Thursday, October 2, 2014

K-Bro Linen Inc.

I do not own this stock of K-Bro Linen Inc. (TSX-KBL, OTC- KBRLF). People were talking about this stock at the 2009 Toronto Money Show. This was one income trust being touted as currently a good buys with very good yield. It was also recommended by Aaron Dunn who is the Senior Equity Analyst for Keystone Publishing Corp, a publisher of Canadian investment newsletters.

The stock just started off in 2005. As an income trust it increased it dividends or distributions. They stopped increases when it changed from an income trust to a corporation. So increases were stopped for 3 years. In 2011 dividends were increased by 4.5% and in 2013 they were increased by 4.4%. There were no dividend increases in 2012 and none so far in 2014. So current dividend increases are running about the rate of current inflation.

The 5 year median Dividend Payout Ratios are running at 89.9% for EPS and 43.5% for CFPS. The corresponding DPR for 2013 were lower at 80% for EPS and 40.1% for CFPS. The 5 year median dividend yield is 5.9% and the current dividend yield is 3.1%. So currently the dividend yields are moderate and the dividend increases are modest.

Shareholders have done well with stock over the past 5 and 10 years with total returns of 29.32% and 18.82% per year over these periods. The dividend portion of this total return was at 5.90% and 6.12% and the capital gain portion of this total return was at 23.42% and 12.70%. The dividend yields will not be as high in the future as all companies that when from income trusts to corporation have lower dividend yields.

The outstanding dividends have not changed over the past 5 year, but have increased by 6.1% per year over the past 8 years. Shares have increased due to stock issues and stock options. The company has had very good grown in revenue, earnings and cash flow over the past 5 and 8 or 10 years.

Revenue per Share has increased by 8.8% and 7.7% per year over the past 5 and 10 years. Earnings per Share have increased by 15.7% and 8.2% per year over the past 5 and 8 years. Cash Flow per Share has increased by 11.7% and 7.6% per year over the past 5 and 8 years.

The company started off with low Return on Equity Ratios but over the past 5 years they have been above 10%. The ROE for 2013 was 14.5% and the 5 year median was 12.6%. The ROE on comprehensive income is the same as for net income.

The liquidity Ratio is a bit low at 1.27 and if you add in cash flow after dividends it is much more respectable at 1.83. The other debt ratios are good with the Debt Ratio at 2.73 and the Leverage and Debt/Equity Ratios at 1.58 and 0.58.

Sound bit for Twitter and StockTwits is: Dividend Growth Small Cap. This small cap has so far been a good investment for its shareholders. This company used to be an income trust so it is hard to say what sort of dividend growth stock it will end up being. See my spreadsheet at kbl.htm.

This is the first of two parts. The second part will be posted on Friday, October 3, 2014 and will be available here. The first part talks about the stock and the second part talks about the stock price.

K-Bro is the largest owner and operator of laundry and linen processing facilities in Canada. K-Bro provides a comprehensive range of general linen and operating room linen processing, management and distribution services to healthcare institutions, hotels and other commercial accounts. K-Bro currently has seven processing plants in six Canadian cities: Quebec City, Toronto, Edmonton, Calgary, Vancouver and Victoria. Its web site is here K-Bro Linen.

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.

1 comment:

  1. Hi Susan,

    I read about KBL on your blog a little way back and I invested in it.. so worth it! Capital gains had been great and dividend steady.

    Thank you for the free bucks :)
    Very great stock. And like I once wrote on my blog: money is in the linen ;---) (dirty one mostly).