The North West Company

On my other blog I am today writing about possible cheap dividend stocks for November 2015 learn more...

Sound bite for Twitter and StockTwits is: Consumer staple dividend growth stock. A lot of companies are struggling in this long slow recovery from 2008. However, this stock is giving a decent return and it increases its dividends. This company softened the blow of decreased dividends by giving a special dividend in 2012 at the time of the decrease. See my spreadsheet on The North West Company.

I do not own this stock of The North West Company (TSX-NWC, OTC-NWTUF). I wanted to review all the income trust stocks touted in the Money Show of 2009. There was a lot of talk at this show about some of the Unit Trust being currently good buys with very good yield. This stock changed from an income trust to a corporation in 2011.

When this company changed to a corporation it reduced the dividends by 30%. Until that time this stock had been raising their dividends and also giving out special dividends. The 10 year dividend growth is 6.8% per year. The three year dividend growth is 6.5% per year. If you look at 5 year growth it is a negative 2.6% per year because of the dividend decrease in 2012.

The dividends are good and the increases as shown above are moderate. The current dividend is 4.67% based on a stock price of $28.86 and dividends of $1.42. The 5 year median dividend yield is 4.49%. The historical median dividend yield is 7.09% because yields were higher when the company was an Income Trusts. Dividends are generally higher in Income Trust companies.

If you had held this stock for 5, 10 or 15 years and bought the stock at a median price, you could have received dividends that cover 28%, 108% or 383% of your original stock price. If you look at yields over these periods, they would be at 5.9%, 10.9% and 31% currently if you had paid a median price for your stock 5, 10 or 15 years ago. You can win with dividend growth stock because of compounding dividend growth.

Shareholders have done well. The 5 and 10 year total return on this stock is 11.67% and 16.20% per year. The portion of this total return attributable to capital gains is 6.96% and 9.17% per year. The portion of this total return attributable to dividends is 4.72% and 7.03% per year. Note that going forward the dividend portion of the total return will be less because of lower dividend yields.

The outstanding shares have grown at 0.05% and 0.02% per year over the past 5 and 10 years. This growth is attributable to Stock Options. Revenue growth is low to moderate. EPS growth is non-existent to moderate. Cash Flow growth is moderate to good.

Revenue is up by 2.4% and 7.5% per year over the past 5 and 10 years. Analysts expect Revenue growth of 10% in 2016. (The financial year for this stock is January 31 of each year.) If you compare the 12 month period to the end of January 31, 2015 to the 12 month period end of the second quarter, revenue is up by 5.3%. Revenue per Share growth is 2.3% and 7.5% per year over the past 5 and 10 years.

EPS is down by 5.3% and up by 5.3% per year over the past 5 and 10 years. Earnings hit a low in 2012 and have slowly recovering and the earnings for 2015 were some 8.4% higher than in 2012. If you look at 5 year running averages, EPS is up by 0.5% and 6.7% per year over the past 5 and 10 years.

Cash Flow has done better with Cash Flow up by 4% and 8.4% per year over the past 5 and 10 years. Cash flow is expected to go down by 18% in 2016. However, if you compare the 12 month period to the end of January 31, 2015 to the 12 month period end of the second quarter, Cash Flow is up by 3.8%. CFPS is up by 4% and 8.3% per year over the past 5 and 10 years.

The Return on Equity has been above 10% each year of the past 10 years. The ROE for 2015 was 19.1% and it has a 5 year median of 20.4%. The ROE on comprehensive income for 2015 was 18.9% and its 5 year median value was 21%. The ROE on comprehensive income suggests the earnings are of good quality.

Debt ratios are generally good, but the Leverage and Debt/Equity Ratios are a little higher than what I would like. The Liquidity Ratio for 2015 is 2.10 and the Debt Ratio is 1.83. I like to see these ratios at 1.50 or above. The Leverage and Debt/Equity Ratios are 2.20 and 1.20. I prefer to see these ratios below 2.00 and below 1.00, respectively. However, these ratios are not unusual.

This is the first of two parts. The second part will be posted on Tuesday, November 3, 2015 and will be available here. The first part talks about the stock and the second part talks about the stock price.

The North West Company is a leading retailer of food and everyday products and services to rural communities and urban neighborhoods in Canada, Alaska, the South Pacific and the Caribbean. North West operates 225 stores under the trading names Northern, NorthMart, Giant Tiger, AC Value Center, and Cost-U-Less. Its web site is here The North West Company.

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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