Thursday, March 19, 2015

Melcor Developments Inc.

Sound bite for Twitter and StockTwits is: Dividend Growth Real Estate Company. Although this company has proven that it is willing to cut the dividend when necessary, I still see it as a dividend growth company. This company is in Western Canada. With this economic heavily dependent on of oil and mining, the economy has seen both booms and busts. See my spreadsheet at mrd.htm.

I own this stock of Melcor Developments Inc. (TSX-MRD, OTC-MODVF). This was one of the stocks on Mike Higgs' list of good dividend growth stocks. So I looked into it and bought it. I bought this stock first in 2008 and then some more in 2009. It is a little followed real estate company from Western Canada.

The company brags that it has been giving out dividends since 1969. Just recently, the company has changed from giving semi-annual dividends to quarterly dividends. This is a big step for a dividend company. This occurred this year. I have dividend records for this company going back to 1990 and in most years the dividends have gone up. The company has increased total dividends each year for the last 10 years except for one year when the dividends were decreased by 40.5% in 2009.

The dividend is moderate with very good dividend growth. The current dividend is 3.46% and the 5 year median 2.78%. The dividends have grown at 18.3% and 17.1% per year over the past 5 and 10 years. The most recent dividend increase was in 2014 and the increase was for 7.1%.

Because I bought my stock in 2008, my current dividend on my original purchase is at 3.45% a value just slightly below the current dividend of 3.46%. If you look at dividends paid, I have received $3.22 dividends per share and my cost per share is $10.86. This means that dividends over the past 7 years have covered some 30% of my stock costs. (I did buy more shares in 2009, when the stock price fell.)

The Dividend Payout Ratios are good. For 2014 the DPR for EPS is 19% and for CFPS is 23%. The 5 year median values are 19% and 22% respectively. I have noticed that in the past the company has cut dividends because it was too high in regards to cash flow not earnings. When dividends were cut in 1998 and 2009 the DPR for Cash Flow per Share was close to 70% in both instances.

My total return is 11.38% per year with 8.12% from capital gains and 3.26% from dividends. The 5 and 10 years total return on this stock is not great, but it is acceptable. The 5 and 10 year total return is 6.97% and 7.14% per year with 3.175 and 3.89% per year from capital gains and 3.80% and 3.25% per year from dividends.

Outstanding shares have increased by 1.8% and 0.8% per year over the past 5 and 10 years. The shares have increased due to stock options and debenture conversion and decreased due to buy backs. Growth in Revenue, Earnings and Cash Flow has all been quite good.

Revenue is up by 18% and 13.5% per year over the past 5 and 10 years. Revenue per Share is up by 15.9% and 12.6% per year over the past 5 and 10 years. EPS is up by 31.8% and 14.7% per year over the past 5 and 10 years. Cash Flow per Share is up by 18.8% and 13.8% per year over the past 5 and 10 years.

Return on Equity was below 10% only once in the past 10 years and it was in 2009. The 2014 ROE is 11.2% and the 5 year median ROE is 12.8%. The ROE on comprehensive income is close with the ROE of 2014 at 11.9% and the 5 year median ROE at 13.5%. With the ROE on comprehensive income higher than the ROE in net income, suggests that the earnings are of good quality.

Debt Ratios are fine. The Liquidity Ratio has been quite good with the one for 2014 at 3.39 and it has a 5 year median of 3.39. However, this ratio is not as important as the other debt ratios when dealing with a real estate company. The Debt Ratio for 2014 is 1.94 and the 5 year median is 1.92, so this is very good.

The Leverage and Debt/Equity Ratios are a little high, but fine with the 2014 ratios at 2.07 and 1.07 respectively. The 5 year median ratios are 2.19 and 1.19, respectively.

This is the first of two parts. The second part will be posted on Friday, March 20, 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 primarily engaged in the acquisition of land for development and sale of residential communities, multi-family sites and commercial sites. It operates western Canada and the US. The company also develops, owns and manages commercial income properties, as well as four golf courses. Its web site is here Melcor.

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.

No comments:

Post a Comment