Friday, April 26, 2013

Thomson Reuters Corp

I own this stock of Thomson Reuters Corp (TSX-TRI, NYSE-TRI). I have held this stock since 1985 and have made 7.03% total return per year with 3.21% per year from capital gains and 3.82% per year from dividends.

The problem is that I hold this stock in my Canadian Trading Accounting. For US investors, this stock has made some money for them over the past 10 years, but not over the past 5. For Canadian investor this company has not made money for them over the past 5 or 10 years. However, the loss over the past 10 years is less than 1% per year.

One other problem is that the dividend is paid in US$. This means that each dividend payment is different, depending on the current currency exchange rate. In most year, the dividends have increased as the dividends paid in US$ have increased. However, there have been years where the dividend payments have gone down for Canadian investors.

The dividends have only increased by 3.8% and 1.3% per year over the past 5 and 10 years in CDN$ terms, but have increased by 5.5% and 6.2% per year in US$ terms. The CDN$ used to be worth a lot less than the US$, but has been close to par for several years now.

The company reports in US$ and has done better in US$ terms than in CDN$ terms as far as growth goes over the past 5 and 10 year. Also, the number of outstanding shares has increased by 2.4% and 5.3% per year over the past 5 and 10 years. The main increase has to do with shares issued in the amalgamation of Thomson and Reuters. Shares have increased because of stock options and DRIP. Shares have been decreased because of share buy backs.

Revenue has increased over the past 5 and 10 years by 12.7% and 5.5% per year in US$. Revenue has increased by 9.9% and 1% per year over the past 5 and 10 years in CDN$. Revenue per Share has increased by 7% and 3% per year over the past 5 and 10 years in US$. Revenue per Share has increased by 4.3% per year over the past 5 years and it has decreased by 1.3% per year over the past 10 years in CDN$.

Growth in EPS is much better than Revenue growth. Growth in Cash Flow per Share is worse. CFPS is up by 2.5% and 3.2% per year over the past 5 and 10 years in US$. CFPS is down by 2.4% and 1.1% per year over the past 5 and 10 years in CDN$.

I was wrong about the Return on Equity in my original report. There was a miscalculation in my spreadsheet. ROE on net income on this stock is 12.1%. The 5 year median ROE is low at 6.9%. The ROE on comprehensive income is 10.7%, a value 12% lower. It is not that big of a difference, but might point to the quality of the earnings. I have reloaded the corrected spreadsheet.

The last thing to look at is the debt ratios. The Liquidity Ratio is rather low at just 0.83. That means that the current assets cannot cover the current liabilities. If you add in cash flow after dividends, you get a more respectable ratio of 1.17. (I would rather see Liquidity at 1.50). The Debt Ratio is very good at 2.19. The Leverage and Debt/Equity Ratios are also very good at 1.90 and 0.88.

The thing is that you can get international exposure with Canadian stocks by investing in international companies. This would be a reason to invest in this company. The problem with this, of course, is that it also exposes you to currency fluctuations.

This stock has not performed as well as I would have hoped, but these are tough economic times. I still think that it has a good long term future. See my spreadsheet at tri.htm.

Thomson Reuters Corp is the leading source of intelligent information for businesses and professionals. The company delivers this must-have insight to the financial, legal, tax and accounting, healthcare and science and media markets, powered by the world's most trusted news organization. They derive the majority of their revenues from selling electronic content and services to professionals, primarily on a subscription basis. Its web site is here Thomson Reuters.

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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