which is little traded. The Leon family own 68% of the outstanding shares of this company. There seems to be only one analyst that follows this stock.
The total return on this stock over the past 5 years is around 2.3%. Since dividends are around 2.86% of the return, there is a small capital loss. The 10 year return is better with return at 11.5% per year with dividends at 3.5% per year. The capital gain over the past 10 years is around 8% per year. Dividends made up 30% of the return.
One of the best growth rates for this stock is for book value. Book Value has grown at 8.5% and 8.2% per year over the past 5 and 10 years. For growth in revenues, earnings and cash flow, the 10 year growth is better than the 5 year growth. This is typical of a lot of companies I have.
For example revenue has grown at 3.2% and 6% per year over the past 5 and 10 years. Cash flow has not grown over the past 5 years and has grown only at 6% per year over the past 10 years.
The debt ratios are very good for this company. This is typical of family owned companies. The current Liquidity ratio is 2.47. This is slightly better than the 5 year median Liquidity Ratio of 2.34. The current Debt Ratio is 3.50. This is also slightly better than the 5 year median Debt Ratio of 3.44. The current Leverage and Debt/Equity Ratios are also very good at 1.40 and 0.40.
The Return on Equity Ratio is good for 2011 at 13.3% and the 5 year median is better at 15.3%. The ROE based on the comprehensive income is similar at 13.2% with a 5 year median ratio of 15.8%. You want the ROE based on the net income and on the comprehensive income to be similar as it generally means that the quality of the net income is good.
I got interested in this stock reading about it in an MPL Communications newsletter. They still follow this stock and still like it. Their web site is called Advice for Investors. I know that I have not done great in this stock, but I feel that it will be a very good long term investment.
This stock is never going to be a high flyer and it will have trouble in any recessionary period. However, over the long term you can expect to earn between 8% and 10% per year, with 3% to 3.5% of the return from dividends.
This company sells home furnishings, appliances and electronics through a chain of retail facilities and franchises located in Canada. Leon family owns 68% of this company. Its web site is here Leons. See my spreadsheet at lnf.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.
Thursday, April 26, 2012
Barclays Bank PLC ADR 2
On my new blog of Investing, Economics Mostly and I have today commented on the Where is retirement going?
I own this stock (NYSE:BCS, LSE-BARC). I bought this stock in March 2000. I have in a US$ account. My gain in US$ is 2.4% per year. I got 6.3% per year in dividends. If I look at US$ to CDN$ changes over the same period of time, I have lost 3.1% because of the differences in the exchange rate. So really I am down some 0.7% per year. So really I have not gained anything, but I really have not lost or not lost much.
A report dated April 12th says that there has been no insider selling or insider buying over past 6 months. One analyst said that institutions only hold 2.4% of the outstanding shares and the average institutional ownership of Regional Banks is 37.5%, which is also lower than S&P 500 as a whole which is 70.5% institutional ownership. It is hard to get institutional ownership information on this bank. The above seems to be only for NYSE ADRs for this bank.
I get 5 year median low and high Price/Earnings Ratios of 5.75 and 12.95. The current P/E Ratio is 6.47, which would suggest a low stock price. These P/E ratios are low and have been quite low lately.
I get a Graham Price of $36.53. The 10 year low median difference between the Graham Price and stock price is the stock price being 36% lower than the Graham Price. Currently the stock price is some 63% below the stock price. This would suggest a very low stock price.
However, the 5 year low difference between the Graham Price and stock price is the stock price being some 72% lower than the Graham Price. Between 2007 and 2009, the stock price fell some 70%, but the Graham Price fell only 45%. Since 2008, the stock price has been way below the Graham Price. This test shows a very low stock price, but because of what has been happening lately, maybe it is not as low as it first appears.
The book value has not gone down like to share price. The 10 year median Price/Book Value Ratio is 1.63 (although it used to be closer to 2.00). The current P/B Ratio is just 0.46. So it is low on an historical basis. Also the book value is higher than the stock price. This shows a very low stock price.
I get a 5 year dividend yield of 2.33% and the current one is 40% higher at 3.3%. However, before the latest crisis, dividend yield was between 3.5% and 4.5%. So, currently it is higher than it has been lately, but this stock has yet to recover from the latest crisis.
When I look at analysts’ recommendations, I get Strong Buy, Buy and Hold. The consensus recommendation would be a Strong Buy.
One Buy recommendations gives a 12 months stock price of $18 US$. He goes on to say that Barclays is in a challenging operating environment. A couple of Analysts say they prefer Standard Chartered Bank (LSE-STAN) to Barclays. One commented on the fact that it is weighted to investment banking so will probably trade at a discount to a good retail bank.
Most analysts think that the dividends are going to grow nicely over the next few years. They also think that earnings will grow nicely also. Revenue is expected to be lower in this year (2012), and then grow modestly. There is an interesting article about this bank and the CEO’s pay. See G&M article. Barclays bank had awarded the CEO, Bob Diamond, a £2.7M bonus for 2011 which was 80% of maximum. Because of the revolt of shareholders on pay to the CEO of Citibank, Barclays CEO agreed to forfeit half his 2011 bonus unless Barclays lifts its return on equity (which was a lowly 6.6 per cent last year) above its 11.5 per cent cost of equity. You can read all about this bank at Wikipedia.
Currently, I intend to hold on to my shares. I still believe it will recover.
Some of the US sites on BCS’s estimates are confusing. Part of the reason is London Stock Exchange reports in pence. That is share price of £2.12 is reported as 212 GBX or GBp.
One of the largest financial services groups in the United Kingdom, Barclays is engaged in banking, investment banking and asset management worldwide. Its web site is here Barclays. See my spreadsheet at bcs.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.
I own this stock (NYSE:BCS, LSE-BARC). I bought this stock in March 2000. I have in a US$ account. My gain in US$ is 2.4% per year. I got 6.3% per year in dividends. If I look at US$ to CDN$ changes over the same period of time, I have lost 3.1% because of the differences in the exchange rate. So really I am down some 0.7% per year. So really I have not gained anything, but I really have not lost or not lost much.
A report dated April 12th says that there has been no insider selling or insider buying over past 6 months. One analyst said that institutions only hold 2.4% of the outstanding shares and the average institutional ownership of Regional Banks is 37.5%, which is also lower than S&P 500 as a whole which is 70.5% institutional ownership. It is hard to get institutional ownership information on this bank. The above seems to be only for NYSE ADRs for this bank.
I get 5 year median low and high Price/Earnings Ratios of 5.75 and 12.95. The current P/E Ratio is 6.47, which would suggest a low stock price. These P/E ratios are low and have been quite low lately.
I get a Graham Price of $36.53. The 10 year low median difference between the Graham Price and stock price is the stock price being 36% lower than the Graham Price. Currently the stock price is some 63% below the stock price. This would suggest a very low stock price.
However, the 5 year low difference between the Graham Price and stock price is the stock price being some 72% lower than the Graham Price. Between 2007 and 2009, the stock price fell some 70%, but the Graham Price fell only 45%. Since 2008, the stock price has been way below the Graham Price. This test shows a very low stock price, but because of what has been happening lately, maybe it is not as low as it first appears.
The book value has not gone down like to share price. The 10 year median Price/Book Value Ratio is 1.63 (although it used to be closer to 2.00). The current P/B Ratio is just 0.46. So it is low on an historical basis. Also the book value is higher than the stock price. This shows a very low stock price.
I get a 5 year dividend yield of 2.33% and the current one is 40% higher at 3.3%. However, before the latest crisis, dividend yield was between 3.5% and 4.5%. So, currently it is higher than it has been lately, but this stock has yet to recover from the latest crisis.
When I look at analysts’ recommendations, I get Strong Buy, Buy and Hold. The consensus recommendation would be a Strong Buy.
One Buy recommendations gives a 12 months stock price of $18 US$. He goes on to say that Barclays is in a challenging operating environment. A couple of Analysts say they prefer Standard Chartered Bank (LSE-STAN) to Barclays. One commented on the fact that it is weighted to investment banking so will probably trade at a discount to a good retail bank.
Most analysts think that the dividends are going to grow nicely over the next few years. They also think that earnings will grow nicely also. Revenue is expected to be lower in this year (2012), and then grow modestly. There is an interesting article about this bank and the CEO’s pay. See G&M article. Barclays bank had awarded the CEO, Bob Diamond, a £2.7M bonus for 2011 which was 80% of maximum. Because of the revolt of shareholders on pay to the CEO of Citibank, Barclays CEO agreed to forfeit half his 2011 bonus unless Barclays lifts its return on equity (which was a lowly 6.6 per cent last year) above its 11.5 per cent cost of equity. You can read all about this bank at Wikipedia.
Currently, I intend to hold on to my shares. I still believe it will recover.
Some of the US sites on BCS’s estimates are confusing. Part of the reason is London Stock Exchange reports in pence. That is share price of £2.12 is reported as 212 GBX or GBp.
One of the largest financial services groups in the United Kingdom, Barclays is engaged in banking, investment banking and asset management worldwide. Its web site is here Barclays. See my spreadsheet at bcs.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.
Wednesday, April 25, 2012
Barclays Bank PLC ADR
I own this stock (NYSE:BCS, LSE-BARC). I bought this stock in March 2000. I have in a US$ account. My gain in US$ is 2.4% per year. I got 6.3% per year in dividends. If I look at US$ to CDN$ changes over the same period of time, I have lost 3.1% because of the differences in the exchange rate. So really I am down some 0.7% per year. So really I have not gained anything, but I really have not lost or not lost much.
I still hope for a good future for this bank. The European Banks have been hit hard by the recent crisis and I do not see any quick turnaround. However, I still do hope for a turnaround. Until 2008, I was earning money on this bank. However, losing some 3% per year on currency really puts a dint in any possible gains. If I look at the difference in the exchange rate for UK pounds to Canadian dollars, I am losing 7% per year over the past 5 years. This is the problem with investing in foreign stock.
This stock is also hard to evaluate. The company reports in UK pounds and I hold it as an ADR from the NYSE. So looking at this stock I am dealing with UK pounds US dollars and Canadian dollars. By the way if you want a good site for currency exchange rates, I use x-rates. This site gives both current and historical exchange rates.
A couple of extra things you should know about investing in UK stocks is that the London exchange quotes stocks in pence. On my spreadsheet I am using pounds, but the stock would be quoted at 211 pence, not the £2.11 number I have quoted.
The other thing with this stock is that I get a big dividend in the first part of the year, which was declared at the end of the previous year. Other dividends paid during the year significantly lower. For example, the last dividend I got in 2011 was $0.062775 per shares. The first dividend I got in 2012 was at $0.187525. (This is a 66% difference.)
Because of difficulties, this bank cut dividends for part of 2009 and then restarted them. However, the new dividends were a lot less than the old ones. Dividends in 2009 were some 97% lower than for 2008. They started increasing the dividends again in 2010 with a very good 350% raise, but dividends in 2010 were still some 85% lower than for 2008. With another increase in 2011, dividends were down by 82% from 2008. It is expected that dividend increases over the next few years will be in the range of 20% per year.
The only good news in growth in the last 5 years is for book value. It has grown at the rate of 8.5% per year in UK£. The 10 year growth in book value is slightly lower at 7.7% per in UK£. (Over the past 10 years, I have only lost 3.7% per year in currency exchange between UK£ and CDN$.)
As far as growth over the past 5 years on this stock, there is none. However, there is some growth over the past 10 years. Revenue has growth at 5% per year in UK£. Earnings have grown at 3.8% per year in UK£. Cash Flow has grown at the rate of 5.9% per year in UK£.
As far as debt ratios goes, the current Debt Ratio is 1.10, which is good for a bank. However, the current Leverage and current Debt/Equity Ratios at 28.13 and 25.68 are rather high, even for a bank.
The Return on Equity Ratio for 2011 is decent at 7.1%. The 5 year median ROE is better at 14.4%. The ROE using comprehensive income is similar, with that ROE at 8.8% for 2011 and 14.4% as the 5 year median ROE.
At the moment I am holding on to the shares I have in this bank. This is about the only foreign shares that I own and I like to have at least something in foreign stocks.
One of the largest financial services groups in the United Kingdom, Barclays is engaged in banking, investment banking and asset management worldwide. Its web site is here Barclays. See my spreadsheet at bcs.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.
I still hope for a good future for this bank. The European Banks have been hit hard by the recent crisis and I do not see any quick turnaround. However, I still do hope for a turnaround. Until 2008, I was earning money on this bank. However, losing some 3% per year on currency really puts a dint in any possible gains. If I look at the difference in the exchange rate for UK pounds to Canadian dollars, I am losing 7% per year over the past 5 years. This is the problem with investing in foreign stock.
This stock is also hard to evaluate. The company reports in UK pounds and I hold it as an ADR from the NYSE. So looking at this stock I am dealing with UK pounds US dollars and Canadian dollars. By the way if you want a good site for currency exchange rates, I use x-rates. This site gives both current and historical exchange rates.
A couple of extra things you should know about investing in UK stocks is that the London exchange quotes stocks in pence. On my spreadsheet I am using pounds, but the stock would be quoted at 211 pence, not the £2.11 number I have quoted.
The other thing with this stock is that I get a big dividend in the first part of the year, which was declared at the end of the previous year. Other dividends paid during the year significantly lower. For example, the last dividend I got in 2011 was $0.062775 per shares. The first dividend I got in 2012 was at $0.187525. (This is a 66% difference.)
Because of difficulties, this bank cut dividends for part of 2009 and then restarted them. However, the new dividends were a lot less than the old ones. Dividends in 2009 were some 97% lower than for 2008. They started increasing the dividends again in 2010 with a very good 350% raise, but dividends in 2010 were still some 85% lower than for 2008. With another increase in 2011, dividends were down by 82% from 2008. It is expected that dividend increases over the next few years will be in the range of 20% per year.
The only good news in growth in the last 5 years is for book value. It has grown at the rate of 8.5% per year in UK£. The 10 year growth in book value is slightly lower at 7.7% per in UK£. (Over the past 10 years, I have only lost 3.7% per year in currency exchange between UK£ and CDN$.)
As far as growth over the past 5 years on this stock, there is none. However, there is some growth over the past 10 years. Revenue has growth at 5% per year in UK£. Earnings have grown at 3.8% per year in UK£. Cash Flow has grown at the rate of 5.9% per year in UK£.
As far as debt ratios goes, the current Debt Ratio is 1.10, which is good for a bank. However, the current Leverage and current Debt/Equity Ratios at 28.13 and 25.68 are rather high, even for a bank.
The Return on Equity Ratio for 2011 is decent at 7.1%. The 5 year median ROE is better at 14.4%. The ROE using comprehensive income is similar, with that ROE at 8.8% for 2011 and 14.4% as the 5 year median ROE.
At the moment I am holding on to the shares I have in this bank. This is about the only foreign shares that I own and I like to have at least something in foreign stocks.
One of the largest financial services groups in the United Kingdom, Barclays is engaged in banking, investment banking and asset management worldwide. Its web site is here Barclays. See my spreadsheet at bcs.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.
Tuesday, April 24, 2012
Bombardier Inc 2
I started a new blog for investment and economic comments at blogger and I have commented on the markets.
I own this stock (TSX-BBD.B). ). I first bought this stock in 1987 and I have made a return of 12.9% per year with 4.4% per year return due to dividends and 8.5% per year due to capital gain. I have certainly been though a lot of ups and downs with this stock.
When I look at insider trading, I find a small amount of insider selling and a small amount of insider buying with a net of insider selling. Insiders not only have options, but they have Deferred Stock Units and Performance Share Units. The CEO and CFO both have more options than shares. The majority of the officers do also, with a couple of exceptions for family members who own lots of shares. The Directors do have more Deferred Stock Units and Performance Share Units than shares.
As far as I can see there are very few institutional owners (some 13) who own 2.3% of the outstanding shares. The institutions have bought a sold a bit over the last 3 months; and have reduced their holdings marginally. Also, according to NASDAQ site, Mclean Budden Ltd sold some 75M shares of Bombardier in December 2011. However, this company buys and sells a lot of stocks. See NASDAQ. This is interesting, but does not tell us much.
I get 5 year median low and high Price/Earnings Ratios of 7.45 and 14.49, a rather low range. The current P/E of 8.54 on a price of $3.99 would suggest a low current stock price.
I get a Graham Price of $1.33. It is low because the book value has crashed. The low and high difference between the Graham Price and stock price is the stock price being 8.5% and $128% higher than the Graham Price. By this measure the stock price is high. However, before the book value crashed the Graham Price was $4.65, which is higher than the current stock price.
The Price/Book Value Ratio is also not going to tell us much either because of the crash in the Book Value. The 10 year P/B Ratio is 2.42 and the current ratio is 23.81
The 5 year median dividend yield is 1.88% and the current yield is 33% higher at 2.51%. If you do not know what measurement to believe on stock price, it is usually a good idea to go with the dividend yield test. In this case it says the stock price is low. (However, the crash of the book value is a bit worrying.)
When I look at analysts’ recommendations I find Strong Buy, Buy, Hold and Underperform. The consensus recommendation would be a Buy. One Hold recommendation comes with a 12 months stock price of $5.00. A Strong Buy comes with a 12 month stock price of $6.95.
One analyst says that the company can burn through a lot of its cash flow. One analyst thinks it is a buy because the global economy will recover and there will be industrial boom. One analyst gave it a Don’t Buy because she felt there was no catalyst to drive the company forward even though the stock was cheap.
There is an article on G&M about the C Series aircraft which is upbeat. See G&M. There is also another article with a negative point of view on Bombardier’s Q400 plane. See G&M.
Bombardier is a world-leading manufacturer of innovative transportation solutions, from commercial aircraft and business jets to rail transportation equipment, systems and services. Headquartered in Montréal, Canada, Bombardier has a presence in more than 60 countries. The Bombardier family controls 64% of the voting rights under this stock. Its web site is here AltaGas. See my spreadsheet at bbd.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.
I own this stock (TSX-BBD.B). ). I first bought this stock in 1987 and I have made a return of 12.9% per year with 4.4% per year return due to dividends and 8.5% per year due to capital gain. I have certainly been though a lot of ups and downs with this stock.
When I look at insider trading, I find a small amount of insider selling and a small amount of insider buying with a net of insider selling. Insiders not only have options, but they have Deferred Stock Units and Performance Share Units. The CEO and CFO both have more options than shares. The majority of the officers do also, with a couple of exceptions for family members who own lots of shares. The Directors do have more Deferred Stock Units and Performance Share Units than shares.
As far as I can see there are very few institutional owners (some 13) who own 2.3% of the outstanding shares. The institutions have bought a sold a bit over the last 3 months; and have reduced their holdings marginally. Also, according to NASDAQ site, Mclean Budden Ltd sold some 75M shares of Bombardier in December 2011. However, this company buys and sells a lot of stocks. See NASDAQ. This is interesting, but does not tell us much.
I get 5 year median low and high Price/Earnings Ratios of 7.45 and 14.49, a rather low range. The current P/E of 8.54 on a price of $3.99 would suggest a low current stock price.
I get a Graham Price of $1.33. It is low because the book value has crashed. The low and high difference between the Graham Price and stock price is the stock price being 8.5% and $128% higher than the Graham Price. By this measure the stock price is high. However, before the book value crashed the Graham Price was $4.65, which is higher than the current stock price.
The Price/Book Value Ratio is also not going to tell us much either because of the crash in the Book Value. The 10 year P/B Ratio is 2.42 and the current ratio is 23.81
The 5 year median dividend yield is 1.88% and the current yield is 33% higher at 2.51%. If you do not know what measurement to believe on stock price, it is usually a good idea to go with the dividend yield test. In this case it says the stock price is low. (However, the crash of the book value is a bit worrying.)
When I look at analysts’ recommendations I find Strong Buy, Buy, Hold and Underperform. The consensus recommendation would be a Buy. One Hold recommendation comes with a 12 months stock price of $5.00. A Strong Buy comes with a 12 month stock price of $6.95.
One analyst says that the company can burn through a lot of its cash flow. One analyst thinks it is a buy because the global economy will recover and there will be industrial boom. One analyst gave it a Don’t Buy because she felt there was no catalyst to drive the company forward even though the stock was cheap.
There is an article on G&M about the C Series aircraft which is upbeat. See G&M. There is also another article with a negative point of view on Bombardier’s Q400 plane. See G&M.
Bombardier is a world-leading manufacturer of innovative transportation solutions, from commercial aircraft and business jets to rail transportation equipment, systems and services. Headquartered in Montréal, Canada, Bombardier has a presence in more than 60 countries. The Bombardier family controls 64% of the voting rights under this stock. Its web site is here AltaGas. See my spreadsheet at bbd.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.
Monday, April 23, 2012
Bombardier Inc
Yes, I know the market is crashing. All of a sudden investors got worried about Europe and panicked. However, if you have good quality Canadian dividend paying stocks, the value of the company on the stock market may go down, but nothing much is changing for your companies. The vast majority of Canadian Dividend paying stocks will continue on to make money and pay you dividends.
Now, on to the stock I want to talk about today, which is Bombardier, a stock that I own this stock (TSX-BBD.B). I first bought this stock in 1987 and I have made a return of 12.9% per year with 4.4% per year return due to dividends and 8.5% per year due to capital gain. I have certainly been though a lot of ups and downs with this stock. It still has not fully recovered from the 2000 bear market, let alone the latest one.
Bombardier restored their dividend payments in 2009, but they are still some 44% lower than what they were when they were cancelled in 2003. They have not increased the dividends since they were restored. The Dividend Payout Ratios are good with 5 year ratios at 21% for earnings and 10% for cash flow. For 2011, the one for cash flow is high at 71%, but it is expected to be at 13% for 2012.
This is a stock you would buy more for capital gain than dividends as dividends as always been low. The stock has a 5 year median dividend of just 1.9%. The dividend yield on this stock is below 2% most of the time. This stock would be considered to be a dividend growth stock.
I have not done badly with stock, but this stock has not done much for its shareholders since it hit a high in 2001. However, I must admit that the family has been working hard to revive this company. This stock has two levels of shares, one voting and one non-voting. The Bombardier family has some 64% of the voting rates on the company.
Over the past 5 years I have broken even on my investment in this company. And over the past 10 years, I am down 11% per year. These figures include both dividends and capital gain.
This stock is reporting in US dollars. And, as all Canadian stocks reporting in US currency, this company has done better in US currency than in Canadian currency. The company was making progress before the latest bear market. Sales have dropped, but they continue to make progress in earnings. Cash flow has always varied a fair bit.
The book value is down considerable for 2011. Part of the reason is the change to the new accounting system, but mostly it has to do with the fact that comprehensive income is negative this year. Net income is positive, but a negative comprehensive income calls into questions the quality of the net income. That is it may not be a good as it looks.
The Return on Equity is high for 2011 at 286%. However, this is because the book value is so low, so this really does not tell us anything at all. As I have said above, because of the difference between the comprehensive income and net income (which ROE is based on), you probably cannot believe the net income and therefore the ROE is rather meaningless.
The debt ratios are low. The current Liquidity ratio is not bad at 1.11, but the Debt Ratios (which looks at Assets and Liabilities) is even lower 1.03. Because the book value has dropped so much the current Leverage and Debt/Equity Ratios are meaningless. The debt ratio on this stock has never been good. They have been sort of in the ok region.
I am holding on to my shares in this company. I still believe it will revive. However, I could be wrong on this.
Bombardier is a world-leading manufacturer of innovative transportation solutions, from commercial aircraft and business jets to rail transportation equipment, systems and services. Headquartered in Montréal, Canada, Bombardier has a presence in more than 60 countries. The Bombardier family controls 64% of the voting rights under this stock. Its web site is here Bombardier. See my spreadsheet at bbd.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.
Now, on to the stock I want to talk about today, which is Bombardier, a stock that I own this stock (TSX-BBD.B). I first bought this stock in 1987 and I have made a return of 12.9% per year with 4.4% per year return due to dividends and 8.5% per year due to capital gain. I have certainly been though a lot of ups and downs with this stock. It still has not fully recovered from the 2000 bear market, let alone the latest one.
Bombardier restored their dividend payments in 2009, but they are still some 44% lower than what they were when they were cancelled in 2003. They have not increased the dividends since they were restored. The Dividend Payout Ratios are good with 5 year ratios at 21% for earnings and 10% for cash flow. For 2011, the one for cash flow is high at 71%, but it is expected to be at 13% for 2012.
This is a stock you would buy more for capital gain than dividends as dividends as always been low. The stock has a 5 year median dividend of just 1.9%. The dividend yield on this stock is below 2% most of the time. This stock would be considered to be a dividend growth stock.
I have not done badly with stock, but this stock has not done much for its shareholders since it hit a high in 2001. However, I must admit that the family has been working hard to revive this company. This stock has two levels of shares, one voting and one non-voting. The Bombardier family has some 64% of the voting rates on the company.
Over the past 5 years I have broken even on my investment in this company. And over the past 10 years, I am down 11% per year. These figures include both dividends and capital gain.
This stock is reporting in US dollars. And, as all Canadian stocks reporting in US currency, this company has done better in US currency than in Canadian currency. The company was making progress before the latest bear market. Sales have dropped, but they continue to make progress in earnings. Cash flow has always varied a fair bit.
The book value is down considerable for 2011. Part of the reason is the change to the new accounting system, but mostly it has to do with the fact that comprehensive income is negative this year. Net income is positive, but a negative comprehensive income calls into questions the quality of the net income. That is it may not be a good as it looks.
The Return on Equity is high for 2011 at 286%. However, this is because the book value is so low, so this really does not tell us anything at all. As I have said above, because of the difference between the comprehensive income and net income (which ROE is based on), you probably cannot believe the net income and therefore the ROE is rather meaningless.
The debt ratios are low. The current Liquidity ratio is not bad at 1.11, but the Debt Ratios (which looks at Assets and Liabilities) is even lower 1.03. Because the book value has dropped so much the current Leverage and Debt/Equity Ratios are meaningless. The debt ratio on this stock has never been good. They have been sort of in the ok region.
I am holding on to my shares in this company. I still believe it will revive. However, I could be wrong on this.
Bombardier is a world-leading manufacturer of innovative transportation solutions, from commercial aircraft and business jets to rail transportation equipment, systems and services. Headquartered in Montréal, Canada, Bombardier has a presence in more than 60 countries. The Bombardier family controls 64% of the voting rights under this stock. Its web site is here Bombardier. See my spreadsheet at bbd.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.
Friday, April 20, 2012
AltaGas Ltd 2
I own this stock (TSX-ALA). I first bought this stock in May 2009 and then bought more in November 2009 and in June 2010. I have made a return of 36.5% per year. Dividends count for 8.8% per year of my return or 24% of my return. My capital gain return is 27.7% per year.
When I look at insider trading, I find insider selling of $1.7M and minimal insider buying with net insider selling of $1.6M. The insider selling looks like officers are cashing in options. This company also has more than just the standard options with Rights Performance Units, Rights Restricted Units and Subscription Rights.
The CEO has a substantial investment with shares own worth just under $38M. One of the directors has a similar investment in the company. The CFO and the officers of the company have more options than shares. Most of the directors do too, with some exceptions.
There are some 68 institutions that own around 34% of this company. They have bought and sold shares over the past 3 months with a net of sellers, but overall institutions have increased their holdings in the company very marginally.
I get 5 year median low and high Price/Earnings Ratios of 12.74 and 15.21. The current P/E ratio of 24.09 is showing a rather high stock price at $30.35. This stock is at basic a utility; so a P/E ratio of 24 is high.
I get a Graham Price of $19.22 and the current stock price is some 58% higher than the Graham Price. The 10 year median low difference between the stock price and Graham price is the stock price being 8% lower than the Graham Price. The 10 year median high difference between the stock price and Graham price is the stock price being 43% higher than the Graham Price. A difference of 58% does point to a high current stock price.
As far as the dividend yield goes, we do not learn too much. The 5 year median dividend yield is 9% and the current one is 4.6% and suggests a high stock price. However, this company used to be an income trust company and those companies had higher dividend yields than corporations.
This company cut is dividend when switching to a corporation. In a corporate model you do not expect as high dividend yields as the income trusts produced. It was expected the dividend yields on income trusts that switched to corporations would lower their dividends yields to 4 to 5% and this is the range for this company.
The 10 year median Price/Book Value Ratio is 2.50 and the current one is 2.33. This is the only test that shows a reasonable stock price.
When I look at analysts’ recommendations, I get Strong Buy, Buy, Hold and Underperform. The consensus recommendation would be a Buy. Most recommendations are Strong Buy and Buy and there are very few others.
A couple of Strong Buy analysts said that they like that AltaGas were buying SEMCO because of this company’s Natural Gas Distribution and Natural Gas Storage Utilities in Alaska and Michigan. See article on Market Wire.
Two Strong Buy analysts gave a 12 months stock price of $36.00. On expects strong growth in dividends over the next 5 and 10 years at around 10% per year. Some analysts like the current dividend yield.
A lot of utility stocks are overpriced because of investors who usually get interest income are looking for income from stocks now. This stock still has a good yield. But, however you look at the P/E Ratio, one of 24 is rather high for a utility stock.
I do not sell a stock simply because it is overpriced as the market overprices and underprices stocks all the time. I will not buy any more of this stock as it is 2.4% of my portfolio. It is at 2.4% of my portfolio because it has grown so well. Usually after such a growth spurt a stock slows down. Analysts do not think this will happen to this stock, but I personally would not be buying at this time.
Going forward, I would expect a dividend yield between 4 and 5% and capital gain closer to 8% than to what I have receiving on this stock.
Blogger Alberta Venture writes of AltaGas on March 12, 2012 on his site.
AltaGas operates physical assets and provides essential services to customers who produce and consume natural gas and power. Their gas business provides gathering, processing, transportation, storage and marketing of natural gas and natural gas liquids. Their power business generates and delivers power in Alberta and British Columbia and is developing a significant portfolio of renewable power projects. Its web site is here AltaGas. See my spreadsheet at ala.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.
When I look at insider trading, I find insider selling of $1.7M and minimal insider buying with net insider selling of $1.6M. The insider selling looks like officers are cashing in options. This company also has more than just the standard options with Rights Performance Units, Rights Restricted Units and Subscription Rights.
The CEO has a substantial investment with shares own worth just under $38M. One of the directors has a similar investment in the company. The CFO and the officers of the company have more options than shares. Most of the directors do too, with some exceptions.
There are some 68 institutions that own around 34% of this company. They have bought and sold shares over the past 3 months with a net of sellers, but overall institutions have increased their holdings in the company very marginally.
I get 5 year median low and high Price/Earnings Ratios of 12.74 and 15.21. The current P/E ratio of 24.09 is showing a rather high stock price at $30.35. This stock is at basic a utility; so a P/E ratio of 24 is high.
I get a Graham Price of $19.22 and the current stock price is some 58% higher than the Graham Price. The 10 year median low difference between the stock price and Graham price is the stock price being 8% lower than the Graham Price. The 10 year median high difference between the stock price and Graham price is the stock price being 43% higher than the Graham Price. A difference of 58% does point to a high current stock price.
As far as the dividend yield goes, we do not learn too much. The 5 year median dividend yield is 9% and the current one is 4.6% and suggests a high stock price. However, this company used to be an income trust company and those companies had higher dividend yields than corporations.
This company cut is dividend when switching to a corporation. In a corporate model you do not expect as high dividend yields as the income trusts produced. It was expected the dividend yields on income trusts that switched to corporations would lower their dividends yields to 4 to 5% and this is the range for this company.
The 10 year median Price/Book Value Ratio is 2.50 and the current one is 2.33. This is the only test that shows a reasonable stock price.
When I look at analysts’ recommendations, I get Strong Buy, Buy, Hold and Underperform. The consensus recommendation would be a Buy. Most recommendations are Strong Buy and Buy and there are very few others.
A couple of Strong Buy analysts said that they like that AltaGas were buying SEMCO because of this company’s Natural Gas Distribution and Natural Gas Storage Utilities in Alaska and Michigan. See article on Market Wire.
Two Strong Buy analysts gave a 12 months stock price of $36.00. On expects strong growth in dividends over the next 5 and 10 years at around 10% per year. Some analysts like the current dividend yield.
A lot of utility stocks are overpriced because of investors who usually get interest income are looking for income from stocks now. This stock still has a good yield. But, however you look at the P/E Ratio, one of 24 is rather high for a utility stock.
I do not sell a stock simply because it is overpriced as the market overprices and underprices stocks all the time. I will not buy any more of this stock as it is 2.4% of my portfolio. It is at 2.4% of my portfolio because it has grown so well. Usually after such a growth spurt a stock slows down. Analysts do not think this will happen to this stock, but I personally would not be buying at this time.
Going forward, I would expect a dividend yield between 4 and 5% and capital gain closer to 8% than to what I have receiving on this stock.
Blogger Alberta Venture writes of AltaGas on March 12, 2012 on his site.
AltaGas operates physical assets and provides essential services to customers who produce and consume natural gas and power. Their gas business provides gathering, processing, transportation, storage and marketing of natural gas and natural gas liquids. Their power business generates and delivers power in Alberta and British Columbia and is developing a significant portfolio of renewable power projects. Its web site is here AltaGas. See my spreadsheet at ala.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.
Thursday, April 19, 2012
For all you Novice Investors
The following is an interview with a friend who wanted to understand what it is I am blogging about, so this is for all you novice investors who are not sure about what I blog about.
I must admit that I am in information overload and spread sheets are beyond me!
I get about 150 people looking at my blog daily and sometimes none or sometimes one or two look at the spreadsheets. You are not alone in this.
You are currently reading "Economics of Good and Evil" by Tomas Sedlacek, how has it helped you to better understand the current economic situation?
I understood the situation before I read the book. I read a lot of economic books, magazines and articles. Tomas Sedlacek is considered to be one of the ‘five hot minds in economics’ by the Yale Economic Review. If you Google Tomas Sedlacek and RSA, you should get his 20 minute video that explains very well our current economic problems.
What advice would you give to the low risk, medium risk and high risk investor?
Risk is a very subjective thing. What I might think is low risk others may not. Maybe we should go to smarter risk or smarter investing. First a smart investor should know his/her comfort level. Do not invest in something that might keep you awake at night. The second big cardinal rule is “do not invest in something you do not understand”.
If you are going to invest what are your goals? Are you trying to retain your capital or to make some money? People who are currently investing in bonds often say that they are safe and they want to retain capital. Of course the current problem with our extremely low interest rates is that you are probably not even retaining capital with bonds as your capital is being eaten away by inflation.
If you are out to make money, you have to realize that often with high returns comes with high risk. This is generally true but not always, because for some high risk investments you make lousy returns. However, you are not going to make any money without taking some risks.
I invest in high quality dividend paying blue chip stocks. Often such stocks make more money than other stock because they are less volatile. My portfolio does not reach the lows of the stock market. It also does not reach the highs either. Less volatile sock often produce higher returns over the long term.
At 45+years, how much money does one really need to start to invest meaningfully?
Usually, when starting out investing, one does not have much money. I started out by buying Canadian Savings bonds on a monthly plan and then cashing them in in November to buy some shares. To buy stock you need a minimum of $3,000. You have to buy stocks in a board lot that is 100 shares. Quality shares start around $30, but can be a lot higher. TD Bank is currently around $82. So for TD Bank you will need $8200, plus commission.
It is a wise idea to have more than one stream of income. A job is generally the first steam of income a person gets. Investing can give you a stream of income. In fact investing can give you a number of different streams if you diversify. Some diversify into commodities, bonds, GIC and stocks. Others make money out of buying and selling or renting real estate and still other make money on the internet.
Personally, I diversify my income using different sectors of the investment market. I have stocks in industrial, consumer, real estate, financial and utility sectors. I have very little in resources as I find this sector very risky.
Should one be looking at GICs and Bonds v mutual funds and stocks?
We have gone from a climate of extremely high interest rates to one of extremely low interest rates. I used to have GICs and Bonds. I sold my last bond in 2007. It was a 30 year CIBC bond due in 2014 with interest rate just below 10%. I sold my last GIC in 1997.
The problem with any interest bearing investment vehicle at the moment is the very low interest rates. A lot of high quality government bonds in Canada have interest rates around 2% and some are lower. Inflation is running current around 2%. And, do not forget that you have to pay tax on any income. This is the reason I have no bonds currently. Interest rates are much too low.
The other reason I have no bonds is that we are at the tail end of a very long bond bull market. With bonds, the interest rate and value of bonds go in the opposite directions. So if you buy a $50,000 bond with a 2% interest rate and interest rates go up, your bond will be worth less than $50,000.
The volatile of the bond value depends on how much interest rates change and what the bond duration is. The longer the period to the bond’s maturity the more volatile the bond’s value will be. Interest rates are extremely low. They have nowhere to go but up. At some point we are going to go into a bond bear market.
People generally do not buy mutual funds, they are sold mutual funds. One problem with a lot of mutual funds is the high fees. However, you cannot expect people to invest for you for free. Another problem is that there are more mutual funds to choose from than there are stocks on the stock exchange. You have the same problem with ETFs (Exchange Traded funds)
Currently, I am into stocks and mostly dividend paying Canadian Stocks. My blog mostly talks about specific stocks.
How about paying off the mortgage v buying RRSPs?
The general rule is always paying off debt before investing. However, this is a general rule. You may have a good reason to do otherwise. If you are going to invest before paying off your debt can you articulate why?
What is the situation with the Toronto housing market from the investment point of view?
I have not owned a house or condo in Toronto yet. I love apartment living, so if I buy it would be a condo. However, I am worried about the number of condos being built currently in Toronto. I also worry about what the future holds for those monthly condo fees. They seem to keep go up and up.
I have always rented an apartment in Toronto. However, when my son was growing up I did have a cottage.
What is your tip of the month to the average zoomer?
Now is not the time to buy utilities and REITs. Everyone is looking for income because of the low interest rates. The stock of utilities and REITs are currently overpriced.
What books would you recommend to the new investor, the low, medium and high risk investor?
I do not read that many investments books. One I did like was Stocks for the Long Run by Jeremy J. Siegel. He is an American, but what he says also applies to our market.
I know a blogger I follow called Dividend Ninja has recently recommended “Never Too Late, Take Control of Your Retirement and Your Future” by Gail Vaz-Oxlade. Another blogger I like, My Own Advisor has recommended Millionaire Teacher by Andrew Hallam.
Maybe you could give me some examples of what you are typically asked by people
Usually people ask me to recommend a stock and I cannot do that as I am not a licenced advisor. Of course, I can tell them what I am buying or what I am reviewing. The thing is I am investing to live off my dividends. It may not be what others want to do. However, the stocks I have and review are often just as great for new investors as they are for people living off dividends.
Would you think it is a good idea for parents/grandparents to buy stocks for their children/grand children?
If the child is 18 or over, there are no problems. You can get into tax complexity if the child is under 18. Any income is taxable back to the parent/grandparent. Capital Gain is taxable in the hands of the child.
If you are using the RESP vehicle, you can of course have stocks if the RESP is a trading account. The problem here for stocks is that you have to plan 5 years before the RESP money is need to get out of the market. No one knows exactly where the market is at any time, but you do know if it is relatively high or relatively low. Within the 5 years to when money is need, you need to pick a time when the market is relatively high to sell the stocks.
I know people have often suggested giving children shares in toy game companies, but I think that is a bad idea. They are not good long term investments. Games and toy changed very rapidly. You need good stable companies. Utilities are probably best. I know utilities are currently overpriced, but they will not always be.
Please Susan, now that you know how very basic my questions are, could you please make your responses at a very simple level?
Let me know what you do not understand and we can fix it.
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.
I must admit that I am in information overload and spread sheets are beyond me!
I get about 150 people looking at my blog daily and sometimes none or sometimes one or two look at the spreadsheets. You are not alone in this.
You are currently reading "Economics of Good and Evil" by Tomas Sedlacek, how has it helped you to better understand the current economic situation?
I understood the situation before I read the book. I read a lot of economic books, magazines and articles. Tomas Sedlacek is considered to be one of the ‘five hot minds in economics’ by the Yale Economic Review. If you Google Tomas Sedlacek and RSA, you should get his 20 minute video that explains very well our current economic problems.
What advice would you give to the low risk, medium risk and high risk investor?
Risk is a very subjective thing. What I might think is low risk others may not. Maybe we should go to smarter risk or smarter investing. First a smart investor should know his/her comfort level. Do not invest in something that might keep you awake at night. The second big cardinal rule is “do not invest in something you do not understand”.
If you are going to invest what are your goals? Are you trying to retain your capital or to make some money? People who are currently investing in bonds often say that they are safe and they want to retain capital. Of course the current problem with our extremely low interest rates is that you are probably not even retaining capital with bonds as your capital is being eaten away by inflation.
If you are out to make money, you have to realize that often with high returns comes with high risk. This is generally true but not always, because for some high risk investments you make lousy returns. However, you are not going to make any money without taking some risks.
I invest in high quality dividend paying blue chip stocks. Often such stocks make more money than other stock because they are less volatile. My portfolio does not reach the lows of the stock market. It also does not reach the highs either. Less volatile sock often produce higher returns over the long term.
At 45+years, how much money does one really need to start to invest meaningfully?
Usually, when starting out investing, one does not have much money. I started out by buying Canadian Savings bonds on a monthly plan and then cashing them in in November to buy some shares. To buy stock you need a minimum of $3,000. You have to buy stocks in a board lot that is 100 shares. Quality shares start around $30, but can be a lot higher. TD Bank is currently around $82. So for TD Bank you will need $8200, plus commission.
It is a wise idea to have more than one stream of income. A job is generally the first steam of income a person gets. Investing can give you a stream of income. In fact investing can give you a number of different streams if you diversify. Some diversify into commodities, bonds, GIC and stocks. Others make money out of buying and selling or renting real estate and still other make money on the internet.
Personally, I diversify my income using different sectors of the investment market. I have stocks in industrial, consumer, real estate, financial and utility sectors. I have very little in resources as I find this sector very risky.
Should one be looking at GICs and Bonds v mutual funds and stocks?
We have gone from a climate of extremely high interest rates to one of extremely low interest rates. I used to have GICs and Bonds. I sold my last bond in 2007. It was a 30 year CIBC bond due in 2014 with interest rate just below 10%. I sold my last GIC in 1997.
The problem with any interest bearing investment vehicle at the moment is the very low interest rates. A lot of high quality government bonds in Canada have interest rates around 2% and some are lower. Inflation is running current around 2%. And, do not forget that you have to pay tax on any income. This is the reason I have no bonds currently. Interest rates are much too low.
The other reason I have no bonds is that we are at the tail end of a very long bond bull market. With bonds, the interest rate and value of bonds go in the opposite directions. So if you buy a $50,000 bond with a 2% interest rate and interest rates go up, your bond will be worth less than $50,000.
The volatile of the bond value depends on how much interest rates change and what the bond duration is. The longer the period to the bond’s maturity the more volatile the bond’s value will be. Interest rates are extremely low. They have nowhere to go but up. At some point we are going to go into a bond bear market.
People generally do not buy mutual funds, they are sold mutual funds. One problem with a lot of mutual funds is the high fees. However, you cannot expect people to invest for you for free. Another problem is that there are more mutual funds to choose from than there are stocks on the stock exchange. You have the same problem with ETFs (Exchange Traded funds)
Currently, I am into stocks and mostly dividend paying Canadian Stocks. My blog mostly talks about specific stocks.
How about paying off the mortgage v buying RRSPs?
The general rule is always paying off debt before investing. However, this is a general rule. You may have a good reason to do otherwise. If you are going to invest before paying off your debt can you articulate why?
What is the situation with the Toronto housing market from the investment point of view?
I have not owned a house or condo in Toronto yet. I love apartment living, so if I buy it would be a condo. However, I am worried about the number of condos being built currently in Toronto. I also worry about what the future holds for those monthly condo fees. They seem to keep go up and up.
I have always rented an apartment in Toronto. However, when my son was growing up I did have a cottage.
What is your tip of the month to the average zoomer?
Now is not the time to buy utilities and REITs. Everyone is looking for income because of the low interest rates. The stock of utilities and REITs are currently overpriced.
What books would you recommend to the new investor, the low, medium and high risk investor?
I do not read that many investments books. One I did like was Stocks for the Long Run by Jeremy J. Siegel. He is an American, but what he says also applies to our market.
I know a blogger I follow called Dividend Ninja has recently recommended “Never Too Late, Take Control of Your Retirement and Your Future” by Gail Vaz-Oxlade. Another blogger I like, My Own Advisor has recommended Millionaire Teacher by Andrew Hallam.
Maybe you could give me some examples of what you are typically asked by people
Usually people ask me to recommend a stock and I cannot do that as I am not a licenced advisor. Of course, I can tell them what I am buying or what I am reviewing. The thing is I am investing to live off my dividends. It may not be what others want to do. However, the stocks I have and review are often just as great for new investors as they are for people living off dividends.
Would you think it is a good idea for parents/grandparents to buy stocks for their children/grand children?
If the child is 18 or over, there are no problems. You can get into tax complexity if the child is under 18. Any income is taxable back to the parent/grandparent. Capital Gain is taxable in the hands of the child.
If you are using the RESP vehicle, you can of course have stocks if the RESP is a trading account. The problem here for stocks is that you have to plan 5 years before the RESP money is need to get out of the market. No one knows exactly where the market is at any time, but you do know if it is relatively high or relatively low. Within the 5 years to when money is need, you need to pick a time when the market is relatively high to sell the stocks.
I know people have often suggested giving children shares in toy game companies, but I think that is a bad idea. They are not good long term investments. Games and toy changed very rapidly. You need good stable companies. Utilities are probably best. I know utilities are currently overpriced, but they will not always be.
Please Susan, now that you know how very basic my questions are, could you please make your responses at a very simple level?
Let me know what you do not understand and we can fix it.
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.
Wednesday, April 18, 2012
AltaGas Ltd
I own this stock (TSX-ALA). I first bought this stock in May 2009 and then bought more in November 2009 and in June 2010. I have made a return of 36.5% per year. Dividends count for 8.8% per year of my return or 24% of my return. My capital gain return is 27.7% per year.
This company used to be an income Trust under AltaGas Income Trust (TSX-ALA.UN). I bought it at a good time when the stock was down. A number of income trust companies lowered their dividends because of the change to a corporation. This company decreased their dividend by 39% before it started to increase it again. The dividend is still 36% lower than it was in at its peak in 2009.
Dividend growth over the past 5 years is negative. It has gone down by 7.9% per year over the past 5 years. However, it is up over the past 10 years by 18.9%. Dividends were increased in 2011 by 4.5%. The 5 year median Dividend Payout Ratios are 121% for earnings and 74% for cash flow. DPRs for 2011 were 132% for earnings and 56% for cash flow. The DPRs for earnings is not expected to be below the earnings level until next year (2013).
If you had held the stock for the last 5 and 10 years you would probably have made a return of 10.8% and 25.6% per year. (I did better because I held the stock for less than 3 years.) The dividend portion of the above return was 6.8% and 9.2% per year. Dividends made up 63% and 36% of the return. Capital gains made up 4% and 16.4% per year of the return.
Going forward you should expect the portion of the return attributed to dividends to go down. Income Trusts gave out very high dividend yields. Corporations have much lower dividend yields. The current dividend yield is 4.55%. I would not expect any improvement on this in the future.
Other growth for this company shows that the 10 year growth is better than the 5 year growth. For example revenue growth is down by 6.2% per year over the past 5 years, but up by 3.3% per year over the past 10 years. Cash Flow is down by 3% per year over the past 5 years, but up by 6.5% over the past 10 years. A lot of companies are in this situation because of the recent recession.
As far as debt ratios go, the current Liquidity Ratio is just 0.65. Even talking off the current portion of the debt (which has been handled) the ratio only moves up to 0.79. However, this is typical of this sort of company. The Debt Ratio is much better at 1.62. The current Leverage and Debt/Equity Ratios at 3.05 and 1.88 are fine and typical of this sort of company. (This company can be compared to pipeline companies like Enbridge (TSX-ENB) or Pembina (TSX-PPL).)
The Return on Equity is rather low at 8.1% for 2011. The 5 year median ROE is better at13.5%. The ROE on comprehensive income at 7.4% is close to the ROE on net income.
I will be holding on to my shares. I bought this as a long term investment. However, I expect a lower rate of return in the future. Over the next few years I would expect total return to be between 10 and 15% with dividends making up 4 to 4.5% of the return and capital gain making up 6% to 10.5%.
AltaGas operates physical assets and provides essential services to customers who produce and consume natural gas and power. Their gas business provides gathering, processing, transportation, storage and marketing of natural gas and natural gas liquids. Their power business generates and delivers power in Alberta and British Columbia and is developing a significant portfolio of renewable power projects. Its web site is here AltaGas. See my spreadsheet at ala.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.
This company used to be an income Trust under AltaGas Income Trust (TSX-ALA.UN). I bought it at a good time when the stock was down. A number of income trust companies lowered their dividends because of the change to a corporation. This company decreased their dividend by 39% before it started to increase it again. The dividend is still 36% lower than it was in at its peak in 2009.
Dividend growth over the past 5 years is negative. It has gone down by 7.9% per year over the past 5 years. However, it is up over the past 10 years by 18.9%. Dividends were increased in 2011 by 4.5%. The 5 year median Dividend Payout Ratios are 121% for earnings and 74% for cash flow. DPRs for 2011 were 132% for earnings and 56% for cash flow. The DPRs for earnings is not expected to be below the earnings level until next year (2013).
If you had held the stock for the last 5 and 10 years you would probably have made a return of 10.8% and 25.6% per year. (I did better because I held the stock for less than 3 years.) The dividend portion of the above return was 6.8% and 9.2% per year. Dividends made up 63% and 36% of the return. Capital gains made up 4% and 16.4% per year of the return.
Going forward you should expect the portion of the return attributed to dividends to go down. Income Trusts gave out very high dividend yields. Corporations have much lower dividend yields. The current dividend yield is 4.55%. I would not expect any improvement on this in the future.
Other growth for this company shows that the 10 year growth is better than the 5 year growth. For example revenue growth is down by 6.2% per year over the past 5 years, but up by 3.3% per year over the past 10 years. Cash Flow is down by 3% per year over the past 5 years, but up by 6.5% over the past 10 years. A lot of companies are in this situation because of the recent recession.
As far as debt ratios go, the current Liquidity Ratio is just 0.65. Even talking off the current portion of the debt (which has been handled) the ratio only moves up to 0.79. However, this is typical of this sort of company. The Debt Ratio is much better at 1.62. The current Leverage and Debt/Equity Ratios at 3.05 and 1.88 are fine and typical of this sort of company. (This company can be compared to pipeline companies like Enbridge (TSX-ENB) or Pembina (TSX-PPL).)
The Return on Equity is rather low at 8.1% for 2011. The 5 year median ROE is better at13.5%. The ROE on comprehensive income at 7.4% is close to the ROE on net income.
I will be holding on to my shares. I bought this as a long term investment. However, I expect a lower rate of return in the future. Over the next few years I would expect total return to be between 10 and 15% with dividends making up 4 to 4.5% of the return and capital gain making up 6% to 10.5%.
AltaGas operates physical assets and provides essential services to customers who produce and consume natural gas and power. Their gas business provides gathering, processing, transportation, storage and marketing of natural gas and natural gas liquids. Their power business generates and delivers power in Alberta and British Columbia and is developing a significant portfolio of renewable power projects. Its web site is here AltaGas. See my spreadsheet at ala.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.
Tuesday, April 17, 2012
Toromont Industries Ltd 2
I own this stock (TSX-TIH). I first bought this stock in 2007 and then some more in 2008. My total return, if I exclude Enerflex is 9% per year. With Enerflex included my return is 7.4% per year. The problem with Enerflex is that Toromont did not have it for very long. Basically, I treating the money I got from it as a special dividend payment.
When I look at insider trading, I find that there is $3.1M of insider selling and a bit of insider buying with net insider selling at $2.7M. This is a lot of insider selling for a company this size. Insiders, not only have options but they have other options type units called Rights Deferred Share Units. Only the CEO and CFO have more options than shares. There are some officers with substantial shares.
There are some 51 institutions that hold 47% of the shares of this company. They have bought and sold shares over the past 3 months and have decreased their holdings by 2.3%. This is a negative.
My 5 year median low and high Price/Earnings Ratios are 11.86 and 15.96. The current P/E ratio of 15.16 would suggest a rather high current stock price. However, I do get a 10 year median P/E ratio of 14.98, which is not far from the current 15.16.
I get a Graham Price of $13.47. The low, median and high difference between the Graham price and stock price is the stock price being 7.9%, 29% and 52% higher than the Graham Price. The current stock price of 23.13 is some 72% higher than the Graham price. This also suggests the current stock price of 23.13 is rather high.
I get a 10 year Price/Book Value of 2.79 and the current P/B Ratio is 4.39. The current one is almost 60% higher than the 10 year ratio and suggests a rather high current stock price. However, you have to wonder how valid this test is for this stock as the book value did decline by 66% in 2011. The decline had mostly to do the purchase and sale of Enerflex.
The current dividend yield is 2.03% and the 5 year median dividend yield is 2.23%, about 7% higher. This would suggest a rather high current stock price. The current yield of 2.03 is not as low as the yield has gone as this stock has a 10 year median low dividend yield of 1.64%. Dividend yield was lower in the past.
When I look at analysts’ recommendations, I find Strong Buy, Buy and Hold recommendations. The consensus would be a Hold. The Hold recommendation comes with a 12 month stock price of $25.69 and a Buy with a 12 months stock price of $27. The price of $27 gives a P/E of 15.88 against the 2013 EPS estimates and within the historical P/E range. (True as my 10 year P/E range is 12.50 to 18.01.)
Some analysts prefer Finning (TSX-FTT) to this stock. Some liked it better before the Enerflex spin-off. There is some ambivalence to the spin-off of Enerflex. Others think it is good long term hold and will have increasing dividends in the future. One mentioned that there has been a recent run up in this stock and he did not expect much upside in the short term.
I am going to hold on to the shares I have. I think that I will do well in the long term on this company. I also do not expect much upside in the near future, but I do expect a good return over the long term.
There are two sections to this company. The Equipment Group is for Caterpillar dealerships. The Compression Group designs, engineers, fabricates and installs compression systems for natural gas, fuel gas and carbon dioxide. This last group also has industrial and recreational refrigeration systems. Its web site is here Husky. See my spreadsheet at tih.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.
When I look at insider trading, I find that there is $3.1M of insider selling and a bit of insider buying with net insider selling at $2.7M. This is a lot of insider selling for a company this size. Insiders, not only have options but they have other options type units called Rights Deferred Share Units. Only the CEO and CFO have more options than shares. There are some officers with substantial shares.
There are some 51 institutions that hold 47% of the shares of this company. They have bought and sold shares over the past 3 months and have decreased their holdings by 2.3%. This is a negative.
My 5 year median low and high Price/Earnings Ratios are 11.86 and 15.96. The current P/E ratio of 15.16 would suggest a rather high current stock price. However, I do get a 10 year median P/E ratio of 14.98, which is not far from the current 15.16.
I get a Graham Price of $13.47. The low, median and high difference between the Graham price and stock price is the stock price being 7.9%, 29% and 52% higher than the Graham Price. The current stock price of 23.13 is some 72% higher than the Graham price. This also suggests the current stock price of 23.13 is rather high.
I get a 10 year Price/Book Value of 2.79 and the current P/B Ratio is 4.39. The current one is almost 60% higher than the 10 year ratio and suggests a rather high current stock price. However, you have to wonder how valid this test is for this stock as the book value did decline by 66% in 2011. The decline had mostly to do the purchase and sale of Enerflex.
The current dividend yield is 2.03% and the 5 year median dividend yield is 2.23%, about 7% higher. This would suggest a rather high current stock price. The current yield of 2.03 is not as low as the yield has gone as this stock has a 10 year median low dividend yield of 1.64%. Dividend yield was lower in the past.
When I look at analysts’ recommendations, I find Strong Buy, Buy and Hold recommendations. The consensus would be a Hold. The Hold recommendation comes with a 12 month stock price of $25.69 and a Buy with a 12 months stock price of $27. The price of $27 gives a P/E of 15.88 against the 2013 EPS estimates and within the historical P/E range. (True as my 10 year P/E range is 12.50 to 18.01.)
Some analysts prefer Finning (TSX-FTT) to this stock. Some liked it better before the Enerflex spin-off. There is some ambivalence to the spin-off of Enerflex. Others think it is good long term hold and will have increasing dividends in the future. One mentioned that there has been a recent run up in this stock and he did not expect much upside in the short term.
I am going to hold on to the shares I have. I think that I will do well in the long term on this company. I also do not expect much upside in the near future, but I do expect a good return over the long term.
There are two sections to this company. The Equipment Group is for Caterpillar dealerships. The Compression Group designs, engineers, fabricates and installs compression systems for natural gas, fuel gas and carbon dioxide. This last group also has industrial and recreational refrigeration systems. Its web site is here Husky. See my spreadsheet at tih.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.
Monday, April 16, 2012
Toromont Industries Ltd
I own this stock (TSX-TIH). I first bought this stock in 2007 and then some more in 2008. My total return, if I exclude Enerflex is 9% per year. With Enerflex included my return is 7.4% per year. The problem with Enerflex is that Toromont did not have it for very long. Basically, I treating the money I got from it as a special dividend payment.
Looking at the 9% return this breaks down into a return of 13.5% per year return on dividends and a 4.5% loss in capital gains. I sold Enerflex after I received the shares and sold this stock at a loss. The stock first tracked up and then down after it was spun-off. It was had headed a bit higher when I sold. It was not a stock I wanted to hold, so I thought I would get out while I could get a reasonable price for it.
The return on this stock is only decent over the past 5 years because of the special dividend of the Enerflex spin-off. I think that the net result of Toromont buying and then spinning Enerflex off is a loss for its shareholders. However, most people feel more confused about it then thinking it was a negative move. There is an article about this at Daily Buy Sell Advisor.
According to my spreadsheet, if you had held this stock over the past 5 and 10 years, you would have earned 8.7% and 14.9% per year return, respectively. The portion accorded to dividends would be 11.5% and 7.3% per year. Going forward, dividend portion of your return will be closer 2% per year.
Looking at growth, the dividends have grown at the rate of 5.8% and 12% over the past 5 and 10 years to the end of 2011. The dividend growth to date would be lower at 3.7% and 10.9% per year over the past 5 and 10 years. The lower to date one is because dividends were decreased following spin-off of Enerflex. However, they have since increased dividends by 9.1%.
Growth in revenue, earnings, cash flow and book value is rather low or non-existent. For example the growth in EPS is negative (3% per year) over the past 5 years and over the past 10 years is 6.5% per year. The growth in cash flow per share is 0% per year and 2.3% per year over the past 5 and 10 years.
The book value declined by 66% in 2011 due to the spin-off the Enerflex. Over the past 5 years book value has declined 9.7% per year. Over the past 10 years book value has grown by 0% per year. This has all to do with the purchase and spin-off of Enerflex. The spin-off value was less than the purchase value.
This big decline in book value has distorted the Return on Equity. Because book value is now so low and net income was quite good, the ROE is showing at an impossible 61%. ROE based on Comprehensive Income is worse at 63%. (The ROE for 2011 is useless and it tells us nothing.)
The only good thing is the debt ratios. The current Liquidity Ratio is very good at 1.74. The current Debt Ratio is also good at 1.79. The current Leverage and Debt/Equity Ratios are ok at 2.26 and 1.26.
I still have hope for this stock. It is an Industrial stock so I expect long term returns to be about 8%, with 2% from dividends and 6% from capital gains. The total return is not far off this when I include Enerflex and get a return of 7.4%. I think it would have done better without buying and selling Enerflex. Also the Industrials have not really recovered from the latest recession. I still think that this company still has potential.
I thought a lot about how to update my spreadsheet because of the Enerflex Ltd (TSX-EFX) spin-off. I have come to the conclusion that as a shareholder of Toromont, I only got a cash equivalent to the share price of Enerflex on the date of separation. That date was June 3rd, 2011. Enerflex was worth $12.65 per share on that day. Unfortunately, the stock went up a bit and then tracked lower for a while. I sold Enerflex at a loss.
There are two sections to this company. The Equipment Group is for Caterpillar dealerships. The Compression Group designs, engineers, fabricates and installs compression systems for natural gas, fuel gas and carbon dioxide. This last group also has industrial and recreational refrigeration systems. Its web site is here Husky. See my spreadsheet at tih.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.
Looking at the 9% return this breaks down into a return of 13.5% per year return on dividends and a 4.5% loss in capital gains. I sold Enerflex after I received the shares and sold this stock at a loss. The stock first tracked up and then down after it was spun-off. It was had headed a bit higher when I sold. It was not a stock I wanted to hold, so I thought I would get out while I could get a reasonable price for it.
The return on this stock is only decent over the past 5 years because of the special dividend of the Enerflex spin-off. I think that the net result of Toromont buying and then spinning Enerflex off is a loss for its shareholders. However, most people feel more confused about it then thinking it was a negative move. There is an article about this at Daily Buy Sell Advisor.
According to my spreadsheet, if you had held this stock over the past 5 and 10 years, you would have earned 8.7% and 14.9% per year return, respectively. The portion accorded to dividends would be 11.5% and 7.3% per year. Going forward, dividend portion of your return will be closer 2% per year.
Looking at growth, the dividends have grown at the rate of 5.8% and 12% over the past 5 and 10 years to the end of 2011. The dividend growth to date would be lower at 3.7% and 10.9% per year over the past 5 and 10 years. The lower to date one is because dividends were decreased following spin-off of Enerflex. However, they have since increased dividends by 9.1%.
Growth in revenue, earnings, cash flow and book value is rather low or non-existent. For example the growth in EPS is negative (3% per year) over the past 5 years and over the past 10 years is 6.5% per year. The growth in cash flow per share is 0% per year and 2.3% per year over the past 5 and 10 years.
The book value declined by 66% in 2011 due to the spin-off the Enerflex. Over the past 5 years book value has declined 9.7% per year. Over the past 10 years book value has grown by 0% per year. This has all to do with the purchase and spin-off of Enerflex. The spin-off value was less than the purchase value.
This big decline in book value has distorted the Return on Equity. Because book value is now so low and net income was quite good, the ROE is showing at an impossible 61%. ROE based on Comprehensive Income is worse at 63%. (The ROE for 2011 is useless and it tells us nothing.)
The only good thing is the debt ratios. The current Liquidity Ratio is very good at 1.74. The current Debt Ratio is also good at 1.79. The current Leverage and Debt/Equity Ratios are ok at 2.26 and 1.26.
I still have hope for this stock. It is an Industrial stock so I expect long term returns to be about 8%, with 2% from dividends and 6% from capital gains. The total return is not far off this when I include Enerflex and get a return of 7.4%. I think it would have done better without buying and selling Enerflex. Also the Industrials have not really recovered from the latest recession. I still think that this company still has potential.
I thought a lot about how to update my spreadsheet because of the Enerflex Ltd (TSX-EFX) spin-off. I have come to the conclusion that as a shareholder of Toromont, I only got a cash equivalent to the share price of Enerflex on the date of separation. That date was June 3rd, 2011. Enerflex was worth $12.65 per share on that day. Unfortunately, the stock went up a bit and then tracked lower for a while. I sold Enerflex at a loss.
There are two sections to this company. The Equipment Group is for Caterpillar dealerships. The Compression Group designs, engineers, fabricates and installs compression systems for natural gas, fuel gas and carbon dioxide. This last group also has industrial and recreational refrigeration systems. Its web site is here Husky. See my spreadsheet at tih.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.
Friday, April 13, 2012
Badger Daylighting Ltd
I so not own this stock (TSX-BAD). This company came up on an article called
Some Small Cap dividend payers to review from G&M. This stock also came out on a list entitled an alluring mix of stability and profits at G&M.
The first article looked at what the pros who manage
small-cap funds are buying. Badger was
one of 10 stocks mentioned and it looked like an interesting stock. It is a dividend paying small cap. The second article looked at what stocks
might appeal to a conservative investor looking for income.
So the above is why I decided to review this company. Now, on to what I found.
The first thing that caught my eye was dividends. Although the current dividend yield at 4% is
good, the 5 year median dividend yield at 6.6% is higher. This is because dividends were reduced by 19%
in 2011. Over the past 5 year dividends are down by 3.5% per year. This company started to pay dividends in 2004
and since that time dividends are up by 9.7% per year.
This stock used to be an Income Trust under
(TSX-BAD.UN). Most companies changing
from Income Trust to corporations lowered dividends. This is what this company did. They have not announced when they might
increase their dividends again, but they probably will. The 5 year median Dividend Payout Ratios are
72% for earnings and 42% for cash flow.
The DPR for 2011 were lower at 44% and 34%. It would seem that they will be about the
same for 2012.
If you had invested in this company over the past 5 and 10
years, you would have made money. The
total return over the past 5 and 10 years would be around 15% and 35% per year,
respectively. The dividend portion would
have been around 7% and 11% per year, respectively. The dividends would have represented
something like 48% and 31% of the return.
Capital gain would have been at 8% and 24% per year, respectively.
There is good revenue, earnings, cash flow and book value
growth for this company. For example, the
earnings growth is running at 9.3% and 29.5% per year over the past 5 and 10
years. Cash Flow is running at 9.3% and
16.6% per year over the past 5 and 10 years.
The debt ratios are good.
The current Liquidity Ratio is 2.76 and the current Debt Ratio is 1.95. These both deal with assets and liabilities
and what you want is ratios at 1.50 (or above).
The current Leverage and Debt/Equity Ratios are also good. They are at 2.06 and 1.06 respectively. (Here the lower the ratio, the better the
ratios.) However, these last two ratios
are rising as the 5 year median Ratios were 1.81 and 0.81. They are not currently high, but they are
going in the wrong direction.
Return on Equity for 2011 is 28.9% and the 5 year median ROE
is 28.6%. The ROE based on comprehensive
income is around the same. For 2011 it
is 30.1% and it has a 5 year median of 28.6%.
When I look at insider trading, I find no insider buying and
no insider selling. It would seem that
options are being turned into shares. There
are 14 institutions that hold 54% of this company. There has been some buying and selling over
the past 3 months and they have reduced their holdings by 4% over this period.
I get 5 year median low and high Price/Earnings Ratios of
7.60 and 11.17. The current P/E of 9.96
is just above the median P/E Ratio of 9.38.
The current P/E of 9.96 is low.
Basically any P/E below 10 is low.
The P/E is just not relatively low to past P/E’s.
I get a Graham Price of $21.90. The current stock price of $25.70 is some 17%
above the Graham price. The low
difference between the Graham price and stock price is the stock price being
20% lower than the Graham Price. The
high difference between the Graham price and stock price is the stock price
being 38% higher than the Graham Price.
I get a 10 year median Price/Book Value Ratio of 2.68 and a
current P/B Ratio of 3.11. The current
ratio is some 16% higher than the P/B Ratio.
As expected the current dividend yield is lower than the 5 year dividend
yield because of the recent dividend cut.
However, the dividend yield has been trending down since a peak in
2009. There is nothing remarkable about
the current stock price. It is neither
really high nor really low and seems to be a bit above the median.
There are few analysts that following this stock. All the recommendations are either Strong Buy
or Hold. The consensus recommendations
would be a Buy. The Strong Buy analysts
like it because of low P/E and great dividend yield. They think the stock is cheap and the company
is well run. Another analyst thought the
price a bit high and would prefer it at $20.50 to $21.50 for it to be a buy.
At the moment I am not buying anything. However, this is an interesting stock with a
good dividend and seems to be reasonable priced.
Badger is North America's largest provider of non-destructive excavating services. Badger traditionally works for contractors and facility owners in the utility and petroleum industries. Badger's business model involves the provision of excavating services through two distinct entities: the Operating Partners (franchisees in the United States and agents in Canada), and Badger Corporate. Its web site is here Badger. See my spreadsheet at bad.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.
Thursday, April 12, 2012
TransAlta Corp 2
I own this stock (TSX-TA). I bought this stock in 1987; I sold some in 2000 and then bought some more in 2009. I have made a total return of 7.45 per year. The portion of dividends is 7.11% and capital gain portion was just 0.34%. The dividend yield was much higher on this stock prior to 1997.
On the insiders trading report, it shows a small amount of insider buying and a small amount of insider selling. The net insider buying at $0.6M. This company is also moving away from options and to Performance Share Ownership Plan (Psop) units, Restricted Share Units and Deferred Share Units. Everyone, including the directors have more of these new types of options than common shares. There are a lot of people with these new type options including CEO, CFO, Officers and others and directors.
There are some 211 institutions that own 53% of the shares of this company. Over the past 3 months they have bought and sold shares. There is a net of buyers, but they have reduced their overall share in this company by 2% during this period.
The 5 year median low and high Price/Earnings Ratios are 17.80 and 23.98. The current P/E ratio is relatively low at 16.11. (Although I think the P/E ratios on this stock are rather high for a utility stock.) I get a Graham Price of $17.39. The low and median difference between the Graham price and the stock price is stock price being 7.9% and 29.8% higher than the Graham Price. Currently, the stock price is 2.8% above the Graham price and this would point to a relatively low stock price.
The 10 year median Price/Book Value Ratio is 1.74 and the current ratio of 1.48 is only 85% of the 10 year median ratio. The current P/B Ratio points to a reasonable stock price. (For the stock price to be low, the current P/B Ratio would have to be just 80% of the 10 year median ratio.) The 5 year median dividend yield is 5.32% and the current yield of 6.49% is some 22% higher. This relatively high dividend yield points to a relatively low stock price.
When I look at analysts’ recommendations I find they include all of Strong Buy, Buy, Hold, Underperform and Sell. The consensus recommendation would be a Hold. One analyst just announced recommendation change from Sell to Hold. The Hold consensus comes with a 12 months stock price of $20.89. One hold analyst gives a 12 months stock price of $21.00. (See my site for information on analyst ratings.)
A number of analysts think that TransAlta is well managed. One analyst said this company was the weakest company in the utilities group. Another analyst said that it is not popular at the moments as it has had some troubles. A number of analysts mentioned the great dividend yield. (It is currently at 6.5%.) A number of analysts thought that it will have trouble growing. The worry is that with Dividend Payout Ratios high the company has not enough money to expand.
I think that the company will get though its problems and be a solid dividend payer in the future. I am holding on to my current shares.
New on April 19, 2012. See someone else’s view of this sock at Student of Value Investing blog.
TransAlta is a power generation and wholesale marketing company. TransAlta maintains a low-to-moderate risk profile by operating a highly contracted portfolio of assets in Canada, the United States and Australia. TransAlta's focus is to efficiently operate our biomass, geothermal, wind, hydro, natural gas and coal facilities in order to provide our customers with a reliable, low-cost source of power. Its web site is here TransAlta. See my spreadsheet at ta.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.
On the insiders trading report, it shows a small amount of insider buying and a small amount of insider selling. The net insider buying at $0.6M. This company is also moving away from options and to Performance Share Ownership Plan (Psop) units, Restricted Share Units and Deferred Share Units. Everyone, including the directors have more of these new types of options than common shares. There are a lot of people with these new type options including CEO, CFO, Officers and others and directors.
There are some 211 institutions that own 53% of the shares of this company. Over the past 3 months they have bought and sold shares. There is a net of buyers, but they have reduced their overall share in this company by 2% during this period.
The 5 year median low and high Price/Earnings Ratios are 17.80 and 23.98. The current P/E ratio is relatively low at 16.11. (Although I think the P/E ratios on this stock are rather high for a utility stock.) I get a Graham Price of $17.39. The low and median difference between the Graham price and the stock price is stock price being 7.9% and 29.8% higher than the Graham Price. Currently, the stock price is 2.8% above the Graham price and this would point to a relatively low stock price.
The 10 year median Price/Book Value Ratio is 1.74 and the current ratio of 1.48 is only 85% of the 10 year median ratio. The current P/B Ratio points to a reasonable stock price. (For the stock price to be low, the current P/B Ratio would have to be just 80% of the 10 year median ratio.) The 5 year median dividend yield is 5.32% and the current yield of 6.49% is some 22% higher. This relatively high dividend yield points to a relatively low stock price.
When I look at analysts’ recommendations I find they include all of Strong Buy, Buy, Hold, Underperform and Sell. The consensus recommendation would be a Hold. One analyst just announced recommendation change from Sell to Hold. The Hold consensus comes with a 12 months stock price of $20.89. One hold analyst gives a 12 months stock price of $21.00. (See my site for information on analyst ratings.)
A number of analysts think that TransAlta is well managed. One analyst said this company was the weakest company in the utilities group. Another analyst said that it is not popular at the moments as it has had some troubles. A number of analysts mentioned the great dividend yield. (It is currently at 6.5%.) A number of analysts thought that it will have trouble growing. The worry is that with Dividend Payout Ratios high the company has not enough money to expand.
I think that the company will get though its problems and be a solid dividend payer in the future. I am holding on to my current shares.
New on April 19, 2012. See someone else’s view of this sock at Student of Value Investing blog.
TransAlta is a power generation and wholesale marketing company. TransAlta maintains a low-to-moderate risk profile by operating a highly contracted portfolio of assets in Canada, the United States and Australia. TransAlta's focus is to efficiently operate our biomass, geothermal, wind, hydro, natural gas and coal facilities in order to provide our customers with a reliable, low-cost source of power. Its web site is here TransAlta. See my spreadsheet at ta.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.
Wednesday, April 11, 2012
TransAlta Corp
I own this stock (TSX-TA). I bought this stock in 1987; I sold some in 2000 and then bought some more in 2009. I have made a total return of 7.45 per year. The portion of dividends is 7.11% and capital gain portion was just 0.34%. The dividend yield was much higher on this stock prior to 1997.
Total return over the past 5 years is 0%. The dividend paid per year was 4.6% per year. (You would have had a Capital loss.) The total return over the past 10 years is 4.6%. Dividends were 4.9% per year and the capital loss was 0.3%. The company has had some recent problems and the stock price has been tracking down.
The 5 year median Dividend Payout Ratios are 91.5% for earnings and 31.5% for cash flow. The cash flow one is fine, but the one for earnings is high. The DPR for earnings was fine for 2011 at 88.5%. It is expected to be over 100% in 2013 and is not expected to improve until 2014. You would not expect any dividend increases in the short term.
This stock has never been a dividend growth stock. Generally the dividend yield has been high and the increases few and far between. The growth in dividends has been at 3% and 1.5% over the past 5 and 10 years. Total inflation has been running at 2% and 2.2% over the past 5 and 10 years. For this stock you expect a rather high yield and a low growth dividend. Although, dividend increases should be keeping up with inflation.
As far as growth goes, there has not been much or just none at all for revenue, earnings, cash flow and book value. It looks like there is growth in earnings over the past 5 years, but that is because earnings hit a low point 5 years ago. Growth in earnings over the past 5 years is really probably around 2%.
The current Liquidity Ratios is a bit low at 0.94, but this is typical for this sort of company. The current Debt Ratio is good at 1.59. The current Leverage and Debt/Equity Ratios are fine for this sort of company at 3.61 and 2.27, respectively.
The Return on Equity looks good at 12.7% for the year ending in 2011. However, the ROE on comprehensive income is really low at 1.3%. The current thinking is that if there is a big difference like this in ROE on net income and comprehensive income, then the ROE on net income may not be as good as it looks.
This is an electrical utility company and what you would expect from it is an 8% return with around 5% from dividends and 3% from capital gains. You would expect dividend growth to be at or a bit better than the rate of inflation. This company used to be like this and if it can get over the current problems it might be again. Why you might invest in it is because it could give you solid returns and with low volatility.
I am holding on to my shares at the present time as I feel that it will get over its current problems.
The globe and mail has a couple of articles on this stock. The first article talks about TA’s recent problems. See article at G&M. The second article is a long interview with the new CEO, Dawn Farrell. See article at G&M
TransAlta is a power generation and wholesale marketing company. TransAlta maintains a low-to-moderate risk profile by operating a highly contracted portfolio of assets in Canada, the United States and Australia. TransAlta's focus is to efficiently operate our biomass, geothermal, wind, hydro, natural gas and coal facilities in order to provide our customers with a reliable, low-cost source of power. Its web site is here TransAlta. See my spreadsheet at ta.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.
Total return over the past 5 years is 0%. The dividend paid per year was 4.6% per year. (You would have had a Capital loss.) The total return over the past 10 years is 4.6%. Dividends were 4.9% per year and the capital loss was 0.3%. The company has had some recent problems and the stock price has been tracking down.
The 5 year median Dividend Payout Ratios are 91.5% for earnings and 31.5% for cash flow. The cash flow one is fine, but the one for earnings is high. The DPR for earnings was fine for 2011 at 88.5%. It is expected to be over 100% in 2013 and is not expected to improve until 2014. You would not expect any dividend increases in the short term.
This stock has never been a dividend growth stock. Generally the dividend yield has been high and the increases few and far between. The growth in dividends has been at 3% and 1.5% over the past 5 and 10 years. Total inflation has been running at 2% and 2.2% over the past 5 and 10 years. For this stock you expect a rather high yield and a low growth dividend. Although, dividend increases should be keeping up with inflation.
As far as growth goes, there has not been much or just none at all for revenue, earnings, cash flow and book value. It looks like there is growth in earnings over the past 5 years, but that is because earnings hit a low point 5 years ago. Growth in earnings over the past 5 years is really probably around 2%.
The current Liquidity Ratios is a bit low at 0.94, but this is typical for this sort of company. The current Debt Ratio is good at 1.59. The current Leverage and Debt/Equity Ratios are fine for this sort of company at 3.61 and 2.27, respectively.
The Return on Equity looks good at 12.7% for the year ending in 2011. However, the ROE on comprehensive income is really low at 1.3%. The current thinking is that if there is a big difference like this in ROE on net income and comprehensive income, then the ROE on net income may not be as good as it looks.
This is an electrical utility company and what you would expect from it is an 8% return with around 5% from dividends and 3% from capital gains. You would expect dividend growth to be at or a bit better than the rate of inflation. This company used to be like this and if it can get over the current problems it might be again. Why you might invest in it is because it could give you solid returns and with low volatility.
I am holding on to my shares at the present time as I feel that it will get over its current problems.
The globe and mail has a couple of articles on this stock. The first article talks about TA’s recent problems. See article at G&M. The second article is a long interview with the new CEO, Dawn Farrell. See article at G&M
TransAlta is a power generation and wholesale marketing company. TransAlta maintains a low-to-moderate risk profile by operating a highly contracted portfolio of assets in Canada, the United States and Australia. TransAlta's focus is to efficiently operate our biomass, geothermal, wind, hydro, natural gas and coal facilities in order to provide our customers with a reliable, low-cost source of power. Its web site is here TransAlta. See my spreadsheet at ta.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.
Tuesday, April 10, 2012
Canam Group Inc 2
I took Easter Monday off from blogging because I never got to take it when I was working. You get a double whammy if you work and have children. Schools and daycares are closed (at least daycares in downtown Toronto are because they are run by unionized workers). I always had to scramble to find someone to look after my son on that day. At least now I do not automatically get stress out by the mere mention of Easter Monday.
I have a US Trading Account. I used to have US stocks, but have not had any for some time. I just have one stock in this account, which is ADR of Barclay’s Bank. Barclay’s Bank has restarted dividend payments so I had a bit of cash there. I today put this money into TD Dow Jones Index (US) –E (TSX- TDB953). This is a no load fund with very low MER. TD makes you agree on purchase to a “minimum holding period”, but it does not tell you what that is.
I finally tracked now the prospectuses of TD Mutual Funds on on their web site. This is no easy task. I could not find them on TD’s site and had to Google “Prospectus TD Mutual Funds” to find them. In the “Part A” they talk about Short-Term Trading and there it says how long you need to hold their funds. Which is 90 days for e-series (what I got) or 60 days for all others but MMF and TD Short Term Investment Class. If you have to agree to this before purchasing, you would think that they would make the information easy to find and not practically impossible to find. Nowhere is there the term “minimum holding period” on their site. I could not find it and Google could not find it.
Ok, let us go to the stock I want to talk about today, which is Canam Group Inc. (TSX-CAM) a stock I bought in November 2011 as a short term investment. I wanted to review it after the December 2011 financials were in. Since I bought shares in this company, they are up 30%. These shares, like the TSX has been going down over the past few days. I will probably hold until they start to pay dividends again. I do not expect this to be a permanent investment.
After my November 2011 blog on this company there was lots of insider buying, $3.3M of it and there was a very little of insider selling. When I blogged before on this stock there had been just minor amounts of insider buying and insider selling. The company has been busy buying back shares. (It is not often when a company buys back stock at good prices.) The company has options, but overall, insiders own lots more shares than options. This is what I like to see.
There are 18 institutions who own some 44% of this stock. Over the past 3 months they have bought and sold, but there have been fewer buyers than sellers. Also, institutions shares have decreased by 14.3% over the past 3 months. This is not a good sign, but then institutions have been known to be herd followers.
The 5 year median low and high Price/Earnings Ratios on this stock are 9.38 and 16.60. The current P/E is 33.93. This is because no one expects much in the way of earnings for this company this year. P/E goes to 12.84 and then to 9.13 compared to expected earnings for 2013 and 2014. However, a current P/E of 33 is high.
I get a current Graham Price of $5.11 and the current stock price of $4.75 is 7% lower. The median difference between the Graham price and stock price is the stock price being some 33% lower than the Graham price. So this shows a relatively current high price.
Then we get into some good news on the share price. The 10 year Price/Book Value Ratio is 1.00. The current P/B Ratio of 0.57 shows a very good price. The good price is shown by the fact that the current P/B Ratio is only 57% of the 10 year median ratio. It is also shown by the fact that the book value of $8.60 is higher than the stock price.
I cannot talk about dividend yield as this company has suspended dividends because of financial difficulties.
When I look at analysts’ recommendations, I find Strong Buy, Hold, Underperform and Sell. It is interesting there is no Buy recommendation. The consensus recommendations would be a Hold. A Hold recommendation comes with a 12 months stock price of $5.12. Analysts talk about the strong balance sheet and high book value (compared to stock price). They also talk about the fact that 60 to 70% of the business is in the US. Everyone thinks that the company has excellent management.
The blogger Value Vestor talks about his investment in this company on his blog entry dated December 2011. The blogger Investing Obtusely has an interesting perspective of this company in his blog of November 2011.
At the moment I will hold on to the stock I have.
Canam Group specializes in the design and fabrication of construction products and solutions for the commercial, industrial, institutional, multi-unit residential, and bridge and highway infrastructure markets. This company has offices in Canada, US, Saudi Arabia, United Arab Emirates, India, Romania France and China. Its web site is here Canam. See my spreadsheet at cam.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.
I have a US Trading Account. I used to have US stocks, but have not had any for some time. I just have one stock in this account, which is ADR of Barclay’s Bank. Barclay’s Bank has restarted dividend payments so I had a bit of cash there. I today put this money into TD Dow Jones Index (US) –E (TSX- TDB953). This is a no load fund with very low MER. TD makes you agree on purchase to a “minimum holding period”, but it does not tell you what that is.
I finally tracked now the prospectuses of TD Mutual Funds on on their web site. This is no easy task. I could not find them on TD’s site and had to Google “Prospectus TD Mutual Funds” to find them. In the “Part A” they talk about Short-Term Trading and there it says how long you need to hold their funds. Which is 90 days for e-series (what I got) or 60 days for all others but MMF and TD Short Term Investment Class. If you have to agree to this before purchasing, you would think that they would make the information easy to find and not practically impossible to find. Nowhere is there the term “minimum holding period” on their site. I could not find it and Google could not find it.
Ok, let us go to the stock I want to talk about today, which is Canam Group Inc. (TSX-CAM) a stock I bought in November 2011 as a short term investment. I wanted to review it after the December 2011 financials were in. Since I bought shares in this company, they are up 30%. These shares, like the TSX has been going down over the past few days. I will probably hold until they start to pay dividends again. I do not expect this to be a permanent investment.
After my November 2011 blog on this company there was lots of insider buying, $3.3M of it and there was a very little of insider selling. When I blogged before on this stock there had been just minor amounts of insider buying and insider selling. The company has been busy buying back shares. (It is not often when a company buys back stock at good prices.) The company has options, but overall, insiders own lots more shares than options. This is what I like to see.
There are 18 institutions who own some 44% of this stock. Over the past 3 months they have bought and sold, but there have been fewer buyers than sellers. Also, institutions shares have decreased by 14.3% over the past 3 months. This is not a good sign, but then institutions have been known to be herd followers.
The 5 year median low and high Price/Earnings Ratios on this stock are 9.38 and 16.60. The current P/E is 33.93. This is because no one expects much in the way of earnings for this company this year. P/E goes to 12.84 and then to 9.13 compared to expected earnings for 2013 and 2014. However, a current P/E of 33 is high.
I get a current Graham Price of $5.11 and the current stock price of $4.75 is 7% lower. The median difference between the Graham price and stock price is the stock price being some 33% lower than the Graham price. So this shows a relatively current high price.
Then we get into some good news on the share price. The 10 year Price/Book Value Ratio is 1.00. The current P/B Ratio of 0.57 shows a very good price. The good price is shown by the fact that the current P/B Ratio is only 57% of the 10 year median ratio. It is also shown by the fact that the book value of $8.60 is higher than the stock price.
I cannot talk about dividend yield as this company has suspended dividends because of financial difficulties.
When I look at analysts’ recommendations, I find Strong Buy, Hold, Underperform and Sell. It is interesting there is no Buy recommendation. The consensus recommendations would be a Hold. A Hold recommendation comes with a 12 months stock price of $5.12. Analysts talk about the strong balance sheet and high book value (compared to stock price). They also talk about the fact that 60 to 70% of the business is in the US. Everyone thinks that the company has excellent management.
The blogger Value Vestor talks about his investment in this company on his blog entry dated December 2011. The blogger Investing Obtusely has an interesting perspective of this company in his blog of November 2011.
At the moment I will hold on to the stock I have.
Canam Group specializes in the design and fabrication of construction products and solutions for the commercial, industrial, institutional, multi-unit residential, and bridge and highway infrastructure markets. This company has offices in Canada, US, Saudi Arabia, United Arab Emirates, India, Romania France and China. Its web site is here Canam. See my spreadsheet at cam.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.
Thursday, April 5, 2012
Canam Group Inc
I own this stock (TSX-CAM). I bought this in November 2011 as a short term investment. I wanted to review it after the December 2011 financials were in. Since I bought shares in this company, they are up 30%. These shares, like the TSX has been going down over the past few days. I will probably hold until they start to pay dividends again. I do not expect this to be a permanent investment.
The financial year of 2011 was not good. Revenues increased nicely as they were up some 17% year over year. Earnings and cash flow were negative as expected. If you had been holding this stock over the past 5 or 10 years, you would have probably have lost money as the 5 and 10 year total returns are negative 13% per year and negative 4.6% per year, respectively.
Dividends are paid as and when the company can afford to pay them. In any event the dividend yield is quite low so that they will not make much difference in total return. Dividend yields have been running between 1% and 2%.
The thing that is still solid about this company is good balance sheet. The debt ratios are not quite as good as for 2010, but they are still good. The current Liquidity Ratio is 1.80. This is a good ratio, but not as good as the 5 and 10 year median ratios of 2.28 and 1.96. The current Debt Ratio at 1.68 is still good, but not as good as the 5 and 10 year median ratios of 2.68 and 1.96. These ratios also dipped in the last recession.
The current Leverage and Debt/Equity Ratios are fine at 2.46 and 1.46. These are not as good as the 5 year median ratios of 2.04 and 1.04. (With these ratios lower is better.) However, these ratios also went higher than usual and even higher than the current ratios in the last recession. (That is the recession prior to the current one we are just coming out of.)
It generally takes a while for company’s financials to react after a bear market, then a recession. After the 2000 bear market, this company hit the worse debt ratios in 2003. This time, the bear market started in 2008 and now, in 2011, the debt ratios are the worse they have been.
Analysts expect the company’s revenues, earnings and cash flow all to improve in 2012. Basically, they expect these to improve, but not to be great over the next few years.
There is no point in talking about Return on Equity as there were no earnings. What analysts seem to be expecting is a slow and gradual improvement in the company over the next few years. With the last bear market/recession, the company was doing well in the 5th and 6th year after the recession. If it does the same thing this time, the 5th and 6th years after the recent bear market would be 2013 and 2014.
At the moment I will be holding on to my shares as I can see more capital gain in the future for this company. I am pleased with the current improvement in this company. With the TSX breaking downward out of the narrow band it has been trading in since early March, I have to wonder if we are going to get any more good upward movement until the fall.
I will continue talking about this stock after the Easter Holidays. That will probably be on Tuesday, April 10th, 2012.
Canam Group specializes in the design and fabrication of construction products and solutions for the commercial, industrial, institutional, multi-unit residential, and bridge and highway infrastructure markets. This company has offices in Canada, US, Saudi Arabia, United Arab Emirates, India, Romania France and China. Its web site is here Canam. See my spreadsheet at cam.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.
The financial year of 2011 was not good. Revenues increased nicely as they were up some 17% year over year. Earnings and cash flow were negative as expected. If you had been holding this stock over the past 5 or 10 years, you would have probably have lost money as the 5 and 10 year total returns are negative 13% per year and negative 4.6% per year, respectively.
Dividends are paid as and when the company can afford to pay them. In any event the dividend yield is quite low so that they will not make much difference in total return. Dividend yields have been running between 1% and 2%.
The thing that is still solid about this company is good balance sheet. The debt ratios are not quite as good as for 2010, but they are still good. The current Liquidity Ratio is 1.80. This is a good ratio, but not as good as the 5 and 10 year median ratios of 2.28 and 1.96. The current Debt Ratio at 1.68 is still good, but not as good as the 5 and 10 year median ratios of 2.68 and 1.96. These ratios also dipped in the last recession.
The current Leverage and Debt/Equity Ratios are fine at 2.46 and 1.46. These are not as good as the 5 year median ratios of 2.04 and 1.04. (With these ratios lower is better.) However, these ratios also went higher than usual and even higher than the current ratios in the last recession. (That is the recession prior to the current one we are just coming out of.)
It generally takes a while for company’s financials to react after a bear market, then a recession. After the 2000 bear market, this company hit the worse debt ratios in 2003. This time, the bear market started in 2008 and now, in 2011, the debt ratios are the worse they have been.
Analysts expect the company’s revenues, earnings and cash flow all to improve in 2012. Basically, they expect these to improve, but not to be great over the next few years.
There is no point in talking about Return on Equity as there were no earnings. What analysts seem to be expecting is a slow and gradual improvement in the company over the next few years. With the last bear market/recession, the company was doing well in the 5th and 6th year after the recession. If it does the same thing this time, the 5th and 6th years after the recent bear market would be 2013 and 2014.
At the moment I will be holding on to my shares as I can see more capital gain in the future for this company. I am pleased with the current improvement in this company. With the TSX breaking downward out of the narrow band it has been trading in since early March, I have to wonder if we are going to get any more good upward movement until the fall.
I will continue talking about this stock after the Easter Holidays. That will probably be on Tuesday, April 10th, 2012.
Canam Group specializes in the design and fabrication of construction products and solutions for the commercial, industrial, institutional, multi-unit residential, and bridge and highway infrastructure markets. This company has offices in Canada, US, Saudi Arabia, United Arab Emirates, India, Romania France and China. Its web site is here Canam. See my spreadsheet at cam.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.
Wednesday, April 4, 2012
Dividend Paying Stocks and TFSA
A TFSA Account
I was looking at what could possibly be done with a TFSA account and I just thought I would throw this in.
A Model of TFSA Investing
I made a model of investing for TFSA, assuming you were putting in $5,000 a year and got a return of 10% with 7.5% of capital gain and 2.5% of dividends. Dividends were increasing at 9% a year. Dividends were being reinvested. At the end of 12 years you could have $86,061.22 and at the end of 20 years $315,740.56.
I am assuming you are investing in good quality dividend paying stocks.
How realistic is this model?
My long term results on Fortis (TSX-FTS), which I first bought in 1987, are 13.4% per year to the end of 2011. Of this total return, 4.9% is attributable to dividends and 8.5% to capital gain. Dividends are 49% of my return. The 10 year median dividend yield is 3.3%. The 10 year dividend growth is 9.5%, per year.
My results on Enbridge Inc. (TSX-ENB) that I have had for only 7 years is 20.1% per year to the end of 2011. Of this total return, 3.5% is attributed to dividends and 16.6% to capital gain. Dividends are 17% of my return. The 10 year median dividend yield is 3.3%. The 10 year dividend growth is 10.8% per year.
I bought Power Financial Corp (TSX-PWF) first in 2001 and more in 2011. My total return to the end of February 2012 is 8.5%. Of this total return 4.4% was attributed to dividends and 4.1% to capital gain. Dividends are 52% of my return. The 10 year median dividend yield is 2.8%. The 10 year dividend growth is 14.47%. (This is mostly life insurance, but they do have some mutual funds. They have done better than Manulife and Sun Life. Like more life insurance companies, they have not raised dividends recently and for this company, since 2009.)
My long term results on Bank of Montreal (TSX-BMO) that I first bought in 1987 are 15.9% per year to the end of 2011. Of this total return, 6.4% is attributable to dividends and 9.5% to capital gains. Dividends are 40% of my return. The 10 year median dividend yield is 3.8%. The 10 year dividend growth is 9.6% per year.
My long term results on Royal Bank (TSX-BY) that I first bought in 1999 is 17.9% per year to the end of 2011. Of this total return, 5.6% is attributable to dividends and 12.3% to capital gains. Dividends are 31% of my return. The 10 year median dividend yield is 3.3%. The 10 year dividend growth is 11.7% per year.
I have had CDN Tire (CTC.A) for a long time also, some 12 years. I have a return of 10.8% per year to the end of February 2012. Of this total return, 1.9% is attributed to dividends and 8.9% to capital gain. Dividends are 18% of my return. The 10 year median dividend yield is 1.3%. The 10 year dividend growth is
What to do about dividends and other small amounts?
Dividends income will start out low. To reinvest them you can use the DRIP facilities most dividend paying stock have. The blogger My Own Advisor covers DRIPs quite thoroughly, so I am not going to go into how this works. See his site.
Or you can just add the dividends to the amount you want to invest in the following year. I sometimes buy small cap dividend paying stocks for small amounts of money in the TFSA account.
You can also buy Mutual funds. I know banks like to the TD allow small amounts for some of their funds. For example TD Canadian Index – e (TDB900) allows $100 initial and subsequent investment. The subsequent investments can be any amount they just have to be $100 or greater. Say you had $246.28 in your account you could just clear this into the mutual fund. All the low investment mutual funds have low yields and this one has a yield 1.85%. It is a no load and MER is just 0.33%.
If you are just starting out you should buy utilities and banks. You can buy less than a board lot of shares. A board lot is a financial term, usually meaning 100 shares and most stocks are sold in 100 share lots. However, you can buy and sell odd-lots (less than 100 shares). You may not get the best price, but it will not be far off and if you plan to hold on to the shares, this will not be a long term problems.
Markets:
For 5 year periods since 1956, we have had 4 years of TSX negative return. Over 10 years, we only had one period of TSX negative returns since 1956. TSX returns over 10 years range from 8.2% to 203.4%. If you had been including dividends there would have been no period of negative returns. For 15 or 20 years periods the TSX does not even come close to a negative period since 1956.
US had 2 10 year periods of negative returns and also one ending in 2008, I believe, since the 1920’s. The TSX has done better over the last few years than the US market.
You also have secular bear and bull markets. These last around 15 years. We have been in a secular bear market since 2000. (Although there is some arguments that the Canadian market has moved out this secular bear market, but the US has not.) Secular bear markets tend to be volatile and muck around and not make much progress as far as stock prices are concerned.
Secular bull markets have strong upward movements. They also have pull backs in stock prices, but overall the stock prices move up. In both secular bear markets and secular bull markets, you have cyclical bull and bear markets. Cyclical bull and bear markets are a lot shorter in duration than the secular bull and bear markets.
Conclusions:
Depending on when the 10 year period was, you could or could have not have achieved the 10 years goal. However, I think that over a 20 year period you most likely would.
See my spreadsheet at TFSA_div.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.
I was looking at what could possibly be done with a TFSA account and I just thought I would throw this in.
A Model of TFSA Investing
I made a model of investing for TFSA, assuming you were putting in $5,000 a year and got a return of 10% with 7.5% of capital gain and 2.5% of dividends. Dividends were increasing at 9% a year. Dividends were being reinvested. At the end of 12 years you could have $86,061.22 and at the end of 20 years $315,740.56.
I am assuming you are investing in good quality dividend paying stocks.
How realistic is this model?
My long term results on Fortis (TSX-FTS), which I first bought in 1987, are 13.4% per year to the end of 2011. Of this total return, 4.9% is attributable to dividends and 8.5% to capital gain. Dividends are 49% of my return. The 10 year median dividend yield is 3.3%. The 10 year dividend growth is 9.5%, per year.
My results on Enbridge Inc. (TSX-ENB) that I have had for only 7 years is 20.1% per year to the end of 2011. Of this total return, 3.5% is attributed to dividends and 16.6% to capital gain. Dividends are 17% of my return. The 10 year median dividend yield is 3.3%. The 10 year dividend growth is 10.8% per year.
I bought Power Financial Corp (TSX-PWF) first in 2001 and more in 2011. My total return to the end of February 2012 is 8.5%. Of this total return 4.4% was attributed to dividends and 4.1% to capital gain. Dividends are 52% of my return. The 10 year median dividend yield is 2.8%. The 10 year dividend growth is 14.47%. (This is mostly life insurance, but they do have some mutual funds. They have done better than Manulife and Sun Life. Like more life insurance companies, they have not raised dividends recently and for this company, since 2009.)
My long term results on Bank of Montreal (TSX-BMO) that I first bought in 1987 are 15.9% per year to the end of 2011. Of this total return, 6.4% is attributable to dividends and 9.5% to capital gains. Dividends are 40% of my return. The 10 year median dividend yield is 3.8%. The 10 year dividend growth is 9.6% per year.
My long term results on Royal Bank (TSX-BY) that I first bought in 1999 is 17.9% per year to the end of 2011. Of this total return, 5.6% is attributable to dividends and 12.3% to capital gains. Dividends are 31% of my return. The 10 year median dividend yield is 3.3%. The 10 year dividend growth is 11.7% per year.
I have had CDN Tire (CTC.A) for a long time also, some 12 years. I have a return of 10.8% per year to the end of February 2012. Of this total return, 1.9% is attributed to dividends and 8.9% to capital gain. Dividends are 18% of my return. The 10 year median dividend yield is 1.3%. The 10 year dividend growth is
What to do about dividends and other small amounts?
Dividends income will start out low. To reinvest them you can use the DRIP facilities most dividend paying stock have. The blogger My Own Advisor covers DRIPs quite thoroughly, so I am not going to go into how this works. See his site.
Or you can just add the dividends to the amount you want to invest in the following year. I sometimes buy small cap dividend paying stocks for small amounts of money in the TFSA account.
You can also buy Mutual funds. I know banks like to the TD allow small amounts for some of their funds. For example TD Canadian Index – e (TDB900) allows $100 initial and subsequent investment. The subsequent investments can be any amount they just have to be $100 or greater. Say you had $246.28 in your account you could just clear this into the mutual fund. All the low investment mutual funds have low yields and this one has a yield 1.85%. It is a no load and MER is just 0.33%.
If you are just starting out you should buy utilities and banks. You can buy less than a board lot of shares. A board lot is a financial term, usually meaning 100 shares and most stocks are sold in 100 share lots. However, you can buy and sell odd-lots (less than 100 shares). You may not get the best price, but it will not be far off and if you plan to hold on to the shares, this will not be a long term problems.
Markets:
For 5 year periods since 1956, we have had 4 years of TSX negative return. Over 10 years, we only had one period of TSX negative returns since 1956. TSX returns over 10 years range from 8.2% to 203.4%. If you had been including dividends there would have been no period of negative returns. For 15 or 20 years periods the TSX does not even come close to a negative period since 1956.
US had 2 10 year periods of negative returns and also one ending in 2008, I believe, since the 1920’s. The TSX has done better over the last few years than the US market.
You also have secular bear and bull markets. These last around 15 years. We have been in a secular bear market since 2000. (Although there is some arguments that the Canadian market has moved out this secular bear market, but the US has not.) Secular bear markets tend to be volatile and muck around and not make much progress as far as stock prices are concerned.
Secular bull markets have strong upward movements. They also have pull backs in stock prices, but overall the stock prices move up. In both secular bear markets and secular bull markets, you have cyclical bull and bear markets. Cyclical bull and bear markets are a lot shorter in duration than the secular bull and bear markets.
Conclusions:
Depending on when the 10 year period was, you could or could have not have achieved the 10 years goal. However, I think that over a 20 year period you most likely would.
See my spreadsheet at TFSA_div.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.
Tuesday, April 3, 2012
BCE Inc 2
I own this stock (TSX-BCE). This was the first stock I bought and I bought some 50 shares in 1982. I added to the shares over time. I also had some BCE shares and still do in my RRSP account, which I did not talk about yesterday. I bought shares for my RRSP account in 1999. If I consider both my accounts and the spin-off and sale of Nortel and Bell Aliant, I have a return of 12.88%, with 7.64% from capital gain and 5.24% from dividends.
(My Total return depends on how quickly I sold off Nortel after I received it and I sold it quite early for the RRSP account, but later for my trading account. I therefore did better in my RRSP account than my trading account.)
When I look at insider trading report I find $24.9M of insider selling and $3.5M insider buying for a net of insider selling at $21.4M. Not only do insiders have things called “options”, but they have Performance-based Restricted Share Units, Restricted Share Units and Share Units. These other units are all shares given to insiders as part of pay. To me they are all options.
When I look at holdings, according to the insider trading report, the CEO has some $5.7M of common shares that he owns. However, he has options that are worth $76M at current stock price. Everyone but directors have more options than shares. The current insider selling is by the CFO and officers of the company.
There are some 536 institutions that own 52% of the shares of this company. Over the past 3 months they have bought and sold shares and now have a few less shares (selling less than 1% of outstanding shares).
I have 5 year median low and high Price/Earnings Ratios of 11.07 and 13.74. The current stock price of $40.08 has a P/E ratio of 12.68. The 5 and 10 year median Price/Earnings Ratios are 12.41 and 12.88. This makes the current price a reasonable one.
I get a Graham Price of $31.27. The low difference between the Graham price and stock price is the stock price 5.3% lower than the Graham Price. The median and high difference between the Graham Price and stock price is the stock price being 14% and 32% higher than the Graham Price. So the current price is not as high as it has been, but it is above a median price.
I get a 10 year median Price/Book Value Ratio of 2.09 and a current P/B Ratio of 2.91. This shows that the current stock price is high. Part of the problem is the decrease in Book Value because of the new accounting rules.
The last test and the most important one is the dividend yield. The current dividend yield is 5.4% and the 5 year median is 5.3%, which is almost 2% lower. This shows that the current price is reasonable or slightly better than the median price over the past 5 years.
When I look at analysts’ recommendations, I find Strong Buy, Buy and Hold. Because there are so many Hold recommendations, the consensus recommendation would be a Hold. The reason for the Hold recommendations seems to be that no one expects the stock price to change much over the next 12 months. There is a worry about future profits due to competition, not only from cable but also from VoIP. (VoIP is voice over internet protocols; think of Skype.)
The Buy recommendations talk about the 5% dividend and think it is a buy and hold for the 5% yield and future growth in dividends. Even the Buy recommendations mention that they do not expect much in capital gain from this stock. They just like the 5% dividend.
This has been a common refrain recently. With interest rates so low, investors are looking for better income and they are buying dividend paying stock for the yield and nothing else. Personally, I like buying dividend paying stock for yield and capital gain. I worry about the future of Telecom company’s earnings because Canadian Telecom rates are so high. If this changes, our Telecom companies will not earn as much or would have to be more efficient. The government seems to be changing the rules for Telecom to allow more competition.
Bell has a friendly takeover of Astral Media (TSX-ACM) in the works and most feel that the deal will close and be good for BCE. There is an article in the G&M on this purchase.
Cash Money has written a January 2012 blog on Canadian Telecoms. The blogger site of dividend stock online has a September 2011 article on Canadian Telecoms.
BCE is Canada's largest communications company, providing the most comprehensive and innovative suite of communication services to residential and business customers in Canada. Operating under the Bell and Bell Aliant brands, the Company's services include Bell Home phone local and long distance services, Bell Mobility, Virgin Mobile and Solo Mobile wireless, high-speed Bell Internet, Bell TV direct-to-home satellite and VDSL television, IP-broadband services and information and communications technology (ICT) services. Its web site is here BCE. See my spreadsheet at bce.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.
(My Total return depends on how quickly I sold off Nortel after I received it and I sold it quite early for the RRSP account, but later for my trading account. I therefore did better in my RRSP account than my trading account.)
When I look at insider trading report I find $24.9M of insider selling and $3.5M insider buying for a net of insider selling at $21.4M. Not only do insiders have things called “options”, but they have Performance-based Restricted Share Units, Restricted Share Units and Share Units. These other units are all shares given to insiders as part of pay. To me they are all options.
When I look at holdings, according to the insider trading report, the CEO has some $5.7M of common shares that he owns. However, he has options that are worth $76M at current stock price. Everyone but directors have more options than shares. The current insider selling is by the CFO and officers of the company.
There are some 536 institutions that own 52% of the shares of this company. Over the past 3 months they have bought and sold shares and now have a few less shares (selling less than 1% of outstanding shares).
I have 5 year median low and high Price/Earnings Ratios of 11.07 and 13.74. The current stock price of $40.08 has a P/E ratio of 12.68. The 5 and 10 year median Price/Earnings Ratios are 12.41 and 12.88. This makes the current price a reasonable one.
I get a Graham Price of $31.27. The low difference between the Graham price and stock price is the stock price 5.3% lower than the Graham Price. The median and high difference between the Graham Price and stock price is the stock price being 14% and 32% higher than the Graham Price. So the current price is not as high as it has been, but it is above a median price.
I get a 10 year median Price/Book Value Ratio of 2.09 and a current P/B Ratio of 2.91. This shows that the current stock price is high. Part of the problem is the decrease in Book Value because of the new accounting rules.
The last test and the most important one is the dividend yield. The current dividend yield is 5.4% and the 5 year median is 5.3%, which is almost 2% lower. This shows that the current price is reasonable or slightly better than the median price over the past 5 years.
When I look at analysts’ recommendations, I find Strong Buy, Buy and Hold. Because there are so many Hold recommendations, the consensus recommendation would be a Hold. The reason for the Hold recommendations seems to be that no one expects the stock price to change much over the next 12 months. There is a worry about future profits due to competition, not only from cable but also from VoIP. (VoIP is voice over internet protocols; think of Skype.)
The Buy recommendations talk about the 5% dividend and think it is a buy and hold for the 5% yield and future growth in dividends. Even the Buy recommendations mention that they do not expect much in capital gain from this stock. They just like the 5% dividend.
This has been a common refrain recently. With interest rates so low, investors are looking for better income and they are buying dividend paying stock for the yield and nothing else. Personally, I like buying dividend paying stock for yield and capital gain. I worry about the future of Telecom company’s earnings because Canadian Telecom rates are so high. If this changes, our Telecom companies will not earn as much or would have to be more efficient. The government seems to be changing the rules for Telecom to allow more competition.
Bell has a friendly takeover of Astral Media (TSX-ACM) in the works and most feel that the deal will close and be good for BCE. There is an article in the G&M on this purchase.
Cash Money has written a January 2012 blog on Canadian Telecoms. The blogger site of dividend stock online has a September 2011 article on Canadian Telecoms.
BCE is Canada's largest communications company, providing the most comprehensive and innovative suite of communication services to residential and business customers in Canada. Operating under the Bell and Bell Aliant brands, the Company's services include Bell Home phone local and long distance services, Bell Mobility, Virgin Mobile and Solo Mobile wireless, high-speed Bell Internet, Bell TV direct-to-home satellite and VDSL television, IP-broadband services and information and communications technology (ICT) services. Its web site is here BCE. See my spreadsheet at bce.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.
Monday, April 2, 2012
BCE Inc
I own this stock (TSX-BCE). This was the first stock I bought and I bought some 50 shares in 1982. I bought another 50 shares the following year. After that, I used the DRIP program to purchase more shares with cash and dividends until 1987. I had an odd-lot of shares, so I bought 40 shares to round out the number of shares.
In May 2000, BCE spun off Nortel, I sold some shares in 2005 and then in July 2006 BCE spun off Bell Aliant. I sold off both Nortel and Bell Aliant and lost on both. Nortel was in free fall by the time Bell spun it off. Things like this can occur if you hold a stock for a long period of time. The reason I sold off some of BCE in 2005 was that Bell was not like the original widow and orphan stock it had been. The Telecommunication business was getting more complex and I thought that Bell was overpriced at that point.
Talking all the things that happened into account Quicken calculates my total return since 1987 at 9.3% per year, with 3.6% in capital gain and 5.7% in dividends. If I just look at BCE I get a total return of 16.3% with 11.7% from capital gain and 4.6% from dividends. (I also have some of this stock in my RRSP account since 1999. I did better at the sale on Nortel as I sold it as early as I could.)
Looking at my spreadsheet, I get total return over the past 5 and 10 years at 16.9% and 5.2% per year, respectively. Over the past 5 years, there was 12% in capital gains per year and 4.9% in dividends per year. Dividends were 29% of the total return. Over the past 10 years, there was 1.7% in capital gains per year and 3.5% in dividends per year. Dividends were 68% of the total return. (Most of the stock I follow did better over the past 10 years and poorer over the past 5 years, but this is the opposite.)
BCE has a very uneven history of dividend increases. I have tracked dividends on my spreadsheet since 1992 and most years there were no increases. Dividends were decreased after BCE spun off Nortel. There were a few years of big increases. The 5 and 10 year growth in dividends are 9.2% and 5.5% per year, respectively. Dividend increases have been very good since 2009, with 2010 and 2011 having two increases in each of these years. The most recent increase was this year and increase was for 4.8%.
The 5 year median Dividend Payout Ratios are 71% for earnings and 26% for cash flow. The DPRs for 2011 were 71% for earnings and 33% for cash flow. The 10 year median DPRs are better and lower at 64% for earnings and 21% for cash flow. The current DPRs are at acceptable levels.
For this company, there is little or negative growth over the past 5 and 10 years for revenues, cash flow and book value. There has not been any year over the past 10 were EPS or Cash Flow was negative. The only decent growth is in EPS. EPS has grown at the rate of 5% and 20% over the past 5 and 10 years.
As for debt ratios, the current Liquidity Ratios is low at 0.62, but the company does have decent cash flow. The current Debt Ratio is strong at 1.60. Both of these ratios are lower than the corresponding 5 and 10 year median ratios. The current Leverage and Debt/Equity Ratios are a little high at 3.70 and 2.31 respectively and they are higher than the corresponding 10 year median ratios of 1.78 and 1.95. (Please note that you want the first to debt ratios high and the second two low. See my site for further information on Debt Ratios.)
The Return on Equity for 2011 is very good at 24%, but the ROE based on comprehensive income is quite a bit lower at 17%. (An ROE of 17% is still good.) The 5 year median ROE is 15% and the 5 year median ROE based on comprehensive income is 14.9%, so they are close. (It is hard to know if the difference is due to the new accounting rules or not.)
There probably is room for shareholders to make a decent profit on this company or any telecom company. However, I feel that these companies may have higher risk than is generally acknowledged. I worry because anything I have read suggests that Canada has some of the highest telecom rates in the world. Such a situation can go on for much longer than anyone can image, but it will not go on forever. The government seems to be taking some steps to correct this situation. I am currently holding on to the shares I own which only constitute 1% of my portfolio.
BCE is Canada's largest communications company, providing the most comprehensive and innovative suite of communication services to residential and business customers in Canada. Operating under the Bell and Bell Aliant brands, the Company's services include Bell Home phone local and long distance services, Bell Mobility, Virgin Mobile and Solo Mobile wireless, high-speed Bell Internet, Bell TV direct-to-home satellite and VDSL television, IP-broadband services and information and communications technology (ICT) services. Its web site is here BCE. See my spreadsheet at bce.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.
In May 2000, BCE spun off Nortel, I sold some shares in 2005 and then in July 2006 BCE spun off Bell Aliant. I sold off both Nortel and Bell Aliant and lost on both. Nortel was in free fall by the time Bell spun it off. Things like this can occur if you hold a stock for a long period of time. The reason I sold off some of BCE in 2005 was that Bell was not like the original widow and orphan stock it had been. The Telecommunication business was getting more complex and I thought that Bell was overpriced at that point.
Talking all the things that happened into account Quicken calculates my total return since 1987 at 9.3% per year, with 3.6% in capital gain and 5.7% in dividends. If I just look at BCE I get a total return of 16.3% with 11.7% from capital gain and 4.6% from dividends. (I also have some of this stock in my RRSP account since 1999. I did better at the sale on Nortel as I sold it as early as I could.)
Looking at my spreadsheet, I get total return over the past 5 and 10 years at 16.9% and 5.2% per year, respectively. Over the past 5 years, there was 12% in capital gains per year and 4.9% in dividends per year. Dividends were 29% of the total return. Over the past 10 years, there was 1.7% in capital gains per year and 3.5% in dividends per year. Dividends were 68% of the total return. (Most of the stock I follow did better over the past 10 years and poorer over the past 5 years, but this is the opposite.)
BCE has a very uneven history of dividend increases. I have tracked dividends on my spreadsheet since 1992 and most years there were no increases. Dividends were decreased after BCE spun off Nortel. There were a few years of big increases. The 5 and 10 year growth in dividends are 9.2% and 5.5% per year, respectively. Dividend increases have been very good since 2009, with 2010 and 2011 having two increases in each of these years. The most recent increase was this year and increase was for 4.8%.
The 5 year median Dividend Payout Ratios are 71% for earnings and 26% for cash flow. The DPRs for 2011 were 71% for earnings and 33% for cash flow. The 10 year median DPRs are better and lower at 64% for earnings and 21% for cash flow. The current DPRs are at acceptable levels.
For this company, there is little or negative growth over the past 5 and 10 years for revenues, cash flow and book value. There has not been any year over the past 10 were EPS or Cash Flow was negative. The only decent growth is in EPS. EPS has grown at the rate of 5% and 20% over the past 5 and 10 years.
As for debt ratios, the current Liquidity Ratios is low at 0.62, but the company does have decent cash flow. The current Debt Ratio is strong at 1.60. Both of these ratios are lower than the corresponding 5 and 10 year median ratios. The current Leverage and Debt/Equity Ratios are a little high at 3.70 and 2.31 respectively and they are higher than the corresponding 10 year median ratios of 1.78 and 1.95. (Please note that you want the first to debt ratios high and the second two low. See my site for further information on Debt Ratios.)
The Return on Equity for 2011 is very good at 24%, but the ROE based on comprehensive income is quite a bit lower at 17%. (An ROE of 17% is still good.) The 5 year median ROE is 15% and the 5 year median ROE based on comprehensive income is 14.9%, so they are close. (It is hard to know if the difference is due to the new accounting rules or not.)
There probably is room for shareholders to make a decent profit on this company or any telecom company. However, I feel that these companies may have higher risk than is generally acknowledged. I worry because anything I have read suggests that Canada has some of the highest telecom rates in the world. Such a situation can go on for much longer than anyone can image, but it will not go on forever. The government seems to be taking some steps to correct this situation. I am currently holding on to the shares I own which only constitute 1% of my portfolio.
BCE is Canada's largest communications company, providing the most comprehensive and innovative suite of communication services to residential and business customers in Canada. Operating under the Bell and Bell Aliant brands, the Company's services include Bell Home phone local and long distance services, Bell Mobility, Virgin Mobile and Solo Mobile wireless, high-speed Bell Internet, Bell TV direct-to-home satellite and VDSL television, IP-broadband services and information and communications technology (ICT) services. Its web site is here BCE. See my spreadsheet at bce.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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