Wednesday, October 22, 2014

Equitable Group Inc.

On my other blog I am today writing about the presentations at the World Money Show in Toronto by Peter Schiff and by Camila Sutton .

I do not own this stock of Equitable Group Inc. (TSX-EQB, OTC-EQGPF). I had read a glowing report on investing on this company in 2013, so I decided to check it out. It was interesting as it was loaning money to new immigrants, a class of people who generally have a difficult time getting loans and mortgages from our regular banks.

Let's look at dividends. The dividend is low with moderate growth. The current dividend yield is 1.07%. The 5 year median dividend yield is 1.72%. The growth in dividends over the past 5 and 8 years is at 8.2% and 7.7% per year.

The Dividend Payout Ratio is low with a 5 year median DPR for EPS of 11% and for CFPS at 9.9%. The corresponding DPR for 2013 is at 10% for EPS. Since the cash flow was negative for 2013 there is no DPR for it.

Shareholders have done well recently. The 5 and 10 year total return is at 26.03% and 12.28% per year with 24.48% and 11.05% per year from capital gains and 1.55% and 1.24% per year from Dividends.

Outstanding shares have increased by 0.6% and 4% per year over the past 5 and 10 years. Revenue and earnings has grown well. I cannot measure cash flow as it negative in 2013. Analysts have been looking a net interest income and that has grown at 22% and 21% per year over the past 5 and 10 years.

Revenues have grown at 17.5% and 22.7% per year over the past 5 and 10 years. Revenue per Share has grown at 16.8% and 18% per year over these time periods. EPS has grown at 15.9% and 20.4% per year over the past 5 and 10 years.

Return on Equity has been over 10% each year of the last 10 years. The ROE for 2013 was 15.9% and the 5 year median was 14.6%. The ROE on comprehensive income was 16.2% in 2013 and the 5 year median is also 16.2%.

The company changed from a Trust company to a Schedule 1 bank in 2013. The current Debt Ratio of 1.05 is generally acceptable for a Schedule 1 bank.

When I look at insider trading I find $8.2M of insider selling and $8.0M of net insider selling. There is insider selling by all classes of insider but most is by directors or $7.7M of insider selling. Although the amount in insider selling at $8M sounds like a lot, it is only 0.84% of market cap.

There is some insider ownership with the CEO owing shares worth $4M and a director with shares worth $101.8M and 13% of outstanding shares.

Since 2008, the Price/Earnings Ratios on this stock have been quite low. The 5 year low median and high median P/E Ratios are 5.49, 7.57 and 6.82. The 10 year corresponding P/E Ratios are similar. The current P/E Ratio at 9.71 based on a stock price of $63.50 and 2014 EPS estimate of $6.54. The stock test suggests that the stock might be relatively expensive. However, a P/E of 9.71 is rather low.

The 5 year median dividend yield is 1.72% and the current dividend yield at 1.07 is some 37% lower. The historical average dividend yield is 2.42 and the historical median dividend yield is 1.52%. All these yields are quite a bit higher than the current yield and this suggests that the stock price might be relatively expensive.

When I look at analysts' recommendations, I find Strong Buy, Buy and Hold recommendations. The consensus recommendation would be a Buy. The 12 month stock price consensus is at $73.30. This suggests a total return of 15.50% with 15.43% from capital gains and 1.07% from dividends.

Sound bit for Twitter and StockTwits is: Dividend Growth Stock. The dividend yield is getting a little low for my liking. I do not buy any stock with a dividend yield less than 1%. Compared to what investors were willing to buy over the last few years, this stock looks expensive. However, the P/E Ratio is quite low at 9.71 and the P/B Ratio is not very high at 1.66 although it is some 45% higher than at 10 year median P/B Ratio of just 1.14. See my spreadsheet at eqb.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.

Equitable Group Inc. is a niche mortgage lender. The company's primary business is first charge mortgage financing, which offer through company's wholly owned subsidiary, Equitable Bank (formerly The Equitable Trust Company). Equitable Bank is a Schedule I bank pursuant to the Bank Act; it actively originates mortgages across Canada and serves single family, small & large commercial borrowers. Its web site is here Equitable Group[.

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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