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.

1 comment:

  1. Interesting! although I have no expert, but I want have to know more and more, on your blog just interesting and useful information. Keep it up!