Manitoba Telecom Services Inc

I own this stock of Manitoba Telecom Services Inc. (TSX:-MBT, OTC- MOBAF), but I probably should not. I first bought this stock in 2006 on the recommendation of TD Waterhouse. The best I can say about this stock is that it is not the worse purchase I have made. Originally, I bought a fair bit of this stock, but I have sold some but still have some left.

What I bought in 2006 and sold in 2010, I made a return of 0.8% per year. The capital gain loss was 6% per year and the dividends were 6.8% per year. The remaining stock I have, I have made a return of 3.4% per year, with a capital loss of 3% per year and dividends at 6.4% per year. It could be worse.

In 2010, this company cut its dividends by 35%. If you look at dividend growth over the past 5 and 10 years, the 10 year growth is at 7.6% per year. Over the past 5 years dividends have declined by 8% per year. The current dividend is high at 5.2%. The 5 year dividend yield is 6.9%.

The dividend was cut because earnings fell. Since the dividend cut, dividends have remained the same. It does not look like their dividend policy is going to change any time soon. The Dividend Payout Ratio for earnings for 2013 and 2014 is expected to be around 80%. (See my site for information on Dividend Payout Ratios).

Total return over the past 5 years is a negative 1.27% with a capital loss of 6.72% per year and dividend at 5.45% per year. The total return over the past 10 years is 5.15%, with a capital loss of 1.03% per year and dividends at 6.18% per year.

The outstanding shares have increased less than 1% per year over the past 5 and 10 years. They have increased due to DRIP and stock options and have decreased due to buy backs. When looking at growth, the growth for the last 10 years is better than that for the last 5 years.

Revenue per share is down 3% per year over the past 5 years and up by 5.5% per year over the past 10 years. Earnings per share over the past 5 and 10 years are flat. However, if you look at 5 year running averages, EPS is down by 7.7% per year over the past 5 years and up by 3% per year over the past 10 years.

Cash Flow per Share is down by 4.7% per year over the past 5 years and is up by 4.3% per year over the past 10 years. Book Value per share has been going down over the past 5 and 10 years. There was a decline in book value because of the change to the IFRS accounting rules. However, book value was going down even without the change in accounting rules.

The Return on Equity for the financial year of 2012 looks very good at 21.7%. However, the ROE on comprehensive income is a lot less at 12.2%. (That is a 44% difference and may suggest that the quality of the earnings is not good.)

The Liquidity Ratio is very low at 0.47. (When this is below 1.00 it means that current assets cannot cover current liabilities.) If you can consider cash flow after dividends, this moves up at 1.17. This is an ok ratio, but it is better if it were at 1.50 or higher. The Debt Ratio at 1.42 is a bit low also and would be better if it was at 1.50 or higher. The Leverage and Debt/Equity Ratios are a bit high at 3.38 and 2.38.

Eventually, I will get rid of this stock as I have determined that is not a core investment for me. However, there is nothing I see to replace it at the moment as most utilities stocks that I like are rather pricey at this point. TD Waterhouse still has a buy on this stock. I do not think that anything startling is going to happen to this stock, so it is safe for the next while.

This company is a full-service communications company. It serves residential and business customers in Manitoba. Their Allstream division serves national business consumers. Its web site is here Manitoba Telecom. See my spreadsheet at mbt.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.