Superior Plus Corp

On my other blog I am today writing about building an Emergency Fund...continue...

I do not own this stock Superior Plus Corp (TSX-SPB, OTC-SUUIF). I started to follow this stock as it was an income trust company that was talked about in the Money Reporter from MPL Communications. This company changed to a corporation from a unit trust (TSX-SPF.UN) in 2009.

In 2011 after this company changed to a corporation, it lowered the dividend by some 63%. Since then the dividend payouts or distributions have not changed. Dividends are down by 17.5% per year and 11% per year over the past 5 and 10 years. Prior to 2011 the dividends did fluctuate, with increases some years and decreases other years.

There were 3 years of negative earnings over the past 10 years. If you add together the EPS for the last 5 years you get a negative value of $0.87. The 5 year running average EPS is a negative $0.17. If you have negative earnings, they are obviously paying out more in dividends then they are earning. The 5 year median Dividend Payout Ratio for cash flow is 76.5%.

The current Liquidity Ratio is good at 1.50, but this is an unusually high ratio for this company. The current Debt Ratio is low at 1.37. The assets can cover the liabilities, but most people want to see a better ratio and one at least at 1.50. The current Leverage and Debt/Equity Ratio are ok at 3.68 and 2.68 (not either high or low).

Revenues per Share are up over the past 5 and 10 years. Using the 5 year running averages, I get growth of 5.5% per year and 8.3% per year over these periods. Earnings are down no matter how you look at them. Cash Flows per Share are down if you look at them over the past 5 and 10 years. However, there is no growth if you use 5 year running averages over the past 5 and 10 years.

When I look at insider trading, I find $7.8M of insider selling and $1.2M of insider buying. Insiders do not have any thing called options, but they have option like vehicles called Rights Business Performance Share Units, Rights Business Restricted Share Units, Rights Performance Share Units, Rights Deferred Share Units and Rights Restricted Share Units. Insiders also own Convertible Debentures with interest rates for around 5.75% to 7.5%. There are very good rates.

The CEO has shares worth $19.2M and has options worth $2M. The CFO has shares worth $3.4M and has options worth $6.3M. An officer has shares worth $2.5M and has options worth $1.6M. A director has shares worth $0.5M and has options worth $0.3M. This is just to give you an idea on insider share ownership and option values.

When I look at analysts' recommendations, I find Buy and Hold recommendations. The consensus recommendation is a Buy recommendation. The 12 month consensus stock price is $13.10. This implies a total return of 7.28% with 4.7% from dividends and 2.58% from capital gains.

The current Price/Earnings Ratio is 12.96 which is not bad. It is close, but higher than the 5 year median high of 12.52. This is based on a stock price of $12.77 and 2013 of $0.99. However, there has been 2 years within the past 5 years that the P/E was negative, so median values may not tell you much.

I get a Graham price of $9.83. The current Price/Graham price Ratio is 1.30. The 10 year median P/GP Ratios are 0.87, 1.19 and 1.62. This put the stock price on the high side, but still in reasonable territory. The 10 year median Price/Book Value per Share Ratio is 2.36 and the current ratio is 24% higher at 2.93. This suggests that the stock price is relatively high. However, the Book Value has been declining over the past 5 and 10 years.

One analyst thought the company was a longer-term turnaround story that has a current good yield of 4.7%. A Forbes article says that looking at a chart of dividends from this company says that you cannot trust the current one to continue. A G&M article talks about this company being a turnaround story.

I still do not like it. Yes, it is paying down its debt. It may make money in the future, but it has not proven it that it can. It has been all over the place with dividends. So, who knows what it might do with dividends in the future. It may have had good reasons to change the dividends the way that it has.

However, I like the way a company like Leon's handle their dividends. If they have extra money, they pay out an extra dividend. They do not raise the based dividends unless they are sure that they can continue with them. This is a better way of handling dividends for shareholders that increasing them in good times and decreasing them when things are not so good.

Yes, it may be a turnaround story, but considering the risks, I cannot image anyone would get a good reward for the turnaround. If I go into a turnaround situation, I want the possibility of a very good return in deed. See my spreadsheet at spb.htm.

Superior Plus Corp. is a group of diversified businesses that operate within three primary divisions. Superior's Energy Services division provides distribution, wholesale procurement and related services in relation to propane, heating oil and other refined fuels throughout Canada and the North Eastern United States. Superior's Specialty Chemicals division is a leading supplier of sodium chlorate and related technology to the pulp and paper sector and a regional Midwest supplier of chloralkali and potassium based products. Superior's Construction Products Distribution division is a leading distributor of walls, ceilings and insulation products to the Canadian and United States construction industry. Its web site is here Superior Plus.

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.