K-Bro Linen Inc.

Sound bite for Twitter and StockTwits is: Interesting dividend growth small cap. It has not had very good growth so far in dividends, but it is expected to do better. It would be an interesting investment. See my spreadsheet on K-Bro Linen Inc.

I do not own this stock of K-Bro Linen Inc. (TSX-KBL, OTC-KBRLF). People were talking about this stock at the 2009 Toronto Money Show. This was one income trust being touted as currently a good buy with very good yield. It was also recommended by Aaron Dunn who is the Senior Equity Analyst for Keystone Publishing Corp, a publisher of Canadian investment newsletters.

This is another stock that used to be an Income Trust. It did not decrease the dividends when changing to a corporation. Although dividends were flat at the beginning, in 2011 it started to raise dividends. Dividend increases are 1.8% and 1.7% per year over the past 5 and 9 years. The last dividend increase was in 2013 and it was for 4.4%. Dividends are paid monthly. Dividends are moderate and currently at 2.4%. Analysts expect that the company will raise dividends again, possibly this year.

The Dividend Payout Ratios are 2014 was 70% for EPS and 42.3% for CFPS. These are lower ratios than in the past especially for EPS. The DPRs for 2015 are expected to be similar to those of 2014. They also give DPR for Distributable Cash at 42.1%.

If you had held this company for 5 or 10 years, the dividends would have paid for 36% and 98% of the cost of the your stock if you paid a relatively median price. If you had held this company for 5 and 10 years, you would be earnings 7.3% or 10.3% on your original investment if you had paid a relatively median price for the stock.

Outstanding shares have increased by 2.6% and 6.8% per year over the past 5 and 9 years. Revenues growth is moderate to good. Earnings growth is good. Distributable cash growth is moderate. Cash Flow growth is moderate to good. Because of the growth in outstanding shares, I will pay more attention to per share values.

Revenue has grown by 9.3% and 11% per year over the past 5 and 10 years. Revenue per share has grown at 6.5% and 4.6% per year over the past 5 and 10 years. Analysts expect good growth in revenues for 2015 at around 10%. However, if you compare the 12 month period to the end of 2014 with the 12 month period to the end of the second quarter, Revenue has grown at just 1.9%.

Distributable Cash (the way they calculate this is close to how free cash flow is calculated), has grown by 7.4% and 7.3% per year over the past 5 and 9 years. Analysts do not seem to mention Distributable Cash when giving estimates.

The EPS has grown by 7.5% and 7.3% per year over the past 5 and 9 years. Analysts expect lower EPS for 2015 by around 5%. If you compare the 12 month period to the end of 2014 with the 12 month period to the end of the second quarter, EPS has grown at 0.6%.

Cash Flow has grown at 8.3% and 13.7% per year over the past 5 and 9 years. Cash Flow per Share has grown at 5.5% and 6.5% per year over the past 5 and 9 years. Analysts expect cash flow to decline slightly for 2015. However, if you compare the 12 month period to the end of 2014 with the 12 month period to the end of the second quarter, Cash Flow has grown at 5.3%.

The Return on Equity has been over 10 years for the last 5 years. The ROE for 2014 was 11.1% and the 5 year median is 12.6%. Net Income and Comprehensive Income are the same so this suggests that the earnings are of good quality.

This is a small company and you would want it to have good debt ratios. Small companies are more vulnerable in bad times that are large companies. The current Liquidity Ratio is quite good at 2.25, but this is not always the case. The 5 year median value is a little low at 1.42. The Debt Ratio has always been good and the ratio for 2014 is 5.72. It has a 5 year value of 3.24. The Leverage and Debt/Equity Ratios are good at 1.21 and 0.21 for 2014. The corresponding 5 year ratios are 1.45 and 0.45.

This is the first of two parts. The second part will be posted on Tuesday, October 13, 2015 and will be available here. The first part talks about the stock and the second part talks about the stock price.

K-Bro is the largest owner and operator of laundry and linen processing facilities in Canada. K-Bro provides a comprehensive range of general linen and operating room linen processing, management and distribution services to healthcare institutions, hotels and other commercial accounts. K-Bro currently has seven processing plants in six Canadian cities: Quebec City, Toronto, Edmonton, Calgary, Vancouver and Victoria. Its web site is here K-Bro Linen Inc.

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.