DirectCash Payments Inc.

On my other blog I am today writing about possible cheap dividend stocks to buy continue...

I do not own this stock of DirectCash Payments Inc. (TSX-DCI, OTC-DCTFF). I wanted to review stocks touted in the 2009 Money Show. There was a lot of talk at this show about some of the Unit Trust being currently good buys with very good yield. This is one stock that was recommended.

This company started as an income trust in 2004. After the income trust tax change announcement was made in October 2006, the company did not raise their dividends. They had some increases in 2005 and 2006. The problem is that they cannot afford to raise the dividends as they do not have earnings to cover the current dividends. I like companies that raise their dividends, so I would not current favor this company.

There are not many analysts that follow this stock, but none expect any positive earnings for 2014. For 2015 the consensus earnings is only $0.08 of earnings with a dividend of $1.38. There will not be any increase in dividends anytime soon. However this stock might be worthwhile following for a while.

The stock price hit a peak in 2010 and it has been falling ever since. The 5 and 10 year total return to date is 7% and 9.75% per year. The portion of this total return attributable to capital gain is a capital loss of 2.13% per year over the past 5 years and 0.33% per year capital gain over the past 10 years. The portion of the total return attributable to dividends over the past 5 and 10 years is at 9.12% per year and 9.42% per year respectively.

The current dividend at 9.6% is high but that is only because the stock price is falling. Eventually dividend yields will probably go to the 4 to 5% range as most old income trusts have.

The outstanding shares have increased by 7.1% and 6.5% over the past 5 and 9 years. Increases in outstanding shares seem to be because of share issues. The company has done well in increasing revenue and cash flow. It just is that it is having trouble in earning money.

Revenue per share is up by 14% and 16% per year over the past 5 and 10 years. Cash Flow per Share is up 14% and 12% per year over the past 5 and 10 years. EPS peaked in 2010 and has been falling since.

To test the current stock price, I cannot use the P/E Ratios as they are negative with a negative EPS. The current Graham Price is probably at $3.61 and this will give us a current P/GP Ratio of 3.98, which is high and suggests the stock is expensive.

The 10 year Price/Book Value per Share Ratio is 2.32 and the current P/B Ratio is 1.98, a value 14% lower and this suggests that the price is reasonable. However, the 10 year Price/CF Ratio is 7.69 and the current P/CF Ratio is 3.40, a value some 56% lower. This suggests that the stock price is cheap. A P/CF Ratio below 5.00 also suggests a cheap price.

The 10 year median Price/Sales Ratio is 2.11 and the current P/S Ratio of 0.93 is some 56% lower. This stock price test suggests that the stock price is cheap. Also, a P/S Ratio under 1.00 also suggests a good stock price.

A recent entry by Ticker Report say that Acumen Capital is giving this stock a Buy recommendation and a 12 month stock target price of $24.00.

There is net insider buying at just under $1M over the past year. Insiders have stock, especially the CEO who owns shares worth around $47.4M. A Director owns shares worth around $0.7M. There seems to be no stock options.

Sound bit for Twitter and StockTwits is: Cheap, but risky. See my spreadsheet at dci.htm.

I will have only one entry for this stock as I must do on some stock because I cover too many stocks to do double entries on all that I follow.

DirectCash is the leading provider of ATMs, debit terminals, prepaid phone cards and prepaid cash cards in Canada. They have built a substantial technological, sales and service infrastructure that enables them to offer convenient and secure revenue streams for businesses across the country. DirectCash operates in Canada, the United States and Mexico. Its web site is here DirectCash Payments 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. 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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