Contrans Group Inc

On my other blog I am today writing about the Oil Sands...continue...

I do not own this stock of Contrans Group Inc. (TSX-CSS, OTC-CTFIF). I got this off an article in the Globe and Mail called "15 dividend stocks where payouts are expected to grow". This number cruncher article was looking for companies with earnings growth over the last 12 months and a decent Dividend Payout Ratio.

There were two stocks on the list that I have never heard of. This is one of them. I first checked into Contrans Group's dividends First of all it has a nice current dividend yield of 3.95%. Next I looked at its history in regards to dividends. What I found out is that it used to be an Income Trust company and had much higher dividends in the past.

When this company switched to a corporation it reduced dividends by 75% between 2009 and 2010. However, in 2011 they raised the dividend by 25%. Dividends were kept at the new rate throughout 2012. They again raised the dividend 25% in 2013.

Another thing to look at is whether or not shareholders have made any money on this stock. The answer to that question is yes, if we look at values to the end of 2012. However, most of the money was made in distributions or dividends, and very little in capital gains. The 5 and 10 years total return is 8.08% and 13.21% per year. The portion attributable to dividends is 6.92% and 11.81% per year. Capital gains were only at1.16% and 1.40% per year over these periods.

A couple of things I want to mention. The first thing is that the stock seems very volatile. The other thing is that since dividends are much lower, will total return be low in the future? Also, the current stock price ($12.66) is lower than it was 7 years ago in 2006.

I filled in some figures on my spreadsheet to complete 5 and 10 years figures to 2012 (the last financial year published). What basically shows up is that Revenue, Earnings and cash flow over the past 5 years is moving down.

Analysts seem to expect that this 2013 will be a good year for this company. However, they do not expect a good year in 2014. The stock has been moving up lately and the P/E of 13.61 based on 2013 earnings of $0.93 and a current stock price of $12.66. This is higher than the 5 year high median P/E Ratio of 12.05 and would therefore suggest that the stock price is rather high. (The 5 year low and median P/E Ratios are 9.94 and 10.99.)

When I look at analysts' recommendations, I see Buy and Hold recommendations. The consensus recommendation would be a Buy. The 12 months stock price consensus is $12.30. This implies a 12 month total return of 1.18%, with 4.95% from dividends and 2.84% capital loss.

The insider trading report shows minimal insider buying and $.07M of insider selling. The company is also buying back shares for cancellation. One good thing to note is that the CEO owns $41M in shares. He has no options. There are options granted, but not many.

Dividend increases are a little inconsistent, but they are good. The Dividend Payout Ratios are currently around 50% for earnings and 26% for cash flow. These DPRs are fine. I must admit I rather see more balance between the capital gains and dividends. This may change for this company as earnings grow. It is a company worth following. See my spreadsheet at css.htm.

Contrans Group Inc. (Contrans) is engaged in freight transportation. It provides freight transportation services to shippers located in Canada, as well as in the eastern, mid-western and southern United States. Its web site is here Contrans.

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.