Manitoba Telecom Services Inc. 2

I own this stock of Manitoba Telecom Services Inc. (TSX-MBT, OTC-MOBAF). In 2006, I was look for something to buy and I wanted a good dividend paying Canadian Stock. TD recommended this stock as a current Buy. I checked the stock out and it looked good. I ended up with some of this stock in my trading, RRSP and Pension Accounts. I have since sold most of this stock.

When I look at insider trading, I find there are none over the past year, no insider buying and no insider selling. There are a lot of stock options and others sorts of options outstanding but not much in insider ownership. The Chairman is rather typical with stock worth around $135,000.

The 5 year low, median and high median Price/Earnings per Share Ratios are 11.19, 12.32 and 13.50. The 10 year corresponding P/E Ratios are higher at 13.26, 15.46 and 17.50. The 10 year P/E Ratios are close to the historical ones, so the P/E Ratios are trending down. The current P/E Ratio is 15.35 based on a stock price of $24.56 and 2015 EPS estimate of $1.60. This is higher than the 5 year median high P/E Ratio. This stock price tests suggests that the stock price is relatively reasonable.

I get a Graham Price of $22.02. The 10 year low, median and high median Price/Graham Price Ratios are 1.04, 1.17 and 1.32. The current P/GP Ratio is 1.12 based a stock price of $24.56. This stock price test suggests that the stock price is relatively reasonable.

I get a 10 year Price/Book Value per Share Ratio of 2.13. The current P/B Ratio is 1.82 based on a BVPS of $13.47 and a stock price of $24.56, a value some 14.6% lower. For a stock to be considered cheap, the current P/B Ratio would have to be some 20% lower than the 10 years median value. This stock price test suggests that the stock price is relatively reasonable.

The 5 year median, historical average and historical median dividend yields are 5.41%, 4.75% and 5.27%. These yields are some 27.9%, 45.7% and 31.3% lower than the current dividend yield of 6.92%. This yield is based on a stock price of $24.56 and dividends of $1.70. Even though the dividend yield is way above the average and median values, it is still not near the historical highs. This stock price test suggests that the stock price is relatively reasonable.

If dividend go to $1.00 as is speculated by many analysts, then the dividend yield would be around 4% and that would make it lower than the above yields I am measuring current dividend yield against.

When I look at analysts' recommendations, I find a Strong Buy, lots of Holds and a few Underperform recommendations. The consensus recommendation is a Hold. The 12 month consensus stock price is $26.40. This implies a total return of some 14.4% with 7.49% from capital gains and 6.92% from dividends. However, if dividends are cut as some analysts suggest the total return becomes 11.50% with 7.49% from capital gains and 4.01% from dividends.

Jonathan Ratner in this article for the financial post suggests that a dividend cut to $1.00 would be in the best interest for long term value creation under this company. The dividend cut is expected after the quarter one financial report for 2015. Some analysts are setting a Hold rating on this stock according to Dakota Financial News. This article by Christine Dobby in the Globe and Mail talks about this company getting a new boss.

Sound bite for Twitter and StockTwits is: Reasonable price not good enough for stock in trouble. This is not the worse investment I have ever made. That does not say much for this stock. I would sell, but I do not have much of it left and I cannot currently see anything I would like to replace it with. See my spreadsheet at mbt.htm.

This is the second of two parts. The first part was posted on Thursday, February 12, 2015 and is available here. The first part talks about the stock and the second part talks about the stock price.

This company is a full-service communications company. It serves residential and business customers in Manitoba. Their Allstream division serves national business consumers. Its web site is here Manitoba Telecom.

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.