TMX Group Ltd.

On my other blog I am today writing about how my dividend growth calculation spreadsheets would be if dividend increases were strong at first and then weaker later continue...

Sound bite for Twitter and StockTwits is: Not dividend growth, price cheap to reasonable. Dividend yield testing is one of my favourite methods because it involves no estimates and uses current values of dividend yield and stock price. By this light this stock is selling at a price that is relatively above the median. See my spreadsheet at x.htm.

I do not own this stock of TMX Group Ltd. (TSX-X, OTC-TMXXF). I looked at this stock in 2008 after I found it on a list of Strongest Dividend Growth stocks. I am interested in such stocks.

This stock started off as a dividend growth stock in 2003. However, since 2007, it has only raised the dividend once and that was in 2010. So I would think that this stock is no longer a dividend growth stock. Dividend growth is good for the last 10 years but is very low for the last 5 years. Dividend growth is at 1% and 10.7% per year over the past 5 and 10 years.

This stock's earnings have fluctuated over the years and they could not always cover the dividends. For example in 2009 the Dividend Payout Ratio is 108% and in 2012 DPR was 219%. The 5 year median DPR for EPS is not bad at 77.6%. However, the DPR for EPS was a bit high in 2014 at 86.5%. The DPR for CFPS is looking ok with the DPR for CFPS for 2014 at 25.3% and the 5 year median at 32.26%.

Shareholders have done well over the last 5 years, but not over the last 10 years. The 5 and 10 years total return is 10.49% and 3.97% per year with 6.65% and 0.82% per year from capital gains and 3.84% and 3.15% per year from dividends.

The outstanding shares have decreased by 6.1% and 2.2% per year over the past 5 and 10 years. Shares have increased due to stock options and share issues and have decreased due to Buy Backs. Revenue growth is moderate to good. Earnings growth is non-existent to moderate. Cash Flow Growth is good.

Revenue has grown at 5.2% and 11.4% per year over the past 5 and 10 years. This is the Revenue value we should be looking at because of decreasing shares. Revenue per Share is up by 12% and 13.9% per year over the past 5 and 10 years. Analysts expect modest growth in Revenue this year.

Net Income, the earnings value we should be most interested in, is down by 1.2% and up by 3.9% per year over the past 5 and 10 years. EPS is up by 5.6% and 6.4% per year over the past 5 and 10 years. Analysts expect very good growth in earnings for 2015, but both EPS and Net Income are down for the first quarter of 2015.

Cash flow is up by 9.7% and 18.8% per year over the past 5 and 10 years and CFPS is up by 16.8% and 21.5% per year over the past 5 and 10 years. Analysts expect a decline in cash flow for 2015, but cash flow is up by 7% for the first quarter of 2015 if you compare the 12 months to the end of 2015 and the 12 months to the end of the first quarter.

Return on Equity has been below 10% each of the past 3 years. The 2015 ROE is 3.4% and the 5 year median is 4.2%. The ROE on comprehensive income is similar as the 2015 ROE is 3.3% and the 5 year median is 4.9%.

There is very little insider ownership expect for one director that owns shares worth around $20.7M. There is no insider buying, but insider selling is just $0.6M and only 0.02% of the market cap.

The 5 year low, median and high median Price/Earnings per Share Ratios are 18.69, 21.74 and 24.79. They are similar to the 10 year values of 15.57, 22.40 and 26.07. The current P/E Ratio is 14.87 based on a stock price of $51.00 and 2015 EPS estimate of $3.43. This stock price testing suggests that the stock is relatively cheap. However, EPS estimates have been lower than the actual EPS over the past 2 years.

I get a Graham Price of $64.56. The 10 year low, median and high median Price/Graham Price Ratios are 1.27, 1.56 and 1.77. The current P/GP Ratio is 0.79 based on a stock price of $51.00. This stock price testing suggests that the stock is relatively cheap.

The 10 year Price/Book Value per Share Ratio is 2.96. The current P/B Ratio is 0.94 and is some 68% lower based on a BVPS of $54.00 and a stock price of $51.00. This stock price testing suggests that the stock is relatively cheap.

The 5 year median Dividend yield is 3.32% and the historical median dividend yield is 3.20%. These are both higher than the current Dividend Yield of 3.14%. What you want for a good stock price is for the current dividend yield is to higher than the median dividend yields. However, the median dividend yields are not that far off the current dividend yield and this suggests that this stock price testing shows the stock is relatively reasonable. However, price is above the relative median and it is far better for it to be at least below the relative median price.

The analysts' recommendations are Buy, Hold and Underperform. There is only 5 analysts following this stock and the consensus would be a Hold. The 12 month stock price is $56.00. This implies a total return of 12.94% with 9.80% from capital gain and 3.14% from dividend. This good return does not quite match the Hold and Underperform recommendations.

This article in the Financial Post talks about TMX Group taking a fresh approach with their hire of Nick Thadaney.

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.

TMX Group Ltd. operates two national stock exchanges, Toronto Stock Exchange serving the senior equity market and TSX Venture Exchange serving the public venture equity market, Natural Gas Exchange (NGX), a North American exchange for the trading and clearing of natural gas and electricity contracts and Shorcan Brokers Limited, a fixed income inter-dealer broker. Its web site is here TMX Group.

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.