Gluskin Sheff + Associates Inc.

On my other blog I am today writing about going to World Money Show Toronto. continue...

I do not own this stock of Gluskin Sheff + Associates Inc. (TSX-GS, OTC-GLUSF). I started to review some of the stock recommended by Jennifer Dowty from a column she wrote and I reviewed in February 2010 on Dividends and Special Dividends. The title of the article in Investor's Digest was Dividend Stocks: Buy, Hold and Collect. Jennifer is now a Portfolio Manager for Manulife Asset Management Limited.

I did a spreadsheet on this stock in February 2010 and was not impressed with the stock. I chose this stock because I recognized the names of Gluskin and Sheff. I reviewed problems with list in February 2010. This stock peaked in 2006 and had not recovered by August 2011. This includes Revenues, Earnings and Book Value. The Stock Price and Cash Flow peaked in 2007.

It has taken a while, but this stock has now fully recovered from problems it was having in 2006 and 2007. In the meantime shareholders have not only gotten a good dividend yield but special dividends were paid in all of the past 6 years.

I had been a bit negative on this stock since I started to review it. However, perhaps that was uncalled for. The gains that this company has made in the last couple of years have been impressive. On the other hand, analysts seem to think that revenue, earnings and cash flow are going to drop significantly for the financial year ending in June 2015. They expect revenue to drop 24%, earnings to drop 36% and cash flow to drop 65%.

So let's first talk about dividends. Dividends are moderate with a moderate increase. The current dividend yield is 3.1% and the 5 year median dividend yield is 2.84%. The dividends have increased over the past 5 and 7 years at 10.5% and 14% per year. The last dividend increase was for 12.5% and occurred in 2014.

Another thing with dividends to discuss is special dividends. Each year over the past 6 years there has been median special dividend of $0.80 a share. This has delivered a median extra yield of 4.3% for these 6 years.

The last thing to discuss is Dividend Payout Ratios. The 5 year median DPR for EPS is 79% and the CFPS is 72%. The DPR for the financial year ending in June 2014 are 99.3% and 85.8%. These figures include special dividends. For financial year of 2012 the company paid out more in dividends than their EPS and CFPS.

The total returns over the past 5 and 9 years are at 14.61% and 10.83% per year. The portion of this return attributable to capital gains is at 7.15% and 5.13% per year. The portion of this return attributable to dividends is at 7.46% and 5.70% per year.

The outstanding shares have not increased over the past 5 years, but have increased by 16.4% per year over the past 9 years. There has been good to excellent growth in revenue, earnings and cash flow over the past 5 and 9 years. The last 5 years growth is generally better than the 9 year growth.

Revenue is up by 29% and 17.9% per year over the past 5 and 9 years. Revenue per Share is up by 28.6% and 2.9% over the past 5 and 9 years. In connection with this, because it is an investment management company, we should also look at Assets under Management (AUM). AUM has growth at 10.9% and 9.2% per year over the past 5 and 8 years.

EPS has grown at 37.6% and 56.5% per year over the past 5 and 9 years. Cash Flow has grown at 34.9% and 23.5% per year over the past 5 and 9 years. CFPS has grown at 34.4% and 34.9% over the past 5 and 9 years.

Return on Equity has been very high with the 5 year median ROE for 2014 at 50.7% and the ROE for the financial year ending June 2014 at 116.2%. The ROE on comprehensive income is about the same with the 5 year median at 50.7% and the ROE for the current financial year at 114.5%.

There is a problem here with ROE. The desirable ROE is between 12% and 15%. Anything higher than 15% and analysts begin to worry about leverage. However, the leverage on this stock is not than high at 2.11. A very high ROE does not necessarily mean better financial performance of a company. There is some discussion of ROE at Ready Ratios and Investopedia.

Debt Ratios are fine with the current Liquidity Ratio at 1.81, the Debt Ratio at 1.90 and the Leverage and Debt/Equity Ratios at 2.11 and 1.11.

Sound bit for Twitter and StockTwits is: Dividend growth stock, special dividends. See my spreadsheet at gs.htm.

This is the first of two parts. The second part will be posted on Tuesday, October 21, 2014 and will be available here. The first part talks about the stock and the second part talks about the stock price.

Gluskin Sheff is an independent investment firm that manages portfolios for high net-worth individuals and institutional clients. Its web site is here Gluskin Sheff.

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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