Tuesday, February 18, 2014

Manitoba Telecom Services Inc.

On my other blog I am today writing about my dividend increases for 2013 continue...

I own this stock of Manitoba Telecom Services Inc. (TSX-MBT, OTC-MOBAF). In 2006, I was look for something to buy and I wanted a good dividend paying Canadian Stock. TD recommended this stock as a current Buy. I checked the stock out and it looked good. I ended up with some of this stock in my trading, RRSP and Pension Accounts. By 2010 I was being to worry about this stock and I want to sell some.

I no longer think that it is a good stock. In the 2009 report, the company said that they cannot guarantee current level of dividends. They have not raised their dividends for years. I like stocks that raise dividends. I sold the stock in my Trading and Pension Accounts and some in the RRSP Account. I had a slight loss in my Trading account and a slight gain in my Pension Account for an overall gain of 0.83% (including dividends). I wished I had never bought this stock.

It is said you should only obtain information form analysts' reports and never take their recommendation. I should have known better. This was a dividend growth company until 2006. It was bad timing on my part. Over past 5 years, dividends are down by 8.2% per year. Dividends are up by 6.1% per year over the past 10 years.

The Dividend Payout Ratios are a problem, especially, the DPR for earnings. For 2013, the DPR for Earnings was at 137%. For 2014 it is expected to be at 97%. The DPR for cash flow is not as bad, with the DPR for cash flow for 2014 at 45% and it is expected to be at 32% for 2014. I doubt if dividends will be increased anytime soon because of the DPR for earnings.

Over the last 5 and 10 years, shareholders would have earned 3.58% and 0.66% per year with capital loss at 2.16% and 4.89% per year and dividend income at 5.74% and 5.55% per year. In my RRSP account which holds the last of this stock I have earned since 2006, 2.85% per year with a capital loss of 3.72% per year and dividends at 6.57% per year.

Outstanding shares have increased by 3.5% and 2.3% per year over the past 5 and 10 years. The shares have increased due to DRIP, stock options and share issues. The shares have decreased due to buy backs. Revenues, earnings and cash flows have been declining. Analysts expect better results in 2014. (However, analysts' had expected better results in 2013 also and this did not occur.)

Revenues per Share have been declining over the past 5 years at 6.5% per year. Revenues per share are up over the past 10 years at 4% per year. Because 2013 had an earnings loss, I cannot determine any positive or negative growth. However, if you look at the 5 year running averages, earnings are down by 15.8% per year over the past 5 years and down by 1% per year over the past 10 years.

Cash Flow per Share has fluctuated, but it is down by 12.5% and 2.5% per year over the past 5 and 10 years. If you look at 5 year running averages, the CFPS is down by 3.8% per year over the past 5 years and up by 2.2% per year over the past 10 years.

Over the past 5 years, Return on Equity has been above 10% for only 2 years. It is interesting that, although ROE on comprehensive income has been over 10% only 2 out of the last 5 years, one of these years was 2013. The ROE on comprehensive income was at 10.8% in 2013. This would imply that earnings were not a bad as first thought of.

The Liquidity Ratio for 2013 is low at just 0.42 and even with cash flow after dividends it is only at 0.68. This means that current assets cannot cover current liabilities. However, if you take off the current portion of the long term loans, the Liquidity Ratio is 0.71, but with cash flow less dividends it reaches over 1.00 at 1.16.

The Debt Ratio has always been good on this company and the current Debt Ratio is 1.69. The Leverage and Debt/Equity Ratios have come down over the past couple of years are not bad at 2.45 and 1.45 for 2013.

This stock is still not doing well. However, I am not in a hurry to sell because I do not think it is going anywhere. See my spreadsheet at mbt.htm.

This is the first of two parts. The second part will be posted on Wednesday, February 19, 2014 and will be available here.

This company is a full-service communications company. It serves residential and business customers in Manitoba. Their Allstream division serves national business consumers. Its web site is here Manitoba Telecom.

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. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

See my website for stocks followed and investment notes. Follow me on Twitter or StockTwits.

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