Thursday, February 28, 2013

TransCanada Corp

I own this stock of TransCanada Corp (TSX-TRP, NYSE-TRP). I first bought this stock in 2000 when it decreased it dividends and was reorganizing. It is a good company and I thought at the time it was doing the right thing. The company had started to reduce the dividend in 1998 and it hit the low point in 2000. It took 7 years (2005) before the dividend paid exceeded the dividends prior of 1998.

I bought some more of this stock in 2006. I have made a return of 12.35% per year on this company's shares. Of my total return, 4.96% per year is attributable to dividends and 7.39% per year is attributable to capital gains. Over the past 5 and 10 years, shareholders' total return would be 6.68% and 11.86% per year, respectively. Of the above total returns, 3.67% and 4.41% per year would be attributable to dividends and 3.01% and 7.45% per year attributable to capital gain.

This stock pays a reasonable dividend and gives reasonable increases in dividends. The current dividend yield is 3.86% and the 5 year median dividend yield is 4.11%. The dividend growth over the past 5 and 10 years is at 5% and 5.7%. The most recent increase, which was for 2012, was 4.8%.

The Dividend Payout Ratios are also good with 5 year median DPRs for earnings at 76.5% and for cash flow at 33%. The DRPs for earnings was higher than usual in 2012 at 94.6%. Until the last few years, the DPR for earnings was under 60%. The DPR for cash flow has fluctuated for has not changed that much.

The outstanding shares have been increasing at the rate of 5.5% and 4% per year over the past 5 and 10 years. The increases in shares have been due to stock options and DRIP. Revenue has declined over the past years at 2% per year and up by 4.4% per year over the past 10 years. The Revenue per Share has declined by 7% per year over the past 5 years and has not increased over the past 10 years.

However, if you look at 5 year running values, the Revenue per Share has only declined by 1% per year over the past 5 years and has increased by 2% per year over the past 10 years. Sometimes you need to look at 5 year running values rather than specific points in time. For the 5 year change in Revenue per Share I was looking years of 2007 and 2012. For the 5 year running values I was looking at the average Revenue per Share from the period of 2003 to 2007 compared to the period from 2008 to 2012.

Earnings is down over the past 5 years by 4.4% per year and up over the past 10 years at 1.7% per year. The Cash Flow per Share is down over the past 5 years by 1% per year and up by 1.7% per year. In both these cases the 5 year running averages is better. Book Value per share is up by 4% per year and 6.4% per year over the past 5 and 10 years. None of the growth values are great, but the economy has not be that great lately either.

The Return on Equity is at 8.7% and the 5 year median is 8.7%. The ROE on comprehensive income is 8.6% and the 5 year median ROE is 8.6%. (The ROE on comprehensive income can basically confirm that the ROE on net income is of good quality.)

This is a utility stock and as most utility stocks, it has a heavy debt load. The Liquidity Ratio is low at 0.57. If you consider also the cash flow after dividends, this ratios becomes 1.04. This is ok, but nothing to write home about. The Debt Ratio is much better at 1.62. The Leverage and Debt/Equity Ratios are rather typical for a utility at 2.86 and 1.77.

If you are starting to build a portfolio, utility stocks are a good place to start. They tend to be at the low end of risk and quite conservative. They provide a decent dividend and decent dividend growth. Such stocks tend to be less volatile than the TSX. That means that it will not lose as much in bear markets, but it also means that it will not gain as much in bull markets.

This is a good conservative utility stock and could be a core holding in a conservative portfolio.

TransCanada is a leader in energy infrastructure. Their network of pipeline taps into virtually all major gas supply basins in North America. TransCanada is one of the continent's largest providers of gas storage and related services. It is a growing independent power producer. Its web site is here TransCanada. See my spreadsheet at trp.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 or StockTwits.

Wednesday, February 27, 2013

Canadian Real Estate Investment Trust 2

On my other blog I am today writing about expanding CPP...continue...

I own this stock of Canadian Real Estate Investment Trust (TSX-REF.UN, OTC-CRXIF). To diversify my portfolio, I have invested in some REITs. I have only invested in REITs that have commercial properties. I bought this stock in September 2006 and since that time I have made a total return of 13.14% per year. Of this total return, 4.49% per year is from dividends and 8.65% per year is from capital gains.

When I look at the insider trading report, I see insider buying of $1.1M and no insider selling. Insiders were buying stocks at priced from $40.50 to $44.60. I can only find one insider that has options and this is a Subsidiary Executive with $0.7M in options. The CEO has $18M in shares and the CFO has $4.8M in shares.

When looking at the stock price, I do not think that looking at Price/Earnings is the way to go. It is presently at 48.26 and I think that it does not reflect anything about the stock price. Using Graham Price is a bit iffy also as part of the formula uses EPS.

The Price/Book Value per Share Ratio is a good place to start. The 10 year median P/B Ratio is 2.13. The current ratio based on a stock price of $43.33 is 1.73 based on a stock price of $43.33. The current P/B Ratio is 82% of the 10 year median Ratio. For a stock to be cheap, the current P/B Ratio would have to be only 80% of the 10 year median Ratio. So this test shows that while the stock price is not quite in the cheap category, it is certainly reasonable.

The dividend yield tells another story. The 5 year median dividend yield is 4.64% and the current dividend yield at 3.58% is 23% lower. The current dividend yield is quite low for a REIT. TD gives the Industry average as 5.12%.

If you look at Price/Cash Flow per Share Ratio, I get a get 5 year low, median and high median P/CF Ratios of 12.32, 13.76 and 15.19. Based on current stock price of $43.33 and 2012's CFPS of $2.61, the current P/CF ratio is 16.59. This shows that the stock price is relatively high.

Often FFO and AFFO values are used in connection with REITs. If you look at 5 year low, median and high median Price/FFO Ratio you get ones of 11.41, 12.74 and 14.08. Using the current stock price of $43.33 and the 2013 FFO $2.76, the P/FFO Ratio is 15.70. If you look at 5 year low, median and high median Price/AFFO Ratio you get ones of 13.26, 14.80 and 16.35. Using the current stock price of $43.33 and the 2013 FFO $2.51, the P/FFO Ratio is 17.26. Both these tests show that the stock price is relatively high.

When I look at analysts' recommendations, I find Strong Buy, Buy and Hold. The consensus recommendation is a Buy. The 12 month consensus stock price is $47.70. This implies a 13.67 total return with 3.58% from dividends and 10.09% from capital gains.

Deloitte puts out an interesting guide to REITs. The Jags Report talks about some analysts raising their 12 month stock price on this stock. The Canadian Money Forum has a discussion on the relative merits of this stock and RioCan.

I like this stock and will buy some more in the future. However, all the indictors I see show that this stock is currently relatively overpriced.

Canadian Real Estate Investment Trust is an equity real estate trust, which acquires and owns a portfolio of income-producing properties. It specializes in the acquisition and ownership of community shopping centers, industrial and office properties across Canada. This company owns office, industrial, retail properties and some miscellaneous items such as apartment buildings. Its web site is here CDN REIT. See my spreadsheet at ref.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 or StockTwits.

Tuesday, February 26, 2013

Canadian Real Estate Investment Trust

I own this stock of Canadian Real Estate Investment Trust (TSX-REF.UN, OTC-CRXIF). To diversify my portfolio, I have invested in some REITs. I have only invested in REITs that have commercial properties. I bought this stock in September 2006 and since that time I have made a total return of 13.14% per year. Of this total return, 4.49% per year is from dividends and 8.65% per year is from capital gains.

Dividends have been increasing by 2.17% and 2.09% per year over the past 5 and 10 years. This is slightly faster than inflation as inflation has been increasing by 1.8% and 1.83% per year over the past 5 and 10 years. (I used information from the Bank of Canada to get inflation rates.)

REITs tend to give good dividend and what you expect is that the dividends (or distributions) will increase at or slightly above the rate of inflation. The current dividend rate under this REIT is 3.32%. The latest dividend increase was 4% for 2013.

The Dividend Payout Ratios are high as far as earnings go with the 5 year median at 119% and for the financial year of 2012 at 125%. However, DPR for cash flow is fine with a 5 year median at 64% and for the financial year of 2012 at 56%. The DPR for the 2012 financial year for FFO is 56% and for AFFO is 62%.

Shareholders have done well over the past 5 and 10 years, with Total Return at 12.73% and at 19.03% per year, respectively. The dividend portion of this return is 4.16% and 6.42% per year, respectively. The capital gain portion is 8.58% and 12.61% per year, respectively.

The outstanding shares have increased by 2.4% and 4% per year over the past 5 and 10 years. The shares have increased due to new stock issues and DRIP and they have decreased through share buy backs.

Revenue has increased by 5.1% and 8.7% per year over the past 5 and 10 years. Revenue per Share has increased by2.7% and 4.9% per year over the past 5 and 10 years. Looking at the 5 year running Revenue per Share, this has increased by 3.7% and 4.7% per year over the past 5 and 10 years. Revenue increases per Share is a little low.

Earnings per Share have gone down by 3% per year over the past 5 years. EPS has not increased over the past 10 years. (However, if you look at the 5 year running EPS over the past 5 years this has increased by 5.7% per year. Sometimes looking at 5 year running averages is better rather than looking only at specific points in time.)

Funds from Operations (FFO) have increased by 4.5% and 7% over the past 5 and 10 years. Adjusted Funds from Operations (AFFO) have increased by 5.5% over the past 5 years. (AFFO has not been around as long as FFO has.)

Cash flow has increased by 7.48% and 7.86% per year over the past 5 and 10 years. Book Value per share has been increasing also, but there was a big increase in Book Value due to the change in accounting rules to IFRS and this shows BVPS changing at a much higher than it probably really is. (Accounting is just as much an art as it is a science.)

Until the last couple of years, ROE was very good for this stock. Since 2011 when BVPS was pushed up the ROE has been rather low and coming in at just 4.7% for the 2012 financial year. For the 2012 financial year, the ROE on comprehensive income was close to the ROE on net income with an ROE of 4.8%.

The Liquidity Ratio is not as important on REITs as it is for other stocks. The current one I calculate to be around 0.90. However, the stock has a good cash flow. Debt Ratio is good at 1.87. The Leverage and the Debt/Equity Ratios are fine at 2.14 and 1.14, respectively.

You would buy a REIT to diversify a portfolio. They provide a decent income which should increase at or slightly above the inflation rate. They will also provide a decent rate of capital gain. They are, of course, subject to the risk of real estate investing and in this case to the risks of commercial real estate investing.

Canadian Real Estate Investment Trust is an equity real estate trust, which acquires and owns a portfolio of income-producing properties. It specializes in the acquisition and ownership of community shopping centers, industrial and office properties across Canada. This company owns office, industrial, retail properties and some miscellaneous items such as apartment buildings. Its web site is here CDN REIT. See my spreadsheet at ref.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 or StockTwits.

Monday, February 25, 2013

Shoppers Drug Mart 2

On my other blog I am today writing about not buying bonds...continue...

I own this stock of Shoppers Drug Mart (TSX-SC, OTC- SHDMF). I bought the stock for my TFSA in 2009, 2010 and 2011. By May of 2011 I sold some shares. I have made the grand total of 1.03% per year on this investment. The portion attributable to dividends is 2.97% per year with a capital loss of 1.76% per year.

When I look at insider trading, I find no insider selling and no insider buying. Recent options given out seem to have been kept by insiders. Shoppers are also buying back shares. For this company there are not only things call options, but also other options like vehicles called Rights Deferred Share Units and Rights Restricted Share Units

The CEO has a few shares and has options are worth $11M. The CFO has a few shares and has options worth $3.7M. An officer has a few shares and has options worth $0.4M. A director has no shares and has options worth $0.4M. This is just to give you an idea on insider share ownership and option values.

The 5 year low, median and high median Price/Earnings Ratios are 13.91, 14.76 and 16.90. The current P/E Ratio is 14.31 based on a stock price of $42.80 and 2013 earnings of $2.99. I get a Graham price of $37.6 and the current Price/Graham Price Ratio is 1.15. The 10 year low, median and high median P/GP Ratios are 1.48, 1.68 and 1.83.

The current Dividend yield is 2.48% and the 5 year median 2.26% a value around 9% lower than the current dividend yield. I get a 10 year median Price/Book Value per Share Ratio of 3.16. The current P/B Ratio is 2.06. The current one is only 66% of the 10 year median Ratio.

On testing the current stock price, it is not surprising that the current stock price does better against the longer term median values as the relative stock price has been going down as the company is switching from a growth stock to a mature stock. I would go with the dividend yield test and suggest the stock price is reasonable.

When I look at analysts' recommendations, I find Strong Buy, Buy, Hold and Underperform recommendations. Most of the recommendations are in the Hold category and the consensus recommendations would be a Hold. The 12 month consensus stock price is $44.30 and this implies total returns of 5.98% with 2.48% from dividends and 3.50% from capital gains.

Shoppers suffer from regulatory pressure. There have been recent coordinated efforts by every province to reduce generic prices. This company also operates in a challenging economic and competitive environment. Some analysts like the stock as a defensive stock; others feel that since a regulated market is a good part of their business, the stock will continue to go sideways.

There is a positive article in the Financial Post with the title of "Seniors discount pays off for Shoppers Drug Mart, sending profit, dividend higher". A number of analysts mentioned that it has recently raised its dividend. They have raised the dividend every year since starting a dividend in 2005.

I am going to hold on to the stock in this company that I currently have. For dividend paying stocks, over the longer term, the capital gain tends to equal the growth in dividends. I expect dividends to grow at 6 to 7% per year and with dividends at 2.5%, I expect a reasonable return of 8 to 9% per year. We are still in a secular bear market, so this may not happen for a while. However, I do invest for the longer term.

Shoppers Drug Mart Corp. is a licensor of Shoppers Drug Mart in Canada and Pharmaprix in Quebec. The company owns and operates Shoppers Home Health Care stores. It also owns MediSystem Technologies Inc. and the new Murale Stores. Its web site is here Husky. See my spreadsheet at sc.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 or StockTwits.

Friday, February 22, 2013

Shoppers Drug Mart

Note: Shoppers increased their dividend for 2013 to $.285 per share per quarter and this gives them a current yield of 2.66%. This is a 7.5% increase.

I own this stock of Shoppers Drug Mart (TSX-SC, OTC- SHDMF). This stock has been a disappointment for me. I watched it for a number of years before buying and it proceeded to go down after all my purchases. I bought the stock for my TFSA in 2009, 2010 and 2011. By May of 2011 I sold some shares. I have made the grand total of 1.03% per year on this investment. The portion attributable to dividends is 2.97% per year with a capital loss of 1.76% per year.

Dividend yield is currently around 2.5% and the stock has a 5 year median dividend yield of 2.26%. The Dividend Payout Ratios are good with 5 year median DPR for earnings at 33% and for cash flow at 22%. So we can say the stock has a decent yield and decent DPRs. (See my site for information on Dividend Payout Ratios).

Total return over the past 5 years is a negative 2.29% per year with a capital loss of 4.18% per year and dividends at 1.89% per year. There is a positive total return over the past 10 years with the total return at 7.45% per year with capital gain at 5.72% per year and dividends at 1.73% per year.

This stock has 5 and 7 year growth in dividends at 11.7% and14.7%. However, the most recent dividend increase, which occurred in 2012, was for 6%. The best dividend increases were in between 2006 and 2008. I would suspect that future ones will be in the 6 to 7% range.

The total outstanding shares have decreased by 0.78% and 0.06% over the past 5 and 10 years. Shares have increased due to stock options and decreased due to share buy backs. Revenue has increased over the past 5 and 10 years by 4.9% and 10.4% per year. Revenue per Share has increased over the past 5 and 10 years by 5.8% and 10.4% per year.

Earnings have increased by 4.5% and 9% per year over the past 5 and 10 years. Cash Flow has increase by 6% and 11% per year over the past 5 and 10 years. Book Value has increased by 7.7% and 10% per year over the past 5 and 10 years. If you look at 5 year running averages for revenue, earnings and cash flow, the 5 year increases are much better.

The Return on Equity is quite good at 14.1% for the financial year ending in 2012 and a 5 year median value of 14.4%. The ROE on comprehensive income is quite close and quite good at 13.7% for the financial year ending in 2012 and with a 5 year median ROE of 13.9%.

The Liquidity Ratio tends to fluctuate on this stock, with the current one at 1.18. However, if you also consider cash flow after dividends, this ratio goes to 1.48. The Debt Ratios are very good and have always been very good. The current one is 2.51. The current Leverage Debt/Equity Ratios are also good at 1.73 and 0.69.

The problem is that this company stopped being a growth stock (or viewed by the stock market as a growth stock). When a company stops being a growth stock, the change you see is mostly in the Price/Earnings Ratio. For the 5 year prior to my purchase the 5 year median P/E Ratio was 26.04. The current 5 year median P/E Ratio is 15.07.

Even though this company has had growth in Revenues, Earnings, Cash Flow and Book Value, the stock price has been going down. After the stock price hit a low in 2010 and did revive a bit, the stock price has been quite flat since the end of 2010. For the moment, I am continuing to hold what stock I have.

Shoppers Drug Mart Corp. is a licensor of Shoppers Drug Mart in Canada and Pharmaprix in Quebec. The company owns and operates Shoppers Home Health Care stores. It also owns MediSystem Technologies Inc. and the new Murale Stores. Its web site is here Shoppers Drug Mart. See my spreadsheet at sc.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 or StockTwits.

Thursday, February 21, 2013

Husky Energy Inc 2

On my other blog I am today writing about Debt Ratios...continue...

I own this stock of Husky Energy Inc. (TSX-HSE, OTC- HUSKF). This is one of very few adventures into the oil and gas stocks I have taken. I bought this in July 2008 and at that time the stock was doing very well. However, this is not the case at present. My total return on this stock is 1.7% per year, with 4.02% per year from dividends and 2.24% per year in capital losses.

When I look at insider trading I find no insider selling and insider buying at $1.2M. It is nice to see some insider buying, however, this is a$30B company and buying of just $1.2M does not add up to much. Interestingly some of this buying has been recent at around $30.50 per share, but seems to be with a company plan.

There are not only options under this company, but other options like vehicles like Performance Share Units, Rights Preferred Share Units and Deferred Share Unit. Part of the problem with insider trading reports is that the report only treats things actually called options as options. It would seem that some the Performance Share Units have been cashed in over the past year.

The 5 year low, median and high median Price/Earnings Ratios are 10.90, 12.52 and 20.96. The current P/E based on a stock price of $30.86 and 2013 earnings estimate of $1.95 is 15.83. This shows the stock price to be a bit high, buy probably still reasonable.

I get a Graham Price of $29.03. The 10 year low, median and high median Price/Graham Price Ratios are 0.77, 1.07 and 1.30. The current P/GP Ratio is 1.06. This ratio points to a reasonable stock price. The 10 year median Price/Book Value per Share Ratio is 2.20. The current ratio is only 73% of the 10 year ratio and this ratio points to a low stock price.

The 5 year median dividend yield is 4.59% and the current yield is 3.89%. The current one is below 5 year median by around 15%. The current difference between these yields point to a stock price that is on the high side, but probably still reasonable.

The stock price testing is gives some mixed results, but there is nothing that says the stock is overbought. There is a problem with the dividend yield test as dividends fluctuate on oil and gas companies. The next best test is the one for P/B Ratio and this shows the stock is cheap.

When I look at analysts' recommendations, I find lots in the Hold recommendation category and a couple in the Underperform category. The consensus would be a Hold. The 12 months stock price is $31.60. This implies and 12 month total return of 6.29% with 3.89% from dividends and 2.40% from capital gains.

A number of analysts feel that the current dividends are safe. They talk about the company having enough cash flow to keep current dividends. Others talk about the oil sector being out of favour at this point in time. A Financial Post article says Husky reported a 16% rise in fourth-quarter net profit as cheaper crude oil fattened refining margins. An iPolitics article talks about Husky missing the analysts estimates for the 4th quarter of 2012.

I think that the relative stock price is reasonable. It would be a contrarian pick, but the point in being a good investor is to buy stocks lower and you sell them. To do this, you obviously have to buy when others are not.

This company is one of Canada's largest energy and energy-related companies. The Company's operations include the exploration, development and production of crude oil and natural gas. Husky has operations in Western Canada, Eastern Canada, US, China, Indonesia and Greenland. This company is mostly foreign owned. Industry: Oil and Gas (Integrated Oils). It is listed under TSX Energy Index. Its web site is here Husky. See my spreadsheet at hse.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 or StockTwits.

Wednesday, February 20, 2013

Husky Energy Inc

I own this stock of Husky Energy Inc. (TSX-HSE, OTC- HUSKF). This is one of very few adventures into the oil and gas stocks I have taken. I bought this in July 2008 and at that time the stock was doing very well. However, this is not the case at present. My total return on this stock is 1.7% per year, with 4.02% per year from dividends and 2.24% per year in capital losses. br >
Dividends are going in the wrong direction with dividend decreases at 10.4% per year. However, over the past 10 years dividends are up by 12.8% per year. The dividends on oil and gas stocks tend to fluctuate rather than go in any one direction. However, people who hold this stock for 10 plus years seem to do well in dividend yield against original purchase price.

For this stock the total return over the past 5 years is negative with a decline of 4.08% per year. The capital loss is 7.58% per year and dividends account for a return of 3.5% per year. The 10 year total return is very good at 24.53% per year, with 13.57% from capital gains and 10.96% from dividends.

Shares have increased by 2.96% and 1.63% per year over the past 5 and 10 years. Increases are mainly due to stocks issued as dividends (for some dividends you can accept stock in place of the dividend) and by stock options for insiders. Revenue is up by 8% and 13.5% per year over the past 5 and 10 years. Revenue per share is up by 4.8% and 11.3% per year.

The earnings per share is down over the past 5 years by 11.5% and up over the past 10 years at 8.16%. The cash flow per share is down by 6.9% over the past 5 years and up by 5.8% per year over the past 10 years. Book Value per share is grown at 7% per year and 12.09% per year over the past 5 and 10 years.

As you can see the 10 year growth figures are much better than the 5 year growth figures. I have also looked at 5 year running growth and for revenue, earnings and book values. These 5 year running growth figures are significantly better over the past 5 years. This is because things like earnings tend to fluctuate and looking at 5 year running figures shows if the company is doing better over time. The answer to this question is, of course, yes.

The Return on Equity has been good with the ROE for 2012 at 10.7% and the 5 year median ROE also at 10.7%. The ROE on comprehensive income is close to the above ROE, coming in at 10.4% for 2012 and with a 5 year median of 10.4%.

Over the last 5 year the Liquidity Ratio has picked up significantly and the current ratio is a good 1.62. The company has good cash flows and this ups this ratio to 2.80. The Debt Ratio is also very good at 2.20. The Leverage and Debt/Equity Ratios are also very good at 1.86 and 0.85.

Our Alberta oil companies are having a hard time as our oil is being sold under world prices because we simply do not have enough oil pipes to deliver the oil we produce to market. It is hard to say when this will be fixed, but such anomalies do not last forever as people will find a way to get our underpriced oil commodity to market at market prices.

This stock certainly has not performed as well as I had hoped it would. However, I do not have much invested in this stock as I do not do much investing in the oil and gas industry. I certainly do not see any other oil and gas company that would be a good replacement for this stock. I still think it will do well over the longer term.

This company is one of Canada's largest energy and energy-related companies. The Company's operations include the exploration, development and production of crude oil and natural gas. Husky has operations in Western Canada, Eastern Canada, US, China, Indonesia and Greenland. This company is mostly foreign owned. Industry: Oil and Gas (Integrated Oils). It is listed under TSX Energy Index. Its web site is here Husky. See my spreadsheet at hse.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 or StockTwits.

Tuesday, February 19, 2013

Intact Financial Corp

On my other blog I am today writing about Adjusting my RRSP Account...continue...

I do not own this stock of Intact Financial Corp (TSX-IFC, OTC-IFCZF). TD Waterhouse put out a report In November 2011 on good dividend paying stocks to own. This was a stock they named. I had not heard of it before, so I decided to investigate it. (Note that this company used to be ING Group)

First of all I will discuss dividends. The have a decent dividend of 2.75% and a 5 year median dividend yield of 3.1%. The can afford the dividends as the 5 year median Dividend Payout Ratios are 37% for earnings and 25% for cash flow. The DPRs for the 2012 financial year are the same.

Dividend growth is good as the 5 year and 7 year growth is 13.7% and 8.2%. The first increase was almost 60%, so I would suspect that the growth would be around 8% in the future. The last increase was just announced for the first quarter of 2013 and increase was for 10%.

The current Liquidity Ratio is very good at 1.93. The other debt ratios are not so good, but it is a financial institution. The Current Debt Ratio is at 1.33 and current Leverage and Debt/Equity Ratios are at 4.50 and 3.39. So they are ok.

As far as growth goes, Revenue has the best growth with Revenue growth at 9.5% and 9.8% per year over the past 5 and 9 years. Revenue per Share has grown at 8% and 7.5% per year. Earnings have been erratic, but analysts expect better earnings over the next couple of years. The Return on Equity has been good with a 5 year median at 12.1% and the 5 year median ROE on comprehensive income slightly higher at 12.7%

When I look at analysts' recommendations I find Strong Buy, Buy and Hold. The consensus would be a Buy (as most of the recommendations are here). (See my site for information on analyst ratings.) The 12 months stock price is $74.10. This implies a return of 18.3% with 2.5% from dividends and 15.8% from capital gains.

On the insider trading report there is some insider buying ($0.3M) and some insider selling ($1M). Insider selling seems to be involving stock options. There are not a lot of outstanding stock options. The CEO owns $5.9M in shares and has options of $4.6M.

When I look at the relative price, the Price/Earnings Ratio at 10.46 shows a relatively low price (5 year median P/E low and high being 12.90 and 15.00). The Price/Graham Price is similar. The Price/Book Value shows a relatively average price with the current P/B Ratio (1.94) being 5% higher than the 10 year median ratio (1.84).

However, the dividend yield shows relative price is elevated with the current dividend yield lower than the 5 year median yield by almost 11% (2.75% to 3.1%). If you get mixed results and there is no reason not to go with the dividend yield test, I would go with the dividend yield test which suggests that stock price is a bit on the high side.

The management of this company is well thought of. It would be a long term investment because there is volatility in property and casualty insurance companies, but these companies can make money for shareholders over the long term. They are getting a good track record for annual increases in dividends. (Dividends have been raised every year since they started 8 years ago.)

Intact Financial Corporation (www.intactfc.com) is the largest provider of property and casualty insurance in Canada. Intact offers home, auto and business insurance through Intact Insurance, Novex Group Insurance, belairdirect, GP Car and Home and BrokerLink. Its web site is here Intact. See my spreadsheet at ifc.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 or StockTwits.

Friday, February 15, 2013

AGF Management Ltd

I do not own this stock (TSX-AGF.B, OTC-AGFMF), but I used to. I bought it in 2001 and sold stock in 2006 and 2008. I made a return of just over 2% per year. I sold it because the company was having problems and I could not see that they would get any better anytime soon. Still, I sold at a better price that I could get today.

It seems to me that this company did not recover well from the prior recession and then it got hit with the last one. Since it is a Mutual Fund company, you would expect a recession to hit it hard, but you also expect to see it recover when a recession is over.

I like looking at cash flow more than earnings. It is harder to fool around with cash flow than earnings and in any event EPS is rather a fake figure. It can be a useful way to compare companies in the same and different industry for example. This company had a negative cash flow in the financial year ending in November 2012 and this is not good.

Also, there is a big difference between the Return on Capital for comprehensive income and net income. This is another warning sign. The ROE on comprehensive income is just 4% and this is almost 60% lower than the ROE on net income, which is a good at 9.9%.

It is also not a good sign with the EPS is higher the CFPS. (Although generally for this stock the EPS/CF Ratio is fine and is between 0 and 0.99. The 10 year median is 0.46.)

Another thing that is not good is the increase in Dividend Payout Ratios. The 5 year median DPRs for earnings and cash flow are 89% and 41%. However, they are increasing and been increasing for sometime. The DPR for earnings was 196% in 2012 and is expected to be 180% and 162% in 2013 and 2012. The cash flow was negative for 2012. However, the lack of cash flow has to do with charges on discontinued operating activities. (In any event, it still negatively affected the cash flow.)

When I look at the analysts' recommendations I find Buy, Hold and Underperform. The consensus recommendation would be a Hold. It is obvious that others have a better opinion that I do of this stock. The 12 month stock price consensus is $11.50. This implies a total return of 6.78% with a capital loss of 2.38% and dividends of 9.17%.

I see a couple of interesting things. The CEO owns some $152M in shares and an officer (another Goldring) owns $141M in shares. (Could this be why there is still a dividend payment?) Reuters says that there are some 32 institutions that own 24% of the outstanding shares. However, over the past 3 months institutions have sold some 23% of their outstanding shares. Some people seem to be bailing out of this stock.

A number of analysts feel that the dividend is safe because if you ignore the cash flow used in discontinued operation activities, they have a positive cash flow. (This is true and shows in their cash flow statement.) Although other sites do not show any sell recommendations, there are sell recommendations on Stock Chase .

There is comments and a report on Q4 at Investment Executive . There is also a Jags Report about the National Bank raising the 12 month stock price from $9.50 to $11. TD Securities and CIBC have commented on their 12 month stock price of $10.50 and $12.50, respectively.

Personally, I would not buy this stock. They cannot cover their dividends with their earnings and probably will not be able to in the near future.

AGF Management Limited is an integrated, global wealth management company, whose principal subsidiaries provide investment management for mutual funds, institutions and corporations, as well as high-net-worth clients; and trust products and services. They sell their products in Canada. Its web site is here AGF. See my spreadsheet at agf.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 or StockTwits.

Thursday, February 14, 2013

Morneau Shepell Inc

I do not own this stock of Morneau Shepell Inc. (TSX-MSI, OTC- MSIXF). Everyone once in a while I go through the stocks that my brokerage, TD Waterhouse, is recommending to find promising new stocks. This stock was rated a buy recently by TD Waterhouse. It was under Diversified Financials.

I first looked at dividends. TD had listed a 6% dividend, which is good. The dividends for this company started in 2005. They had a few increases until it decided to convert from an income trust to a corporation. They then decreased the distributions by 17.5%, but retained a monthly distribution format. This was effective January 2011 and distributions have remained level since. I would like it better when it can increase dividends.

I next looked up the earnings estimates as the 2012 financial report has not yet been produced. I wanted to check the Dividend Payout Ratios. The DPR ratios for EPS were high, with the 2012 estimates at 136%. However, this was expected to move below 100% by 2014. The DPR ratios for CF were better as they were in the 70% range. I would like it better if the DPRs were much better, especially the DPR for earnings.

Next I check the stock prices over the years to see if the company has made any money for their shareholders. Well, they have made some money for the shareholders who bought at the time of the IPO (initial public offering), but not much over the past 5 years.

For those who bought at the IPO the return has been 9.87% per year with 6.84% per year from distributions and 3.03% per year from capital gains. Over the past 5 years this stock has gained 3.51% per year for its shareholders, with 6.33% per year from distributions and a capital loss of 2.82% per year. I do not much like stocks where you gain dividends, but lose capital.

I finished off the spreadsheet. The first thing that I do not like is the very high Dividend Payout Ratio in regards to earnings. The 5 year median DPR for earnings is 214%. It has been coming down with the one for 2012 expected to be at 162%, for 2013 to be 128% and for 2014 to be 99%.

Another thing is that the Intangible and Goodwill assets have been higher than the stocks' market cap (106% in 2011). However, with the 3rd quarter of 2012 these assets are now only 87% of the market cap.

The outstanding shares have been increasing strongly mainly due to acquisitions. This is not bad within itself as long per share values are increasing. However, growth in Book Value per Share is very low at 3.7% and 2% over the past 5 and 10 years.

This stock has a good dividend yield at 6%, but I prefer stocks that have growing dividend. I do not think that they will be in a position to raise their dividends for some time. I would not be interested in this stock at this point in time, so I am not waiting for the fourth quarterly results to report on this stock.

The Earnings per Share growth is not great. The one for the past 7 years looks good, but it starts from a very low point. The earnings using the 5 year running average has grown over the past 3 years at 6.5%. This is ok, but not great.

Cash flow growth is not great either at 0.25% over the past 5 years and the 5 year running average growth over the past 3 years is at 6.8%. The 7 year growth looks very good, but this is starting from a low level. The 5 year running averages growth is probably a better indicator on growth for this company.

The Return on Equity is quite low with the ROE for the last 12 months at just 5.6%. The 5 year median ROE is also just 5.6%. The ROE on comprehensive income is a bit better at 6%.

A good thing about this stock is the growth in revenue. Revenue has grown at 23% and 20% per year over the past 5 and 7 years. Revenue per Share is good at 11% and 10.5% per year. The 5 year running average growth over the past 3 years is almost 10%, so this is good.

Another good thing is the debt ratios. The current Liquidity Ratio is 1.97. The current Debt Ratio is 2.51. The current Leverage and Debt/Equity Ratios are also quite good at 1.66 and 0.66, respectively.

When I look at analysts' recommendations, I find Buy, Hold and Underperform recommendations. The consensus recommendation is a Hold. The 1 year stock price is $16.30, implying a return of 8.94% with 5.91 from dividends and 3.03% from capital gains.

The P/E is 21.64, a ratio below the 5 year median of 22.13 for this stock. I get a 2013 Graham Price of $10.81 and the P/GP ratio is 1.22. This is between the 10 year low and median P/GP Ratios of 1.12 and 1.23. The current P/B Ratio is 1.55 and the 8 year median P/B Ratio is 4% lower at 1.48. I cannot use the dividend yield test as dividends have been travelling down.

The testing suggests that the current price is relative good to reasonable. However, I think that the P/E Ratio of 21.64 is too high a P/E ratio for this stock. In other words, the price may be relatively good; I just do not think it is really that good on an absolute basis. Yes the dividend yield might be good, but there is not much growth possible for capital gain. I would not buy it at this relatively price. It cannot grow it dividends and without that, the capital gain will not grow, for the value of this business will not grow.

Morneau Shepell Inc. is provides human resource consulting and outsourcing services. The firm delivers solutions to assist employers in managing the financial security, health and productivity of their employees. Its web site is here Morneau Shepell. See my spreadsheet at msi.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 or StockTwits.

Wednesday, February 13, 2013

Canadian National Railway 2

On my other blog I am today writing about Saving For Retirement...continue...

I own this stock of Canadian National Railway (TSX-CNR, NYSE-CNI). I originally bought this stock in 2005 and in 2009 for my trading account. To date, I have made 16.52% per year on this stock. For this stock, of my total return some 1.63% is in dividends and 14.89% is in capital gains.

When I look at the Insider Trading report, I find $73.3M of insider selling and $3.2M of insider buying. Some $24.6M of the insider selling is by the CEO. Not only are there options under this company there are also Deferred Share Units and Restricted Share Units. Selling seems to be in connection with options. The company is also buying back shares for cancellation.

The CEO has shares worth $2.9M, and has options are worth $126.6M. The CFO has shares worth $0.2M and has options worth $30M. An officer has shares worth $0.3M and has options worth $3.8M. A director has shares worth $1.9M and has options worth $3.9M. This is just to give you an idea on insider share ownership and option values. The CEO owns 6.8% of the outstanding shares. (See my blog entry on stock options.)

The 5 year low, median and high median Price/Earnings per Share Ratios are 11.87, 13.49 and 14.84. The current P/E is 16.08 based on a $99.07 stock price and 2013 earnings of $6.16. I get a Graham Price of $60.37. The 10 year low, median and high median Price/Graham Price Ratios are 1.02, 1.20 and 1.35. The current P/GP Ratio is 1.64.

I get a 10 year Price/Book Value per Share Ratio of 2.52 and a current one of 3.77. The current ratio is almost 50% higher than the 10 year ratio. I get a 5 year median dividend yield of 1.80% and a current one of 1.51 a yield some 16% higher.

All my tests show that the stock price is high. It is not extraordinarily high, but still high.

When I look at analysts' recommendations I find Buy, Hold and Underperform recommendations. The consensus, as there are a lot more Hold recommendations than anything else is a Hold recommendation. The 12 months consensus stock price is $95.40. This is a value below the current stock price and suggests a loss of 2.91% with a capital loss of 3.71 and dividends of 1.51%.

One analyst with a Hold recommendation gave a 12 month stock price of $104, and thought that CNR deserved a premium over other railway stocks. Another analysts thought the stock was a bit pricey and gave it an Underperform (or partial sell) rating. This company is well thought of. Analysts are impressed by the 15% dividend increase in 2012 and that the company has raised dividends for 17 years in a row.

The web site Seeking Alpha has the recording of the management discussing the Q4 2012 results. For the financial post Scott Deveau commented on the 4th quarter results for this company. He says that CNR completed a record year.

Canadian National Railway Company and its operating railway subsidiaries, spans Canada and mid-America, from the Atlantic and Pacific oceans to the Gulf of Mexico, serving the ports of Vancouver, Prince Rupert, B.C., Montreal, Halifax, New Orleans, and Mobile, Ala., and the key metropolitan areas of Toronto, Buffalo, Chicago, Detroit, Duluth, Minn./Superior, Wis., Green Bay, Wis., Minneapolis/St. Paul, Memphis, St. Louis, and Jackson, Miss., with connections to all points in North America. Its web site is here CNR. See my spreadsheet at cnr.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 or StockTwits.

Tuesday, February 12, 2013

Canadian National Railway

I own this stock of Canadian National Railway (TSX-CNR, NYSE-CNI). I originally bought this stock in 2005 and in 2009 for my trading account. To date, I have made 16.52% per year on this stock. For this stock of my total return some 1.63% is in dividends and 14.89% is in capital gains.

I had also had some of this stock in my RRSP account. However, I am changing the stocks in my RRSP account as I have too many with low dividends. With low dividends, it means that I need to keep a lot of cash in my RRSP account so that projected dividends and cash add up to 5 years in which I do not need to sell stocks to raise money for RRSP withdrawals. I will talk about this subject later.

Even though dividends are low (5 year median dividend yield is just 1.8%), the dividend increases have been good with growth at 12.3% and 18% per year. For the stock I bought in 2005, I am making a return of 4.16% in dividend yield on my original purchase. In 15 years, you could expect to make between 10% and 14% return on your original investment.

The dividends are low and so are the Dividend Payout Ratios. For the financial year of 2012, the DPRs were 24.5% for earnings and 21.5% for cash flow. These are close to the 5 year median values of 24% and 19%.

The total return on this stock over the past 5 and 10 years is at 16.01% and 17.49% per year. The portion attributed to dividends is 1.88% and 1.89% per year over these periods. The capital gain portion is 14.13% and 15.60% per year over these periods.

They have been quite business in buying back shares. The outstanding shares have decreased by 2.5% and 3.2% per year over the past 5 and 10 years. This is a high rate of buy backs. The shares have been increased on this same period of stock options. This high rate of stock buy backs can distort some of the values I look at. Buying back shares is not bad in itself, but you should be aware of the consequences.

Revenue has increased by 4.7% and 5% over the past 5 and 10 years. The Revenue per Share has increased much better at 7.3% and 8.4% per year. When a company buys back a lot of shares, this can cause the per share values to be better.

Earnings per Share have increased by 7.8% and 16.6% per year over the past 5 and 10 years. The Cash Flow per Share has grown at the rate of 6.4% and 8.3% per year over the past 5 and 10 years. Book Value per Share has grown at 4.2% and 6.2% per year over the past 5 and 10 years.

The Return on Equity is very good at 24.3% for the financial year ending in 2012. Their buy back policy could affect this number. (See my blog for further information on Return on Equity.) Also, the ROE on comprehensive income is lower at 20.5%. This is over 15% lower and I think a bit significant.

However, there is often a big difference between the ROE on Net Income and on Comprehensive Income. Although I expect the ROE to be good on this stock, it just may not be as good as it appears. This is just a warning. I note that the EPS/CFPS ratio is 0.88 and this is fine as it is below 1.00. (If this ratio was higher than 1.00, it would also be a warning.)

The Liquidity Ratio has always been low on this stock with the current Ratio being 0.85 and the 5 year median ratio being 0.93. If you include cash flow after dividends the Ratio raises to 1.95 a good value. Also, if you take off the current portion of the debt (which has been handled) you get a better Ratio of 1.15.

The Debt Ratio has always been much better and quite good at 1.70. The Leverage and Debt/Equity Ratios are fine at 2.42 and 1.42 for this type of company.

Canadian National Railway Company and its operating railway subsidiaries, spans Canada and mid-America, from the Atlantic and Pacific oceans to the Gulf of Mexico, serving the ports of Vancouver, Prince Rupert, B.C., Montreal, Halifax, New Orleans, and Mobile, Ala., and the key metropolitan areas of Toronto, Buffalo, Chicago, Detroit, Duluth, Minn./Superior, Wis., Green Bay, Wis., Minneapolis/St. Paul, Memphis, St. Louis, and Jackson, Miss., with connections to all points in North America. Its web site is here CNR. See my spreadsheet at cnr.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 or StockTwits.

Monday, February 11, 2013

Richelieu Hardware Ltd 2

On my other blog I am today writing about modest money blogger's entry on great Canadian Blogs...continue...

I own this stock of Richelieu Hardware Ltd (TSX-RCH, OTC- RHUHF). I first bought this stock in 2007 because it was on the Investment Reporter's list of good stocks to own. After I bought it the stock proceed to go down for the next two years. When I reviewed the stock in March 2009, I had lost 16% per year. So in 2009, I bought some more. To date, I have earnings of 20.28% per year on this stock.

When I look at insider trading I find $1.6M of insider selling and a bit of insider buying with a net of insider selling of $1.4M. The selling is all by officers of the company and seems to be concerning options. The buying is by officers and directors and buying seems mainly under the company's stock plan. The company is also buying back shares for cancellation.

According to Reuters some 44% of the outstanding shares are owned by institutions and they have sold just over 3% of the shares over the past 3 months.

The CEO has shares worth $47.36M, and his options are worth $11.7M. The CFO has very few shares and options worth $0.5M. An officer has very few shares and options worth $0.6M. A director has very few shares and has very few options. This is just to give you an idea on insider share ownership and option values. The CEO owns 6.8% of the outstanding shares.

The 5 year low, median and high median Price/Earnings Ratios are 12.05, 14.37 and 16.65. I calculated the current P/E of 16.88 using 2013 earnings of $2.34 and stock price of $39.50. I get a Graham Price of 26.81 and the 10 year low, median and high median Price/Graham Price Ratios of 12.94, 29.49 and 42.62. The current P/GP Ratio is 47.35.

The 10 year Price/Book Value per Share is 2.52. The current P/B Ratio is 2.89 a value almost 15% higher. The 5 year dividend yield is 2.58% and the current dividend yield is 1.22% a value some 23% higher.

All my stock testing shows that the current stock price is relatively high, although not excessively so.

There are not many analysts following this stock. I find two with recommendations of Buy and Hold. The 1 year consensus stock price is $40.50. This implies a total return of 3.75% with 1.22% from dividends and 2.53% from capital gains.

Localized USA blog says that Scotia Capital, in the latter part of January increased their target price on this stock. They have an outperform call on this stock (which is the same as a buy).

This company is a distributor, importer and manufacturer of specialty hardware and complementary products. Its products are kitchen and bathroom cabinets, furniture, and window and door. It is also involved with residential and commercial woodworking industry. It has a large customer base of hardware retailers. Its web site is here Richelieu. See my spreadsheet at rch.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 or StockTwits.

Friday, February 8, 2013

Richelieu Hardware Ltd

I own this stock of Richelieu Hardware Ltd (TSX-RCH, OTC- RHUHF). I first bought this stock in 2007 because it was on the Investment Reporter's list of good stocks to own. After I bought it the stock proceed to go down for the next two years. When I reviewed the stock in March 2009, I had lost 16% per year.

However, The Investment Report does follow good stocks. Also, the company had good growth in revenue, earnings, dividend, book value and cash flow. So in 2009, I bought some more. To date, I have earnings of 20.28% per year on this stock. They only started to pay dividends in 2002 and dividend yield is low. The portion of my return attributable to dividends is 1.27% per year and the portion attributable to capital gains is 19.01% per year. Investment Reporter is produced by MPL communications .

The stock is considered to be a dividend growth stock. The dividends have grown at the rate of 11.4% and 15.9% per year over the past 5 and 10 years. The current dividend yield is just 1.43%, but the 5 year dividend yield is a bit higher at 1.58%. Commiserate with the low dividend yield is low Dividend Payout Ratios. The 5 year DPRs for EPS is 22.3% and for Cash Flow is 18.3%.

Over the past 5 and 10 years to the end of 2012, this stock has had total returns of 10.19% and 11% per year. The portion of these returns attributable to dividends is 1.32% and 1.27% per year. The portion attributable to capital gains is 8.87% and 9.73%. (I did better because I bought this stock at a low price in 2009.)

The outstanding shares have been decreasing over the past 5 and 10 years at the rate of 2% and 0.9% per year. Outstanding share are increased due to stock options and decreased because of share buy backs. Revenues have increased over the past 5 and 10 years by 5.3% and 8% per year. Revenues per Share have increased at 7.6% and 9% per year over the past 5 and 10 years.

The Earnings per Share have increased by 8% and 9.9% per year over the past 5 and 10 years. The Cash Flow per Share has increased by 9% and 10.4% per year over the past 5 and 10 years and the Book Value per Share have increased by 8.6% and 12.3% per year over the past 5 and 10 years.

Return on Equity is very good with the ROE for the financial year ending November 2012 at 16.2% and the 5 year median ROE at 15.5%. (ROE has not been lower than 10% over the past 5 years.) The ROE on comprehensive income is fairly close coming in at 15.8% and the 5 year median at 15%.

The company has a very strong balance sheet, with the current Liquidity Ratio at 4.57 and the Debt Ratio at 5.65. The Leverage and Debt/Equity Ratios are also good at 1.23 and 0.22, respectively.

I think that this stock has been a very good investment for me. It is the sort you would buy when building a portfolio when you do not need much in the way of dividend income. The thing with dividend paying stock is that they tend to be more disciplined than non-dividend paying stock.

This company is a distributor, importer and manufacturer of specialty hardware and complementary products. Its products are kitchen and bathroom cabinets, furniture, and window and door. It is also involved with residential and commercial woodworking industry. It has a large customer base of hardware retailers. Its web site is here Richelieu. See my spreadsheet at rch.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 or StockTwits.

Thursday, February 7, 2013

Nordion Inc

I do not own this stock of Nordion Inc. (TSX-NDN, NYSE-NDZ), but I used to own it when it was called MDS Inc. I bought stock in the MDS in 1996, 1997, and 1998. I sold all my shares in 2006. On this stock, I made a total return per year of 5%. Basically, in 2006 I thought this company had lost its way and was going nowhere. I had invested in it as it was one of very few Health Care sector companies in Canada and it was considered to be a very good company at the time I bought it.

After paying some dividends in 2011 and 2012, this company has again cut the dividends to zero. To me it seems like this company just cannot get its act together. Total return is very much negative over the past 5 and 10 years with declines at 18% per year and 10.5% per year. These are heavy losses for shareholders. Shares were down by some 25% between the end of 2011 and 2012.

Outstanding shares have been decreasing as over the past 5 and 10 years at the rate of 12.8% and 7.9% per year. Shares have increased for stock options and decreased for buy backs. In 2010 they bought back some 44% of the outstanding shares and in 2012 they bought back 8% of their outstanding shares.

The heavy buyback of shares has not helped in per share values. Revenue per share growth is down by 16% and 10% per year over the past 5 and 10 years. Cash flow per share is not down as much at a decline of 3% and 7.5% per year over the past 5 and 10 years.

Return on Equity is non-existent because there was only one year of profits within the last 5 years. The only good thing to say is that debt ratios are good. The Liquidity ratio is quite good at 1.96 as is the Debt Ratio at 1.83.

I suppose you could say that the stock price is good. I do not get much of a fix on the relative stock price as it has had lots of negative EPS years lately, Book Value has been tanking and the dividend has been cut to zero. The Price/Earnings Ratio is 10.65, which is a good one. I used a stock price of $10.37 and a 2013 EPS of $0.69. The Price/Graham Price Ratio is 1.01, which shows a good price.

When I look at the analysts' recommendations, I find Strong Buy, Hold, Underperform and Sell. The consensus would be a Hold. The 12 months consensus stock price is $8.52. This implies a 15.6% capital gain. One analyst said that this company has been out of favour lately.

See CNBC article on medical isotope problems. The apprentice millionaire portfolio blogger wrote about this company in mid-December 2012. He has a more optimistic view that I do.

This company cannot seem to make money. It may not be entirely their fault; however, it still is not making money.

Nordion Inc. is a global life sciences company that provides products and services for the development of drugs and diagnosis and treatment of disease. The company is a provider of pharmaceutical contract research, medical isotopes for molecular imaging, radiotherapeutics, and analytical instruments. Its web site is here Nordion. See my spreadsheet at ndn.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 or StockTwits.

Wednesday, February 6, 2013

Exco Technologies Ltd 2

On my other blog I am today writing about the return on equity (ROE)...continue...

I do not own this stock of Exco Technologies Ltd (TSX-XTC, OTC- EXCOF). This is a stock given as a recommendation by Keystone at the Toronto Money Show of 2012. I decided to check into it as it is a small tech company that is paying dividends. Also, I decided to review this stock because Keystone has recommended some very good stocks in the past.

When I look at insider trading I find $1M and insider selling and $0.4M of insider buying with $0.6M net insider selling. Insider buying was both bought at lower and higher stock prices than insider selling, so this tells us nothing. Some of the selling is of stock options. The company is also buying back and cancelling shares.

The CEO has shares worth $56M, and his options are worth $0.7M. The CFO has shares worth $1.5M and options worth $0.5M. An officer has shares worth $0.3M and options worth $1M. A director has shares worth $0.1M and has options worth 0.2M. This is just to give you an idea on insider share ownership and option values. If you look at insiders with large holdings, these holding add up to 36% of the outstanding shares.

The 5 year low, median and high median Price/Earnings Ratios are 7.00, 7.13 and 8.83. These are very low. The P/E Ratio may not be a good measure as there have been a number of years lately of very low and negative earnings. The current P/E Ratio is 9.00 based on a stock price of $5.85 and a 2013 EPS of $0.65. This is a low P/E Ratio and so suggests a good stock price.

I get a Graham Price of $7.33. The 10 year low, median and high median Price/Graham Price Ratios are 0.82, 1.20 and 1.47. However, these Ratios have all been under 1.00 over the past 3 years. The current P/GP Ratio of .080 is low on a relative basis and low on an absolute basis. (Any ratio at or below 1.00 is considered low.)

I get a 10 year median Price/Book Value per Share Ratio of 1.14. The current ratio is 1.59. The current one is some 40% higher than the 10 year median ratio. This is not surprising as the book value has been fall because of negative earnings.

I would take more seriously the dividend yield test. The 5 year median dividend yield is 3.16%. The current is almost 3% lower at 3.08%. The company has been increasing the dividend at a very good clip lately and the relative dividend yield is lower than the 5 year dividend yield, but it is quite close. This would suggest that the stock price is reasonable.

The way I look at stock price testing is that if there are inconsistent outcomes, and there is no good reason to disregard the dividend yield test, you should go with the dividend yield test. This says that the stock price is relatively reasonable.

When I look at analysts' recommendations, I find two, a Strong Buy and a Buy. There is not many analysts following this stock. The 12 month consensus stock price is $6.63. This implies a total return of 16.41%, with 3.08% from dividends and 13.33% from capital gains.

The Jags report talks about Canaccord Genuity rising its target price on this stock from $6.50 to $6.75 on February 1, 2013. The Canadian Dividend Blogger talks about this stock being on his list of high dividend growers. According to the Edmonton Journal BMO listed this company as one of their top Canadian Small Cap picks for 2013.

I can see why people like this stock. It has very good dividend growth and dividend is at a nice 3%. The current stock price seems reasonable. However, it is a small cap stock and it is an industrial stock in the auto industry, so it is risky. However, it has very good debt ratios and with a large insider ownership. I do not see them increasing the dividends beyond what can be afforded.

Exco is a global designer, developer and manufacturer of dies, moulds, equipment, components and assemblies to the die-cast, extrusion and automotive industries. The Die Casting and Extrusion Technology groups operations are based in Canada, U.S., Mexico and Colombia and primarily serve automotive and industrial markets throughout the world. The Automotive Solutions Group has facilities are located in Canada, U.S., Mexico and Morocco and supply the North American, European and Asian markets. Its web site is here Exco. See my spreadsheet at xtc.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 or StockTwits.

Tuesday, February 5, 2013

Exco Technologies Ltd

I do not own this stock of Exco Technologies Ltd (TSX-XTC, OTC- EXCOF). This is a stock given as a recommendation by Keystone at the Toronto Money Show of 2012. I decided to check into it as it is a small tech company that is paying dividends. Also, I decided to review this stock because Keystone has recommended some very good stocks in the past.

This may be called a tech stock, but it supports the auto industry. This is a tough business to be in at present. The company has high insider ownership which is a plus. The dividends are reasonable with the current one at 3.02% and the 5 year median at 3.16%. Since they started to pay dividends in 2003, they have increased the dividend yield and the Dividend Payout Ratios.

The 5 year median DPRs are 22.5% for earnings and 17.3% for cash flow. They DPRs are similar for the financial year ending in September 2012. These are reasonable DPRs for this type of company. What is also good is the dividend growth which over the past 5 and 10 years was at 17.6% and 11.7% per year.

To the end of 2012, this stock has made money for its shareholders over the past 5 years, with an 11.26% per year total return. The portion of this return attributed to dividends was 1.88% per year. The portion attributable to capital gain was 9.39% per year. About 17% of the total return was dividends.

The stock did not do as well over the past 10 years for its shareholders. The total return over the past 10 years was 0.13% per year, with the portion attributable to dividends at 1.10% per year. There was a capital loss of 0.97% per year. So basically, the shareholders have broken even on this stock over the past 10 years. This stock seems to have peaked in 2006 and then got hurt badly by the bear market in 2008.

The outstanding shares have decreased by 0.4% per year over the past 5 years and increased by 0.3% per year over the past 10 years. Shares have increased due to stock options and have decreased due to the company buying back shares.

Revenues haven't grown much in the past 5 and 10 years. They were dropping from 2004 to 2009. Over the last 3 years the grown in revenue has been good (15% to 20% range). However, analysts' are expecting low growth over the next two years.

For Earnings per Share, after 4 years of negative earnings, the company has been making money over the past 2 years. However, here again, analysts' expect EPS to grow, but not by much over the next 2 years. For cash flows, there is no growth over the past 10 years, but a very good 12.8% growth per year over the past 5 years. There has been no growth in Book Value per Share over the past 5 and 10 years. This is not surprising considering there were a number of years with negative EPS.

Return on Equity was good for the financial year ending in September 2012. It was 17%. The 5 year median is a lot lower at 8.5%. This is because of the negative EPS years of late. The ROE on Comprehensive income is only 3% off the ROE on Net Income and came in at 14%.

For the 12 months ending in December 2012, ROE is also good at 16.7% and the ROE on comprehensive income is also quite good at 16.3%.

As is common on companies with large insider ownership, this company has a very strong balance sheet. The Liquidity Ratio is very good at 3.81 for the September 2012 financial year. The current Ratio is higher at 4.63. The Debt Ratio is also very good with the one for September 2012 at 5.24 and the current one at 6.36. The Leverage and Debt/Equity Ratios are also very good at 1.19 and 0.19 respectively.

This stock is more an industrial stock then tech. It is also rather small. However, management expects to have slow, but steady growth over the next few years and I find this reasonable. They have some very good features, such as a strong balance sheet that will see it through tough times. They have a nice dividend yield at 3%. I would expect the dividends growth to slower in the future, but I am sure growth will be reasonable.

I think it has the potential to be a solid performer with reasonable dividend. You would buy for the rising dividend and some capital gains.

Exco is a global designer, developer and manufacturer of dies, moulds, equipment, components and assemblies to the die-cast, extrusion and automotive industries. The Die Casting and Extrusion Technology groups operations are based in Canada, U.S., Mexico and Colombia and primarily serve automotive and industrial markets throughout the world. The Automotive Solutions Group has facilities are located in Canada, U.S., Mexico and Morocco and supply the North American, European and Asian markets. Its web site is here Exco. See my spreadsheet at xtc.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 or StockTwits.

Monday, February 4, 2013

Transcontinental Inc 2

On my other blog I am today writing about the Respect for Democracy Rally...continue...

I do not own this stock of Transcontinental Inc. (TSX-TCL.A, OTC-TCLAF). I have tracked this stock for some time as it is on the dividend lists that I follow of Dividend Achievers (see resources) and Dividend Aristocrats (see indices).

When I look at the insiders' trading report, I find $1.1M of insider selling and a net insider selling of $0.9M. Insiders not only have options, but Deferred Share Units of Participation, Restricted Share Units of Participation, and Participation Units of Deferred Shares. (This is the best I can translate as options like vehicles are denoted in French.)

The CEO has very few shares, but his options are worth $10M. The CFO has very few shares and options worth $1M. An officer has very few shares and options worth $1.4M. A director has shares worth $2.2M and has options worth 0.5M. This is just to give you an idea on insider share ownership and option values. Rémi Marcoux owns most of the Class B multiple voting shares worth around $155.8M.

According to Reuters, there are 61 institutions that own some 87% of this company. Over the past 3 months they have increased their shares by some 11.5%. See their information on this company.

The 5 year low, median and high median Price/Earnings ratios are 5.20, 6.89 and 7.88. These are very low P/E Ratios. The 10 year low, median and high median P/E Ratios are 8.06, 10.45 and 12.81. The current P/E Ratio of 6.48 is quite low. This P/E Ratio is based on 2013 EPS of 1.84 and a stock price of $11.93.

I get a Graham Price of $20.51. The10 year low, median and high median Price/Graham Price Ratios are 0.65, 0.80 and 0.93. The current P/GP Ratio is 0.58. Also, a stock price is considered to be a good one when the stock price is at or below the Graham Price (that is a P/GP Ratio of 1.00 or below.)

The 10 year median Price/Book Value per Share Ratio is 1.37 and the current P/B Ratio is 1.17 a value 85% of the 10 year ratio. The 5 year median dividend yield is 3.56% and the current yield is 4.86%. The current yield is some 37% above the 5 year dividend yield. Both these tests say that the current stock price is good.

When I look at analysts' recommendations, I find Buy, Hold and Underperform recommendations. The consensus recommendation would be a Hold. The 12 months consensus stock price is $11.60. This implies a 2.09% gain with 4.86% coming from dividends and a capital loss of 2.77%.

Old industries can hang on a lot longer than you can image. This company is still basically a printing company and it is having a tough time, but it does generally make money. They print magazines and newspapers and magazines and newspapers are still surviving, but none are really thriving. Another negative is that goodwill and intangible assets make up some 80% of the market cap of this company.

On the other hand the stock price is from quite good to cheap. They have a nice 4.9% dividend yield. They have positive cash flow. They have very good dividend growth and a very low Dividend Payout Ratios. However, personally, I rather move on to tech stocks than purchase a company making money in an old industry. I also like companies that I can shove into my portfolio for the very long term. It is hard to know if this company will survive in the longer term.

Transcontinental, one of Canada's top media groups, is the largest printer in Canada and Mexico and the fourth-largest in North America. In addition to commercial printing, it operates 150 websites and is a leading publisher of consumer magazines, French-language educational resources and community newspapers in Quebec and the Atlantic provinces. Its web site is here Transcontinental. See my spreadsheet at tcl.htm.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on Twitter or StockTwits.

Friday, February 1, 2013

Transcontinental Inc

I do not own this stock of Transcontinental Inc. (TSX-TCL.A, OTC-TCLAF). I have tracked this stock for some time as it is on the dividend lists that I follow of Dividend Achievers (see resources) and Dividend Aristocrats (see indices).

The 5 and 10 year growth in dividends is at 15.7% and 16.9% per year. The last dividend increase was for 7.4%, but dividends between 2011 and 2012 were increased by 16.3%. They have been increasing their yield. For this stock, dividends started out low in 1993 (around 1%) and the yield has been steadily rising and today the yield is 4.86% with a 5 year median dividend yield of 3.56%.

As the yield has been rising, so have the Dividend Payout Ratios. The 5 year DPRs for earnings is 19.9% and for cash flow is 10.5%. The DPR for the financial year ending in 2012 were 31% for earnings and 16.5% for cash flow. There was a big rise in dividend in 2011 when the dividends were increased by 40%. The DRPs are currently affordable.

Share prices have been tracking down over the past 5 and 10 years. So, for the 5 and 10 years ending at the end of 2012, total returns are a negative 3.65% and 2.77%. Returns attributed to dividends are at 3.01% and 2.16% per year over the past 5 and 10 years. The capital losses were 6.66% and 4.94% per year over the past 5 and 10 years.

The outstanding shares have decreased by 1.1% per year over the past 5 and 10 years. They have increased basically due to stock options and have decreased because of share buy backs. As far as growth goes, this company has low to no growth in most categories.

Over the past 5 years revenues are down by 1.9%. Over the past 10 years revenues are up by 1.7%. Revenues per Share are down by 0.8% over the past 5 years and up by 2.9% per year over the past 10 years.

Over the past 5 years the company has been reporting adjusted Earnings per Share, which most analysts are following. The adjusted EPS excludes special items and discontinued operations. EPS has grown by 4.3% and 2.5% per year over the past 5 and 10 years.

Cash Flow per Share has grown over the past 5 and 10 years by 0% and 3% per year. Book Value per Share has decreased over the past 5 years by 6.3% and has increased over the past 10 years by 1.7%.

The Liquidity Ratio is low as it is just 0.83. That means that the current assets cannot cover the current liabilities. If you add in cash flow after dividends this ratio goes up to 1.09, which is still a low ratio, but liabilities are covered. This is an industrial stock, so you would expect fluctuation in the cash flow.

Since there was an earnings loss this year, the Return on Equity is, of course, negative. What I do not like is that there is a big difference between the ROE on Net Income and the ROE on comprehensive income. The difference between the two rates is at 32%. Maybe a sign that the loss was larger than it first appears?

The Debt Ratio is currently very good and it has always been very good. The current ratio is 1.73. Leverage and Debt/Equity Ratios are ok at 2.66 and 1.54.

The last thing to mention and it is a bit negative also is that they have a lot of Goodwill on the books and it equals about 60% of the stock's market Cap.

Basically, this stock has gone nowhere since the economic problems of 2001. They are in print median and that is an old business. I know that are involved with Interactive Marketing, as they call it, but they are trying to make money from the internet. A lot of companies are trying to make money from the internet and not many are getting anywhere. Companies will eventually figure this out, but will this company be a winner? Who knows? They certainly are trying.

The low Liquidity Ratio makes them vulnerable in the event of an economic crisis. What is fine for one company is not necessarily fine for another. For example, some companies can count on cash flow no matter what the economy does. An example would be a Utility company can generally count on their cash flow. An industrial company cannot. I think that this company could be vulnerable to cash flow drying up.

Transcontinental, one of Canada's top media groups, is the largest printer in Canada and Mexico and the fourth-largest in North America. In addition to commercial printing, it operates 150 websites and is a leading publisher of consumer magazines, French-language educational resources and community newspapers in Quebec and the Atlantic provinces. Its web site is here Transcontinental. See my spreadsheet at tcl.htm.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on Twitter or StockTwits.