Manitoba Telecom Services Inc.

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.

In 2010 I was beginning to worry about this stock. I no longer thought that it was a good stock. In the 2009 report, the company said that they cannot guarantee current level of dividends. I got rid of this stock in my Trading and Pension Accounts in 2010. I had a slight loss in my Trading account and a slight gain in my Pension Account for an overall gain of 0.83% (including dividends).

In 2010 dividend were decreased by almost 35%. Some analysts now expect the dividends to be decreased again by around 40%. It is clear that the company cannot afford the dividend it is now paying. The Dividend Payout Ratio for 2014 was 100%. It is expected to be around 106% in 2015. The company also had a profit loss in 2013.

The payout ratio for cash flow is not as bad. The DPR for CFPS was 31.7% in 2014 and is expected to be around 40% in 2015.

The dividend yield is currently quite high at 6.92%. This is not quite as high as it got in 2009, but it is getting close to that. If the dividend is dropped to $1.00 per share the dividend yield would drop to 4.1%.

The stock price hit a high in 2004 and it has been dropping ever since. The total return over the past 5 and 10 years is at 3.38% and 1.96% per year with capital losses of 2.93% and 4.66% per year and dividends at 6.31% and 6.62% per year.

I my color code growth in Revenue, Earnings and Cash Flow. What my spreadsheet shows is mostly red with a bit of blue. The outstanding shares have increased over the past 5 and 10 years by 3.9% and 2.4% per year. This makes the per share growth most important.

Revenue is down by 2.3% and 0.6% per year over the past 5 and 10 years. However, Revenue per Share is down by 5.9% and 1.8% over these periods. EPS is up by 1.6% per year over the past 5 years, but down by 8.8% per year over the past 10 years. Cash Flow per Share is down by 1.9% and 1.2% over the past 5 and 10 years.

It is interesting that using 5 year running averages the EPS is down by 12.4% over the past 5 years. However, this is due to a big earnings loss in 2013.

The Return on Equity has been less than 10% twice in the past 5 years. The ROE for 2014 was 12.5% with a 5 year median also of 12.5%. A problem is that comprehensive income was only 5.2% in 2014. Its 5 year median is also quite low at 7.7%. This is not a promising situation and suggests that the EPS is not as good as they appear.

The Liquidity Ratio is very low at 0.62 and it has always been low with a 5 year median of just 0. 47. For 2014 if you add in cash flow after dividends the Liquidity Ratio is 1.31. However, the 5 year median of this Liquidity Ratio is marginal at 0.99. They depend on cash flow for current liabilities and the ratio is not quite high enough.

The Debt Ratio is fine at 1.64 and it has always been good. It has a 5 year median value of 1.64. The Leverage and Debt/Equity Ratios are a bit high at 2.55 and 1.55. However, I must say that these are rather common for the industry this company is in.

Sound bite for Twitter and StockTwits is: Doing poorly, likely dividend cut. This is my annual review and it shows that this company is not doing well. It is interesting that TD suggests that once the dividend cut is done, the stock price might perk up a bit. I am considering selling the rest of this stock. Currently my total return is running at around 1.3% per year. See my spreadsheet at mbt.htm.

This is the first of two parts. The second part will be posted on Friday, February 13, 2015 and will be 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.