I do not own this stock of Home Capital Group (TSX-HCG, OTC- HMCBF). I started reviewing this company in September 2009. It is a dividend growth company and was coming up on lists of good dividend paying stocks. It is on some dividend paying companies lists that I look at.
When I look at insider trading, I find $23.7M of insider selling and $23.6M of net insider selling. There is a minimal amount of insider buying. Outstanding shares were increased by 636,000 shares for Stock options and this is 0.91% of the outstanding shares. This is rather a lot as most banks' outstanding shares are increased by less than 0.50% for stock options.
There is some insider ownership with CEO having shares worth around $171.3M and a director having shares worth around $100.2M. However, these holdings just amount to around 6% of the outstanding shares.
The 5 year low, median and high median Price/Earnings per Share Ratios are 7.50, 9.19 and 10.88. These are generally lower than the corresponding 10 years ratios 7.50, 9.22 and 12.12. The current P/E Ratio is 10.25 based on a stock price of $45.40 and 2015 EPS estimate of $4.33. This stock price test suggests that the stock price could still be relatively reasonable although at the top end of the reasonableness range.
I get a Graham Price of $45.58. The 10 year low, median and high median Price/Graham Price Ratios are 0.78, 0.95 and 1.19. The current P/GP Ratio is 1.00 based on a stock price of $45.40. This stock price tests suggests that the stock price is relatively reasonable.
I get a 10 year Price/Book Value per Share Ratio of 2.24. The current P/B Ratio is 2.18 based pm a stock price of $45.40 and BVPS of $20.85. There is only 2.9% diffidence between the 10 year P/B Ratio and the current ratio. This stock price tests suggests that the stock price is relatively reasonable.
The 5 year median, historical average and historical median dividend yields are 1.51%, 1.42% and 1.36%. The current dividend yield at 1.94% is some 28%, 37% and 43% higher than these dividend yields. This stock price tests suggests that the stock price is relatively reasonable. The historical high dividend yield is 2.32% a value just 16% higher than the current dividend yield.
Analysts' recommendations are Strong Buy, Buy and Hold. The consensus recommendation is a Buy. The 12 month stock price consensus is $52.10. This implies total return of 16.70% with 1.94% from dividends and 14.76% from capital gains.
Ian Tam of Number Cruncher names this company as one of 10 with sustainable growing dividends. Nelson Smith at Motley Fool thinks that this company is too risky to buy. However, Joseph Solitro at Motley Fool thinks that this stock would be a great long-term investment opportunity.
Jim Bates on TSI Network thought this was a good stock to buy in August of 2014. This company is also discussed on Dividend Growth Investing and Retirement blog in February of this year.
Sound bite for Twitter and StockTwits is: Risky but price is reasonable. There is some concern about the riskiness of this stock and what might happen if the Real Estate Market fell in Ontario. It is riskier than our banks, but the P/E is much lower. See my spreadsheet at hcg.htm.
This is the second of two parts. The first part was posted on Thursday, March 05, 2015 and is available here. The first part talks about the stock and the second part talks about the stock price.
Home Capital Group Inc. operates through one subsidiary, Home Trust Company, to provide mortgage lending, deposit, retail credit and credit card issuing services. They have subprime mortgages. Its stock is widely held. Its web site is here Home Capital.
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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