Wednesday, September 10, 2014

Chemtrade Logistics Income Fund

On my other blog I am today writing about my 3 blogs and my web site continue...

I do not own this stock of Chemtrade Logistics Income Fund (TSX-CHE.UN, OTC-CGIFF). I decided to investigate this stock after reading an article in the G&M in February 2012 about investing in small cap stocks that pay dividends. This was one of the stocks mentioned that I had never heard of before.

This company has purchased General Chemical Holding Company. An article in the Financial Post says that Chemtrade doubles in size with the purchase of General Chemical.

This company gave out dividend increases from their start in 2001 until 2007. They decreased the dividends in 2007 by just over 16%. The dividends have been flat since 2007. The 5 and 10 years change in is dividends are flat for the past 5 years and dividends were decrease by 1% per year over the past 10 years. Some analysts do expect dividends to start to rise again in 2014, but so far I see no sign of that.

The company was an income trust back when it started. The distributions or dividends were, of course, much higher than the EPS. They are still paying out higher dividends than EPS with the 5 year median Dividend Payout Ratio at 105% and the DPR for 2013 at 923%. They earned little last year. The DPR for EPS for 2014 is expected to be187% and for 2015 it is expected to be 103%.

The 5 year DPR for CFPS is at 53% and the DPR for CFPS for 2014 was at 46%. If dividends do not change it is expected to be around 36% this year. The DPR for 2013 for AFFO is 46% and for FFO is 66%. I know people are still looking at AFFO and FFO for this stock, but it is now a corporation, no matter what the name says.

The dividends are still quite high on this stock with the current dividend yield at 5.64% and the 5 year median at 8.98%. It was expected after the income trust tax changes were announced in late 2006 that income trust dividend yields would go down to around 4 to 5% because of stock price increases and/or dividend cuts. This stock hit a high of dividend yields in 2006 of 14.3% and since then they have been gradually declining.

Shareholders have not done badly with this stock over the past 5 and 10 years. The 5 and 10 years total returns are at 22.76% and 6.80% per year with 14.08% and 0.47% per year from capital gains and 8.68% and 6.33% per year from dividends.

The Return on Equity was lower than 10% only once in the last 5 years and that year was 2013 when it was just 1.8%. The 5 year median is 17.8%. The ROE on comprehensive income was 11.9% in 2013. Some of the financing costs of acquiring General Chemical Holding Company were written off in 2013 and this is the main reason for the low EPS in 2013.

The 5 year low, median and high median Price/Earnings per Share Ratios are 8.71, 11.00 and 13.28. The comparable 10 year ratios are 13.91, 15.68 and 17.45. The current P/E Ratio is 33.23 based on a stock price of $21.27 and 2014 earnings of $0.64. The P/E Ratio for 2015 is 18.34 based on a stock price of $21.27 and 2015 EPS of $1.16. No matter how you look at P/E Ratio testing, it shows that the stock price is relatively expensive.

I get a Graham price of $12.16 and the 10 year Price/Graham Price Ratios ae 0.96, 1.11 and 1.27. The current P/GP Ratio is 1.75. This stock price test says that the stock price is relatively high.

The 10 year Price/Book Value per Share Ratio is 1.75 and the current P/BV Ratio at 2.07 is some 20% higher. This is based on a stock price of $21.27 and BVPS of $10.26. This stock price test says that the stock price is relatively high.

I cannot use the dividend yield to look at the stock price because this stock used to be an income trust. However, it is interesting to see that looking at Price/Cash Flow per Share Ratios shows that the current stock price is reasonable. The 10 year P/CF Ratio is 6.39 and the current P/CF Ratio is 6.39.

When I look at analysts' recommendations, I find Buy and Hold recommendations. Most of the recommendations are a Hold, so the consensus recommendations would be a Hold. The 12 month stock price consensus is $21.60. This implies a total return of 7.19% with 5.64% from dividends and 1.55% from capital gains.

Sound bit for Twitter and StockTwits is: Stock is probably expensive. The current stock price does look relatively high on a lot of measures. However, a lot of analysts seem to be excited by this company's purchase of General Chemical Holding Company and feel that it will be very good for the long term for this company.

The purchase of General Chemical Holding Company seems to be depressing the EPS. However, it is not depressing the CFPS. See my spreadsheet at che.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.

This company is one of Canada's largest energy and energy-related companies. The Company's operations include the exploration, development and production of crude oil and natural gas. Husky has operations in Western Canada, Eastern Canada, US, China, Indonesia and Greenland. This company is mostly foreign owned. Industry: Oil and Gas (Integrated Oils). It is listed under TSX Energy Index. Its web site is here Chemtrade Logistics.

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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