Leon's Furniture Ltd

I own this stock of Leon's Furniture Ltd. (TSX-LNF, OTC-LEFUF). I had some money in 2006 and this stock has been on MPL Communication's Investor Reporter list for some time. It was also on Mike Higgs' Dividend Growth Stock list. I bought some in 2006 and then some more in 2008, 2009, 2010 and 2013.

This is a dividend growth stock. It has modest dividends and modest increases. The current dividend is 2.81% and the 5 year median dividend is 3.01%. The 5 and 10 year dividend growth has been at 7.4% and 12.3% per year.

This company does not do a dividend increase every year. However, it has a fairly good record. This is only the second time that dividends were not increased annually since 1994. The last dividend increase was for 11% in 2012. There was no increase in 2013 and none so far in 2014. However, this company gives out the occasional special dividend and there was a special dividend given in 2012.

The Dividend Payout Ratios for EPS and CFPS are 46% and 36%, respectively. The DPRs for 2013 were at 46% and 23% for ESP and CFPS. The DPR for EPS is expected to be lower in 2014. Both the dividend yield and DPRs are been increasing lately. At one time the dividends were below 2% and the DPR for EPS was around 28% and for CFPS around 24%. Part of the increase seems to be company policy but part is probably because the economy has not been kind to retail since the last recession.

I have made a total return on this stock of 7.59% per year with 4.48% from capital gains and 3.11% from dividends. The 5 and 10 year total return on this stock is at 9.87% and 8.47% per year. The portion of these returns attributable to dividends is 3.57% and 3.58% per year. The portion of these returns attributable to capital gain is 6.30% and 4.90% per year.

The outstanding shares have not been increased over the past 5 and 10 years. The shares have increased due to Stock Options and decreased due to Buy Backs. Revenue, Earnings and Cash flow have increased over the past 5 and 10 years. However, Revenue growth is much better than either Earnings or Cash Flow. The increases in Earnings are the lowest.

The Revenue per share, using 5 year running averages, has increased by 8.1% and 9% per year over the past 5 and 10 years. The Earnings per Share has increased, using the 5 year running averages at 1.6% and 5.6% per year over the past 5 and 10 years. The Cash Flow per share has increased by 3.5% and 7.4% per year over the past 5 and 10 years using the 5 year running averages.

The Return on Equity has been over 10% since 1995. The ROE for 2013 is at 14.9%. The ROE on comprehensive income was not as good in 2013, but it was a good figure at 14.3%.

Correction* The Liquidity Ratio has always been very good until this year and the one for 2013 is just 0.96. Prior to 2013, this ratio was always high and the 5 year median Liquidity Ratio is 2.62. The Debt Ratio used to be also quite good as has the Leverage and Debt/Equity Ratios. The 2013 Ratios are 1.42 for Debt and 3.39 and 2.39 for the Leverage and Debt/Equity Ratios. The 5 year median for Debt Ratio is 2.47 and for the Leverage and Debt/Equity Ratios is 1.46 and 0.46.

The change in the Debt Ratios occurred because of the purchase of The Brick Ltd. by Leon’s Furniture Ltd.

My investment has done fine in this stock. The total return is not high, but it is respectable. This is a retail stock and you buy retail stock for diversification. My dividend yield on my original investment in 2006 is at 3.61%. This is higher than the current dividend yield of 2.81% and is a respectable yield. I plan to hold on to the shares that I have in this company. See my spreadsheet at lnf.htm.

This is the first of two parts. The second part will be posted on Monday, May 26, 2014 and will be available here. The first part talks about the stock and the second part talks about the stock price.

This company sells home furnishings, appliances and electronics through a chain of retail facilities and franchises located in Canada. Leon family owns 68% of this company. Its web site is here Leon's Furniture.

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.

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