Monday, March 23, 2015

Canadian Tire Corp.

On my other blog I am today writing about Beta continue...

Sound bite for Twitter and StockTwits is: Dividend growth consumer stock. I have done well with this stock and consider it a core stock in my portfolio. See my spreadsheet at ctc.htm.

I own this stock of Canadian Tire Corp. (TSX-CTC.A, OTC- CDNAF). In 2000 when I first bought this stock, it was on the Investment Reporter's list of conservative Canadian stocks. I bought this stock for my Canadian Trading account in 2009. I bought it because I have done well with it in my Pension Account and it was a consumer stock.

One thing I find curious is the current difference in the stock price for the Common Share (TSX-CTC) and the Class A Non-voting Shares. Usually, there is a premium the Common and Voting Shares. However, in 2013 it was 25%, and then in 2014 it climbed to over 100% and now is currently hovering around 81%.

There was an article by David Milstead in Globe and Mail at the end of 2014 that talks about this. He comes to the conclusion that someone thinks that there is some sort of transaction that will occur on this company. It would seem no one is sure why this is happening.

This stock is currently a dividend growth stock with a moderate dividend and good growth. The current dividend yield is 1.62% and the 5 year median dividend yield is 1.68%. Over the past 5 and 10 years the dividend has grown at 17.4% and 14.1% per year.

The last dividend increase was for 2015 and was for 5%. However, if the dividend does not change in 2015, shareholders will receive a 12% increase in dividends in 2015 compared to 2014. In 2014 the dividend was increased twice.

The Dividend Payout Ratios are very good. The DPR for 2014 was 24.7% for EPS and 10.6% for CFPS. The 5 year median DPRs are 19.7% for EPS and 8.34% for CFPS. It is not surprising the DPRs have increased as the dividends paid in 2014 were 34% higher than the dividends paid in 2013.

I first bought this stock in 2000 and since then have bought more. I did recently sell some of this stock from my RRSP account as I am taking money from this account and I am selling off the lowest dividend payers. It is not that I do not like this company, but the dividends are lower than other stocks.

My total return on this company is at 14.82% per year with 13.36% per year from capital gains and 1.46% per year from dividends. The 5 and 10 year total return to date on this stock is 15.38% and 7.60% per year with 13.68% and 6.41% per year from capital gains and 1.69% and 1.19% per year from dividends.

There are two classes of shares. The common and voting shares are mainly for insiders but are traded on the Toronto Stock Exchange (TSX-CTC). The other class of shares is a Class A and non-voting. This is the main class of shares and is some 96% of the outstanding shares for the company.

The outstanding shares have decreased slightly over the past 5 and 10 years. The outstanding shares are down by 1% and 0.5% per year over the past 5 and 10 years. The shares have increased due to DRIP and Stock Options and have decreased due to Buy Backs.

As far as growth goes, it is moderate to good. The growth over the past 5 years is better than the growth over the past 10 years. The lowest growth is for Revenue. The company also talks about an Adjusted EPS as well as EPS. Also because of decreasing shares, things like Revenue is more important than Revenue per Share

Revenue is up by 7.5% and 5.7% per year over the past 5 and 10 years. Revenue per Share is up by 8.6% and 6.2% per share over the past 5 and 10 years. Cash Flow is up by 14.6% and 8.1% per year over the past 5 and 10 years. Cash Flow per Share is up by 15.8% and 8.6% per year over the past 5 and 10 years.

The adjusted EPS is up by 13.5% and 9.3% per year over the past 5 and 10 years. EPS is up by 13.1% and 8% per year over the past 5 and 10 years. Net Income is up by 12.5% and 7.3% per year over the past 5 and 10 years.

The ROE has been above 10% every year over the past 5 years and for 9 of the past 10 years. The ROE for 2014 was at 10.7% and the 5 year median is 10.7%. The ROE on comprehensive income for 2014 was slightly higher at 11.1% with a 5 year median of 11.1%. This suggests that the earnings are of good quality.

Debt Ratios are good and have always been good. The Liquidity Ratio for 2014 is 1.86 and has a 5 year median of 1.85. The Debt Ratio is 1.63 for 2014 and the 5 year median is 1.63. The Leverage and Debt/Equity Ratios are a little high but acceptable at 2.58 and 1.58 in 2014 with 5 year median values of 2.28 and 1.28, respectively.

This is the first of two parts. The second part will be posted on Tuesday, March 24, 2015 and will be available here. The first part talks about the stock and the second part talks about the stock price.

Canadian Tire operates several retail businesses that offer everyday products and services through a network of over 1,700 locations across the country. The key banners that the company operates under include Canadian Tire Retail, FGL Sports, Mark's, Petroleum, Part Source, and Financial Services. Its web site is here Canadian Tire.

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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