Tuesday, January 28, 2014

Transcontinental Inc.

I do not own this stock of Transcontinental Inc. (TSX-TCLA), OTC-TCLAF). This used to be a dividend growth stock. It probably is still considered one on lists. It is still on a number of dividend lists. However, it has fallen on hard times. Although the company is trying to do more modern things, it is still in the print media business.

This company is still raising their dividends, but at the cost of higher Dividend Payout Ratios. The DPRs are still not high with 5 year median DPRs of 24.5% for EPS and 12.6% for CFPS. The DPRs for 2013 were 28.7% for EPS and 13.8% for CFPS. The DPRs before 2011 were around 18% for EPS and 8% for CFPS. They obviously decided to pay a higher ratio as in 2011 they increased the dividends 40% and that is when the DPRs moved higher.

The dividend growth over the past 5 and 10 years is good at 13.4% and 15.3% per year. The last dividend increase was in 2012 and was for 7.4%. There was no dividend increase in 2013, but they did pay a special dividend almost twice the current annual dividend. The dividend yield is a good one as the 5 year median dividend yield is 3.6%.

This stock did well to the end of last year with total return of 13.21% per year over the past 5 years with 5.21% per year from dividends and 8% per year from capital gains. The total return to date is lower as the stock price has dropped recently with the market. The total return to date over the past 5 year is 6.40% per year with 5.26% per year from dividends and 1.13% per year from capital gains.

No matter what you look at, the stock has not done well over the past 10 years. The loss is similar to the end of 2013 and to date. The Total Loss to date is 2.4% per year, with dividends at 2.79% per year and capital loss at 5.20% per year.

Outstanding share have decreased by .7% and 1.3% per year over the past 5 and 10 years. The outstanding shares have increased due to Stock Options and decreased due to Buy Backs. There have also been changes in the Class A and B shares as there have been conversions of Class B shares into Class A shares. Class A shares are Subordinate Voting Shares and Class B shares are multiple voting shares.

A problem is the lack of growth in revenues. Revenue per Share has declined by 2% and increased by 2% per year over the past 5 and 10 years. When looking at 5 year running averages, nothing much changes as here Revenue per Share is flat over the past 5 years and has increased by 2% per year over the past 10 years.

Earnings per Share have not much to show as the last two years have had negative EPS. Even the 5 year running averages coming into 2013 is a negative figure. However, analysts feel that things will turn around in 2014 with EPS of 1.95.

The growth in Cash Flow per Share is low with the 5 and 10 year growth at 2.7% and 3.8% per year. Using the 5 year running averages tell the same basic story.

There is no Return on Equity because of negative net income. However, the comprehensive income turned positive in 2013 with an ROE of 6.7%. Not great, but it is positive.

The Liquidity Ratio has always been low and generally below 1.00. This means that the current assets cannot cover the current liability. They have depended on cash flow to cover the difference. This is not something I like to see in a retail stock. The current Liquidity Ratio is 0.98. If you include cash flow after dividends, then the ratio is 1.63. The 5 year median Liquidity Ratio is 1.00.

The Debt Ratio is better and is at 1.78 and it has a 5 year median value also of 1.78. Leverage and Debt/Equity Ratios are a little high but ok at 2.14 and 1.14 and is typical for what is considered an Industrial stock.

It seems like an ok dividend stock, but not one I would like to buy and tuck away in my portfolio for a long time. I think that if you buy this stock, you would want to keep an eye on it. I just wonder if you would get enough return for this about of monitoring. See my spreadsheet at tcl.htm.

This is the first of two parts. The second part will be posted on Wednesday, January 29, 2014 and will be available here.

Transcontinental, one of Canada's top media groups, is the largest printer in Canada and Mexico and the fourth-largest in North America. In addition to commercial printing, it operates 150 websites and is a leading publisher of consumer magazines, French-language educational resources and community newspapers in Quebec and the Atlantic provinces. Its web site is here Transcontinental Inc.

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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