Chemtrade Logistics Income Fund

I do not own this stock Chemtrade Logistics Income Fund (TSX-CHE.UN, OTC-CGIFF). I decided to investigate this stock after reading an article in the G&M in February 2012 about investing in small cap stocks that pay dividends. This was one of the stocks mentioned that I had never heard of before.

This company started off as an Income Trust. It is still called an Income Fund and has a UN as part of its TSX symbol. However, Income Trusts lost their tax advantages in 2011. This company stopped raising dividends and started to decrease them in 2007 just after the tax department changed the tax rules on Income Trusts. The dividends were decreased some 17% and they have not changed since.

The Dividend Payout Ratio for earnings has been mostly above 100%, with a 5 year median at 99%. The 5 year median DPR for cash flow is better at 61%. The most recent DPR for earnings was at 128% and for cash flow was at 43% for the financial year of 2012. One analyst thought that the company might start to raise dividends again in 2015.

The 5 year median dividend yield is at 9.57%. However, this yield has been decreasing as the dividend yield has decreased on most old Income Trust stocks. The current dividend yield is still quite high at 7.02%.

The shareholders have so far done quite well with the 5 and 10 year total return at 24.77% and 17.78%. The dividend portion of this total return is at 11.20% and 12.78% per year and the capital gain portion is at 13.56% and 5% per year, respectively. Note that the dividend portion of the total return will probably decrease in future years.

The outstanding shares on this stock have increased by 4.4% and 10% per year over the past 5 and 10 years. They have increased due to Debenture Conversions and Share issues. They have decreased due to buy backs. Revenues and earnings have increased nicely. There is lower growth in cash flows and mediocre growth in book value.

Revenue has increased by 11% and 16% per year over the past 5 and 10 years. For Revenue per Share, looking at 5 year running averages, these have increased by 9.7% and 9.8% per year over the past 5 and 10 years. Earnings per Share, looking again at 5 year running averages, these have increased by 18% and 7% per year over the past 5 and 10 years.

The Cash Flow per Share, using the 5 year running averages, has increased by 7.7% and 4.8% per year over the past 5 and 10 years. The Book Value per Share is up by 4.7% per year over the past 5 years, but down by 7.2% per year over the past 10 years. (Generally speaking, Income Trust tends to have declining book values.)

The Liquidity Ratio has varied over the years. The current ratio is 1.06. However, if you add in cash flows after dividends it gets to a much better one of 1.60. The Liquidity Ratio for 2012 was lower at 0.92 and with the added in cash flows after dividends getting it to just 1.27.

The Debt Ratios tend to be a bit better with the current one at 1.52 and the one for 2012 at 1.47. The Leverage and Debt/Equity Ratios are fine and currently at 2.91 and 1.91.

The current Return on Equity for 2012 was at 12.1% and the 5 year median ROE was at 17.8%. However, the ROE on comprehensive income is coming in generally quite a bit lower and for 2012 was 25% lower with an ROE at 9.1%. This can point to the fact that the quality of the earnings may not be very good. However, in some years, the ROE on comprehensive income is higher than the ROE on net income. It has a 5 year median value of 13.9.

I think that this company is performing quite well. It was expected that the dividend yield on old Income Trust companies would end up by now in the 4% to 5% range. Perhaps this is lagging in this respect because it is a small company and it has not yet got the DPRs for earnings in the right place. See my spreadsheet at che.htm.

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

Chemtrade Logistics Income Fund is a global supplier of sulphuric acid, liquid sulphur dioxide and sodium hydrosulphite and a processor of spent acid, particularly in the U.S. Gulf Coast region. Chemtrade is also a regional supplier of sulphur, sodium chlorate and phosphorus pentasulphide, and also produces zinc oxide at three North American locations. Its web site is here Chemtrade.

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.