Home Capital Group

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.

This company has been paying dividends since 1999. Dividends are moderate with good growth. The current dividend yield is 1.94% and it has a 5 year median dividend yield of 1.51%. The dividends have grown at 19.3% and 27.9% per year over the past 5 and 10 years. The most recent increase was in 2015 for 10%. However, note that the company has often raised dividends twice in each year.

I get Dividend Payout Ratios in 2014 of 15.7% for EPS and negative 51.3% for CFPS. Cash Flow is negative in 2014. The 5 year median DPRs for EPS is at 14.11% and for CFPS is 9.2%. This is the first year of negative cash flows since dividends started in 1999. It is not an uncommon occurrence for banks to have negative cash flows. Analysts do expect cash flow to turn positive in 2015.

If dividends continue to grow at 19% per year, that means using current stock price and dividend yield of 1.94%, an investor could hope to have a yield on original cost at 11% in 10 years' time and 26% in 15 years' time.

Shareholders have done well with 5 and 10 year total return at 13.64% and 11.84% per year. The portion of this attributable to dividends is 1.75% and 1.41% per year. The portion of this growth attributable to capital gains is at 11.88% and 10.43% per year.

Except for cash flow, I see good growth in Revenues, Earnings and Book Value. Even for cash flow, if you look at the 5 year running average, this is also quite good.

For Revenue, analysts are only looking at Total Net Interest Income. This has growth at 22.5% and 17.9% per year over the past 5 and 10 years. If you look at the above plus other income, revenue has grown at 12.2% and 16.3% per year over the past 5 and 10 years.

EPS has good growth also with growth at 16.5% and 21.6% per year over the past 5 and 10 years. If you look at CFPS growth using 5 year running average, growth is at 17.2% and 20.2% per year over the past 5 and 10 years.

The Return on Equity has been above 10% every year for the past 5 and 10 years. To find this ratio below 10% you have to go back almost 20 years. The ROE for 2014 was 21.6% and 5 year median was at 22.7%. The ROE on comprehensive income is close with this ROE at 21.6% in 2014 and with a 5 year median of 22.6%. This suggests that the earnings are of good quality.

The current Debt Ratio is 1.08 which is where most banks are at, at the present time. The Leverage (A/BK) and Debt/Equity Ratios are 13.86 and 12.86 which are a bit lower than the banks currently, so this is good.

Sound bite for Twitter and StockTwits is: Div. growth small financial institution. Since this financial institution is on the small side, it means that it has good room to grow. Shareholders have done well. See my spreadsheet at hcg.htm.

This is the first of two parts. The second part will be posted on Friday, March 6, 2015 and will be available here. The first part talks about the stock and the second part talks about the stock price.

This is the second of two parts. The first part was posted on xxx and is available here. The first part talks about the stock and the second part talks about the stock price.

I will have only one entry for this stock as I must do on some stock because I cover too many stocks to do double entries on all that I follow.

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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