Newfoundland Capital Corp.

I do not own this stock of Newfoundland Capital Corp. (TSX-NCC.A). I started to follow this stock as it was suggested as a decent dividend paying stock for investment purposes in the latter part of 2009. It is not on any dividend lists that I follow so I took a look at it.

For this stock, dividends have varied over time. They started to pay dividends in 1997 and then stopped them in 1999. Dividends were restarted in 2004 and for most years since they have paid dividends. The exception is 2009 when no dividends were paid. However, they did pay 3 dividends, rather than the usual 2 in 2008. Over the past 5 and 9 years, dividends are up by 0% and 18.2%. Analysts do not see any dividend increases over the next few years.

The Dividend Payout Ratios are good. The 5 year median DPR for EPS is 17% and for CFPS is 21%. The corresponding ones for 2013 are 17% and 21%. I guess the problem is that for 2014 they are expected to be 28% and 18% respectively.

The total returns over the past 5 and 10 years to date are at 5.30% and 9.09% per year. The portion of this return attributable to dividends is at 1.96% and 2.02% per year over the past 5 and 10 years. The portion of this return attributable to capital gains is at 3.34% and 7.07% per year over the past 5 and 10 years. The return over the past 5 years is not great, but not disastrous either.

The outstanding shares have declined by 4.4% and 2.4% per year over the past 5 and 10 years. This makes growth in revenues, earnings and cash flow more important than revenue per share, EPS and CFPS. Generally growth has been good over the past 5 and 10 years.

Revenues have grown at 3.6% and 8% per year over the past 5 and 10 years. Revenue per Share has grown at 11.3% and 10.6% per year over these periods.

Since exactly 5 year ago, the company had an earnings loss I can only look at 4 year and 10 year growth. Earnings have grown at 15% and 16% per year over the past 4 and 10 years. EPS has grown at 19% and 18% over these periods.

Cash Flow has grown at 9.5% and 7% per year over the past 5 and 10 years. CFPS has grown at 14.5% and 9.6% per year over the past 5 and 10 years.

The Return on Equity has been below 10% 4 times in the last 10 years and only once in the past 5 years. The ROE for 2013 is at 20.2% and the 5 year median ROE is at 14.8%. The ROE on comprehensive income is 21.5% for 2013 and the 5 yea median is at 17.6%. Basically the ROE on comprehensive income suggests that the earnings are of good quality.

The Liquidity Ratios has been lower than what I would like with the one for 2013 at 1.37 and the 5 year median at 0.96. However, for 2013 if you add in cash flow after dividend the Ratio is 2.16. The Debt Ratio is good at 2.31 as is the Leverage and Debt/Equity Ratios at 1.76 and 0.76.

There is lots of insider ownership by the Steele family, with the CEO (Robert George Steele) owning shares worth 7.6M and the chairman (Harry R. Steele) owning shares worth just over $175M.

The 5 year median Price/EPS Ratios are 12.56, 15.81 and 19.07. These are a bit higher than the corresponding 10 year Ratios. The current P/E Ratio is 15.13 based on 2014 earnings estimate of $.55 and a stock price of $8.25. This would suggest that the current stock price is reasonable.

I get a Graham price of $7.76. The 10 year low, median and high Price/Graham Price Ratios are 1.07, 1.24 and 1.41. The current P/GP Ratio is 1.06 based on a stock price of $8.25. This stock price test suggests that the stock price is relatively cheap. However, on this sort of stock I would prefer a P/GP Ratio of 1.00 or lower to point to a cheap price. I think that a P/GP Ratio for this stock at 1.06 shows a reasonable price.

The 10 year median Price/Book Value Per Share Ratio is 2.09 and the current P/B Ratio at 1.68 is some 20% lower. This stock price test suggests that the stock price is cheap.

The 5 year median dividend yield is 1.59% and the current dividend yield at 1.82% is some 14% higher. The historical dividend yield is at 1.11% and the current dividend yield of 1.82% is some 64% higher. This testing suggests that the stock price is reasonable to cheap.

Sound bit for Twitter and StockTwits is: Not Dividend Growth Stock, but price is reasonable. I think that the dividend yield is rather low at 1.82% for a stock with no dividend increases over the past 5 years. Both the 5 year median dividend yield at 1.59% and the 10 year median dividend yield at 1.65% are lower.

Why buy? Not a great dividend, no dividend increases and it is not even cheap. The growth in revenue, earnings and cash flow is quite good as it’s the debt ratios. But, 5 year total return is rather low. See my spreadsheet at ncc.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.

Newfoundland Capital Corporation Limited also owns and operates Newcap Radio. Newcap Radio is one of Canada's leading radio broadcasters with 79 licenses across Canada. The Company reaches millions of listeners each week through a variety of formats and is a recognized industry leader in radio programming, sales and networking. The Company has 58 FM and 21 AM licenses spanning the country employing over 800 radio professionals in Canada. Newfoundland Capital Corporation Limited also owns and operates the Glynmill Inn, Corner Brook, Newfoundland and Labrador. Its web site is here Newfoundland Capital Corp.

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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