Rogers Sugar Inc.

I do not own this stock of Rogers Sugar Inc. (TSX-RSI, OTC-RSGUF). This stock was brought to my attention by Dividend Ninja. This company used to be a Unit Trust (TSX-RSI.UN) but it has recently converted to corporation.

This is not a dividend growth company. The company started out declaring just what they thought they could afford to pay, which meant that they changed each year, sometimes up and sometimes down. The dividends did rise while it was an income trust, but it was an income trust only from 2007 to 2011 when it converted to a corporation. At that time dividends were decreased.

Since then there was one dividend increase of 5.9% in 2012. There were no dividend increases in 2013. Analysts do not expect any dividend increases over the next two years and I would agree that this would be unlikely.

Looking at the longer term, dividends have decreased by 4.6% and 2.8% per year over the past 5 and 10 years. When I record dividends, I look at what was actually paid within the financial year, not what was declared in the financial year. So there appears to be more ups and downs in the dividends than actually occurred in years when the company transitions from quarterly to monthly and then back to quarterly dividends.

The company's earnings has basically been going south since 2008 so they are paying a high portion of their earnings. The 5 year Dividend Payout Ratio for earnings is 96%. For 2014 it is expected to be 97%. The 5 year median DPR for CF is better at 40%. However, it has been rising lately and is expected to be 74% for 2014. With these DPRs I would not expect any increases in dividends in the near future.

The dividend yield is still quite good. It is currently at 7% and the 5 year median dividend yield is 6.2%. Since the company changed to a corporation the dividend yields have declined. The historical median dividend yield is just over 10%. It was expected that dividend yields would decline on old income trust stocks to a 4% to 5% range. This stock is still outside this range.

The decline in dividend yield leads into the fact that the total return has been good. As the yields have declined, the stock price has gone up. Although in this case, yields have also declined by a dividend cut. The 5 and 10 years total return on this stock is at 16.54% and 14.29% per year. The capital gain portion of this return is at 7.24% and 4.12% per year over these periods. The dividend portion of this return is at 9.29% and 10.17% per year over these periods.

There has been very small increase in outstanding shares over the past 5 and 10 years at 1.5% and 0.6% per year. Shares have increased due to Stock Options and conversion of Debentures to shares. Shares have decreased due to Buy Backs. Revenue is growing not badly, but both earnings and cash flow growth is not going well.

Revenue per Share is up by 4.4% and 3.4% per year over the past 5 and 10 years. Earnings per Share are down by 4.9% per year over the past 5 years and EPS is up by 6.9% per year over the past 10 years. EPS have declined over the past 5 years. If you look at the 5 year running averages over the past 5 years, EPS are up by 14% per year, but that is only because of a big loss in one year. The decline of 4.9% per year over the past 5 years is quite accurate.

The Cash Flow can vary year to year. If you look at the 5 year running averages over the past 5 years, the CFPS is down by 4.5% per year. Also, by the 5 year running averages over the past 10 years, CFPS is up by 3.6%.

The Return on Equity has been over 10% each year over the past 8 years. The ROE for 2013 is 14.6% and the 5 year median ROE is at 15.2%. The ROE on comprehensive income better than for net income and this is good. The ROE on comprehensive income is at 17.7% for 2013 and has a 5 year median of 15.9%.

The Liquidity Ratio is very good for 2013 at 1.87. However, this ratio does fluctuated a lot and the 5 year median is just 1.32. Not a bad figure, but I would prefer it at 1.50. If you add in cash flow after dividends, the 5 year median Liquidity Ratio is 1.47.

The Debt Ratio has always been good and it is currently at 1.85. The 5 year median Debt Ratio is 1.87. The Leverage and Debt/Equity Ratios at 2.17 and 1.17 are higher than what I would like but are typical for this sort of stock.

It is good that they have growth in revenue, because without growth in revenue, it is hard to growth earnings and cash flow. However, they do not seem to be able to translate revenue growth into earnings and cash flow growth. You can also see that reflected in to Operational Profit Margin (CF/Revenue) Ratio. This ratio has declined from 12.97 in 2009 to 6.09 in 2013. This ratio is going the wrong way. You want this ratio to be increasing or stable. You do not want to see it decreasing.

This would not be a favorite stock for me. I know that the dividend yield is quite high, but I rather buy dividend grow stocks. Also, it does not seem to be able to translate revenue growth into earnings and cash flow growth. See my spreadsheet at rsi.htm.

This is the first of two parts. The second part will be posted on Friday, January 31, 2014 and will be available here.

Rogers Sugar Inc was established to hold all of the common shares and notes of Lantic Inc. Lantic Inc. is a refiner, processor, distributor and marketer of sugar products in Canada. Its web site is here Rogers Sugar.

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.