Monday, July 29, 2013

Newfoundland Capital Corp

On my other blog I am today writing about why people should have an Emergency Fund...continue...

I do not own this stock Newfoundland Capital Corp (TSX-NCC.A, TSX-NCC.B). I started to follow this stock as it was suggested as a decent dividend paying stock for investment purposes. It is not on any dividend lists that I follow. This is probably because dividends have been inconsistent.

As far as I can see, they started paying dividends in 1997, but then paid none between 2000 and 2002, inclusive. Dividends were restarted in 2003. The growth in dividends over the past 5 and 9 years is 12.5% and 20.6% per year. However, a lot of years did not have dividend increases. The most recent dividend increase was in 2011 for a 50% increase. There has been no increase since.

The Dividend Payout Ratios are good, with the 5 year median DPR for earnings at 22.2% and the DPR for cash flow at 21.7%. The DPR for 2012 was almost 52%, but this is expected to move down to 27% in 2013. Some analysts expect slight dividend increases in 2014 or 2015. The current dividend yield is 2.12% and the 5 year median is 1.66%.

Investors of this stock have done well over the past 5 and 10 years with total returns at 8.87% and 14.23% per year over these periods. The dividend portion of these returns is at 1.66% and 1.92% per year, respectively and the capital gain portion is at 7.21% and 12.81% per year, respectively.

Outstanding shares have declined over the past 5 and 10 years at the rate of 2.6% and 1.8% per year. The decline has been in the Class A shares, which are subordinate voting shares. Class B shares are multiple voting shares. Shares have increased due to stock options and decreased due to Buy Backs. Mostly, the 5 year running growth over the past 5 and 10 years has been better than the 5 and 10 year growth.

Revenue has grown at 5.8% per year and 9.7% per year over the past 5 and 10 years. Revenue per Share has grown at 8.7% and 10.7% per year over the past 5 and 10 years. The 5 and 10 years growth using 5 year running averages is similar. Growth in Revenue has been rather smooth.

There is a big difference in the 5 year running growth of EPS over the past 5 and 10 years compared to the 5 and 10 year growth. The 5 and 10 year 5 year running growth in EPS is at 3% and 17% per year over the past 5 and 10 years. EPS over the past 5 years is down by 10% per year and over the past 10 years up by 3.4% per year. Earnings do fluctuate year by year.

Cash Flow per Share has grown over the past 5 and 10 years no matter how you measure it. The CFPS growth over the past 5 and 10 years is at 16.4% and 7.4% per year, respectively. If you look at the 5 year running average growth over the past 5 and 10 years, you get growth at 12% and 10% per year, respectively.

Return on Equity has fluctuated over the years and the 5 year median ROE is just over 10% at 10.5%. The ROE for 2012 financial year is 9.1%. The ROE based on Comprehensive Income is better at 10.1%, a value 10% high than the ROE based on net income. This is a positive.

The Liquidity Ratio is low coming in at just 0.97. This means that current assets cannot cover current liabilities. It needs the cash flow to move this ratio into decent territory and it is still rather low at 1.44. The Debt Ratio is much better at 2.05. The Leverage and Debt/Equity Ratios are low and therefore quite good at 1.95 and 0.95.

You would buy this stock for diversification purposes. You would have to be able to put up with fluctuating earnings, but you might get some very good dividend yields on your initial purchase price over the longer term. Also, dividends are only paid semi-annually, not in the general quarterly manner. See my spreadsheet at ncc.htm.

This is the first of two parts. Second part will be posted on Tuesday, July 30th, 2013 and will be here.

Newfoundland Capital Corporation Limited also owns and operates Newcap Radio. Newcap Radio is one of Canada's leading radio broadcasters with 79 licenses across Canada. The Company reaches millions of listeners each week through a variety of formats and is a recognized industry leader in radio programming, sales and networking. The Company has 58 FM and 21 AM licenses spanning the country employing over 800 radio professionals in Canada. Newfoundland Capital Corporation Limited also owns and operates the Glynmill Inn, Corner Brook, Newfoundland and Labrador. Its web site is here Newfoundland Capital Corp.

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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