Wednesday, April 3, 2013

Canadian Tire Corp

I have finished loading up my RRSP/RRIF accounts with cash for withdrawals over the next few years, so I am ready for the next crash. I had a bit of extra money after selling off low dividend stocks in my RRSP account, so I bought some more Manulife Financial Corp (TSX-MFC). The current yield on this stock is 3.56%.

I own this stock of Canadian Tire Corp (TSX-CTC.A, OTC- CDNAF). I first bought this stock in 2000 and then more in 2009 and 2010. The later purchases were for my trading account. This stock is more suited for a trading account then an RRSP type account because the dividend rate is low. The 5 year median is just 1.75%.

This stock may have a low dividend rate for the dividend increases are good. Over the past 5 and 10 years, the dividends have increased by 10% and 11.6%, respectively. The last increase was in 2013 and that increase was for 16.7%. This is a consumer discretionary stock, so the dividend increases can vary a lot.

I have made a total return of 10.09% per year on this stock, with 8.4% from capital gain and 1.69% from dividends. I made most of this return on the stock I bought in 2000. Of you look just at the later purchases, I have made only 5.94% per year, with 1.67% from dividends and 4.27% from capital gains. I expect that over the longer term I will do better on these purchases.

The last 5 years have not been good for investors in this stock. Basically, people that invested 5 years ago have broken even on this stock with 1.33% from dividends and a capital loss of 1.33%. The 10 year return is much better at 9.5%, with 1.6% from dividends and 7.9% from capital gain. This is a consumer discretionary stock, so you should expect a decent return over the longer term, but not so much in the short term.

The number of outstanding shares have decreased by 0.8% over the past 5 years and increased by .16% over the past 10 years. These are just marginal changes. The outstanding shares have increased due to stock options and DRIP and decreased due to stock buy backs.

Revenue has increased by 5.8% and 6.8% per year over the past 5 and 10 years. Revenue per Share has increased by 5.9% and 6.6% per year over the past 5 and 10 years. This is not a great increase but it is decent.

Earnings per Share have grown by 5.6% and 9.2% per year over the past 5 and 10 years. Cash Flow per Share has increase 17% and 9.6% per year over the past 5 and 10 years. Book Value per Share has increased by 9.1% and 8.4% per year. So the company has done ok.

The Return on Equity for this stock mostly runs at 10% or better. It has a 5 year median ROE of 10.5% and an ROE of 10.5% for the financial year ending in 2012. The ROE on Comprehensive Income for 2012 is close to the ROE on Net Income. That ROE is 10%. The 5 year median ROE on Comprehensive income is 10.9%. The Net Income and Comprehensive Income have varied over the years.

This stock has two types of stocks, as there are voting and non-voting shares. The Type A stock, largely sold on the TSX, is the non-voting shares. There is a large insider ownership. Often this results in good debt ratios and this stock is no exception.

The current Liquidity Ratio is quite good at 1.68. The current Debt Ratio is also good at 1.57. The Leverage and Debt/Equity Ratios, while not that low are fine at 2.77 and 1.77.

Over the longer term, this stock should be a solid performer. You would buy it for diversification and for the increasing dividend. See my spreadsheet at ctc.htm.

Canadian Tire Corp engages in retail sales, financial services and petroleum sales. They own Canadian Tire Store, Gas Outlets, Parts Source Stores and Mark's Work Warehouse. The Canadian Tire stores offer a unique range of automotive, sports and leisure and home products. The company is controlled by the Billes family who own most of the voting shares. Its web site is here Canadian Tire.

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.

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