Leon's Furniture Ltd

I own this stock of Leon's Furniture Ltd (TSX-LNF, OTC- LEFUF). I first bought this stock in 2006 and then bought more in 2008, 2009 and 2010. I have made a return on my purchases of 4.61% with 1.28% from capital gains and 3.33% from dividends.

This is a stock that has been on the list of the Investment Report of MPL communications for some time. In an Investor Hotline email which emails are available on their site, they say that Leon's remains a Hold for dividends and capital gains. They do not expect Leon's to have any special dividends until they integrate their Brick purchase.

Leon's only increases dividends when they felt that they could be sustained. If they had extra money, it is given out as a special dividend. The last special dividend I received was for 2012 and it was at $0.15 per share. The current dividend is $0.10 per share, quarterly.

The company has a moderate level of dividends (long term at around 2.5%) with moderate increases. The 5 and 10 year growth in dividends is at 8% and 13% per year. Dividend increases slowed down after 2008, but the most recent dividend increases was for 11%.

The Dividend Payout Ratios have always been good under this company. The 5 year median DPR for earning is 46% and for cash flow is 36%. (See my site for information on Dividend Payout Ratios).

The outstanding shares have decreased by 0.4% and 1% over the past 5 and 10 years. The company does buy back shares occasionally. Employees can buy under the company's Management Share Purchases plan, convertible, non-voting shares. The company does not appear to have stock options.

Revenue has increase by 1.4% and 4.3% per year over the past 5 and 10 years. Revenue per Share has increased by 1.4% and 5.3% per year over the past 5 and 10 years. If you look at the 5 year running average for revenue per share, increases are better at 5.2% and 7.2% per year over the past 5 and 10 years.

Earnings per Share have increased by 1.2% and 5.8% per year over the past 5 and 10 years. Here again, the 5 year running average EPS has increased better at 4.9% and 6.9% per year over the past 5 and 10 years. The Cash Flow per Share has decreased by 5.3% per year over the past 5 years, but increased by 1.6% over the past 10 years. The 5 year running average has increased by 3.8% and 7.13% per year over the past 5 and 10 years.

When the 5 year running average increases are better than the 5 year and 10 year increases it usually points to the fact that exactly 5 or 10 years ago, the values were better than average or were very good years. For example, the EPS 5 years ago was at $0.80 and for the latest year financial year were $0.85, an increase of just 1.2% per year.

However, the average EPS between 2003 and 2007 (5 years ago) was $0.65. Compare that with the 5 year average EPS from 2008 to 2012 and you get EPS of $0.83, an increase of 4.9% per year. There were nice increases in EPS from 2003 to 2007, but EPS was rather flat from 2008 to 2012 with some declines as well as increases in EPS.

The Return on Equity is 10.3% for the last financial year of 2012. The 5 year median ROE is 15.2%. The ROE on Comprehensive Income is close at 10.9% and with a 5 year median of 15.6%. With the comprehensive income higher than the net income it points to the good quality of the net income.

Insider ownership is almost 70%. When this occurs you often get very good debt ratios and this stock is no different. The current Liquidity Ratio is 2.96 and the Debt Ratio is 4.36. (Generally, I want both of these to be at 1.50 or above.) The Leverage and Debt/Equity Ratios are quite low and therefore good at 1.30 and 0.30.

I bought this stock to diversity into retail stocks. The company has a good, but inconsistent record of dividend increases. I also like the idea of receiving the occasional special dividend. At this point my capital gain return is low, but we are in difficult economic times. I plan to hold on to my shares. See my spreadsheet at lnf.htm.

This company sells home furnishings, appliances and electronics through a chain of retail facilities and franchises located in Canada. Leon family owns 68% of this company. Its web site is here Leon's.

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.