Tuesday, May 27, 2014

Progressive Waste Solutions Ltd.

I own this stock of Progressive Waste Solutions Ltd. (TSX-BIN, NYSE-BIN). I first bought this stock in 2007 because TD Securities had a very favorable report on this stock and had it on it action buy lists. I had money because I had recently sold RIM. At that time it was an income fund. In 2010, I needed to buy something for Pension Acct. I have this already and it is on TD Action Buy List. Of 13 analysts, 11 say strong buy and 2 hold.

When this company changed from an Income Trust to a corporation, it cut its dividend by 72%. This was in 2009. In 2011 it started to raise the dividends and they are up 20% between 2011 and 2013. The last dividend raise was in 2013 and it was an increase of 7.1%.

The thing is that the decrease in dividends brought the Dividend Payout Ratios into line with what they should be for a corporation. The 5 year median DPR for EPS is 66% and for CFPS is 16%. For 2013 these ratios were 53% for EPS and 14% for CFPS.

As an Income Trust company the dividends yield were quite high. When this company changed to a corporation, the dividend yields became much lower. Currently the dividends are 2.11%. As a dividend growth stock, the dividends are moderate and the dividend increases are moderate. Since 2008 they also have not raised the dividends each year as there was no dividend increase in 2012.

I have earned a total return of 5.13% per year with 2.53% per year from capital gains and 2.60% per year from dividends. The 5 and 10 year total return is 13.66% and 5.87% per year. The portion of this return attributable to dividends is at 2.68% and 4.38% per year. The portion of this return attributable to capital gain is at 10.97% and 1.49% per year.

The thing is that the stock price fell heavily in 2008 when it was known that the dividend was to be cut. The stock fell some 70%. Dividend investors do not like dividend cuts. However, I think that the company was wise to do this to get their Dividend Payout Ratios into line with what a corporation should have.

What complicates this stock is that in 2009 they started to report in US$ rather than CDN$. They also started to report in US GAAP rather than CDN GAAP. This is because they have business both in Canada and US. The dividends are still paid in CDN$.

The outstanding shares by increased by 14.8% and 15.8% per year over the past 5 and 10 years. The shares have increased due to Stock Options and Share Issues. The shares have decreased due to Buy Backs. Revenue, Cash Flow and Earnings have grown well, Revenue per Share, CFPS and EPS have not done as well because of the increase in outstanding share. Basically, there is good growth in EPS, but not for Revenue per Share or CFPS.

2013 was a good year for this company, but 2011 was not. In 2011 they had good Revenue and Cash Flow, but that they had an EPS loss. However, the loss in 2011 was due to a non-cash impairment loss (that is they wrote off goodwill).

Revenue has grown over the past 5 and 10 years at 17% and 32% per year. Revenue per share has grown at 2.2% and 13.68% per year over the past 5 and 10 years. Since I only have dated back to 2002, I only can look at 5 year running averages over the past 5 years and the Revenue per shares has grown at 3.3% per year. These figures are in US$.

Net Income has grown at the rate of 25% and 28% per year over the past 5 and 10 years. The 5 year running average has only grown at 4.2% per year and this is because of the big net income loss in 2011. The EPS has grown at 9% and 10% per year over the past 5 and 10 years. The 5 year running average is down by 9%, but again this is because of the loss in 2011. I think that the growth over the past 5 and 10 years is more accurate measure of the growth of this company. These figures are in US$.

Cash flow has grown at the rate of 17% and 28% per year over the past 5 and 10 years. Cash Flow per Share's is much less at 1.5% and 10% per year. If you look at the 5 year running averages, the CFPS has grown at 2% per year. CFPS just has not grown much over the past 5 years.

The Return on Equity has always been quite low for this company. For 2013 it was the highest it has ever been at 9.1%. The 5 year median is just 5.3%. The ROE is expected to be around 9.6% for 2014. The comprehensive income was lower than that on net income for 2013 coming in at just 6.5%. However, its 5 year median value is higher at 7.4%. The low ROE is certainly a negative for this company.

The Liquidity Ratio was low in 2013 at 1.00. This ratio has always been low and the company generally depends on cash flow to pay help cover current liabilities and if you add in cash flow less dividends the ratio is a health 2.29.

The Debt Ratio for this company has always been quite good. The ratio for 2013 is 1.61 and the 5 year median is 1.88. The Leverage and Debt/Equity Ratio are rather standard for an industrial stock and for 2013 were are 2.63 and 1.63.

This is an industrial dividend growth stock. You would buy it to diversify and for the exposure to the US market. See my spreadsheet at bin.htm.

This is the first of two parts. The second part will be posted on Wednesday, May 28, 2014 and will be available here. The first part talks about the stock and the second part talks about the stock price.

They are a full-service waste management company providing non-hazardous solid waste collection and landfill disposal services for municipal, commercial, industrial and residential customers in five provinces and ten US states. Two-thirds of their business is in US. Its web site is here Progressive Waste.

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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