Chesswood Group Ltd.

Sound bite for Twitter and StockTwits is: Small div growth company. This company still has some problems. I would to see growth in cash flow in order to even start to recommend this company. See my spreadsheet on Chesswood Group Ltd.

I do not own this stock of Chesswood Group Ltd. (TSX-CHW, OTC-CHWWF). A reader wrote me in 2012 that he was researching and found a company that he hoped I could give him a brief outlook on. He said that the company is Chesswood Group and they are basically a financial leasing company. From 2009 to 2012 they increased their dividends from 2.5 cents to 5.5 cents per month. This is a 120% increase.

This company was an income trust until 2011 when it changed to a corporation. When it decided to become a corporation, it decreased it dividends by 75%. It started to raise them again in the latter part of 2009. The 5 year dividend growth rate is 19.1% per year. They raised the dividends rapidly at first and then the dividend raises slowed down. The last dividend increase was in 2014 and was for 8.3%. They have not raised the dividends yet in 2015.

The Dividend Payout Ratios are getting better. The DPR for EPS for 2015 is 84% and for CFPS is 28%. The payout for cash flow is fine, but the one for earnings is a bit high.

This company has always had a high dividend yield. The historical high and low is at 29.68% and 4.15%. The historical median is 8.77%. The current dividend yield is 8.13%. The yield started to decrease in 2013 and hit a low of 3.8%, but has gone up since. Most analysts thought that old income trust companies would end up with yields of 4 to 5%.

With high yields the shareholders have had dividend payments that cover a significant amount of their share prices. For example if this stock was bought 5 years ago at a median price, dividends would now have covered 68% of the share price. Because of increases in dividends, if this stock had been bought 5years ago at a median price, a shareholder would be getting a dividend yield on original cost of 15.2%.

Share price reached a peak in early 2014 and has been travelling downward ever since. There were capital losses of 35% in 2014 and another 21% in 2015. In the past 5 years, the total return is still good at 18.60% per year with 9.14% per year from capital gain and 9.46% per year from dividends.

The outstanding shares have increased by 9% and 5% per year over the past 5 and 8 years. The company went public in 2006. This makes the per share values the most important. There is non-existent to moderate growth in revenue, there is moderate to good growth in earnings, but growth in CFPS is non-existent to moderate.

The Revenue per Share is down by 2.1% per year over the past 5 years and up by 3.1% per year over the past 8 years. EPS is up by 20.9% and 5.2% per year over the past 5 and 10 years. CFPS is down by 2.5% per year over the past 5 years and up by 4.3% per year over the past 8 years. The third quarterly report shows increase in Revenue, but declines in EPS and Cash Flow.

The 5 year low, median and high median Price/Earnings per Share Ratios are 10.06, 12.76 and 14.71. The 8 year corresponding ratios are lower at 8.05, 10.03 and 12.01. The current P/E Ratio is 9.06 based on a stock price of $9.60 and 2015 EPS estimate of $1.06. This stock price test suggests that the stock is relatively cheap, but analysts are expecting EPS to go up by almost 14% in 2015. However, if you compare the 12 month period to the end of 2014 with the 12 month period to the end of the third quarter, EPS is down by 7.5%.

I get a Graham Price of $17.70. The 8 year low, median and high median Price/Graham Price Ratios are 0.60, 0.81 and 0.97. The current P/GP Ratio is 0.54. This stock price testing suggests that the stock price is relatively cheap.

The 8 year median Price/Book Value per Share Ratio is 1.09. The current P/B Ratio is 0.73 based on a stock price of $9.60 and BVPS of $9.36. The current ratio is some 33% below the 8 year median. This stock price testing suggests that the stock price is relatively cheap.

If you look at dividend yield the story is a bit different. The 5 year median dividend yield is 8.22% compared to the current dividend yield of 8.13% based on a stock price of $9.60 and dividends of $0.78. The historical (or 8 year) median dividend yield is 8.77%. The current dividend yield is below these years by 1.2% and 7.4% respectively. These testing suggests that the stock price is reasonable, but above the relative median.

One thing I would like to mention that I did not like was that in 2011 this company did a 1 to 100 consolidation and then a 100 to 1 split. The sole purpose of this seemed to be to get rid of small shareholders. This is not a positive sign for small investors. Also, it seems that this company used to be classified as a Consumer Discretionary but is now showing up in the Financial Services sector. I am also changing how I classify this company.

When I look at analysts' recommendations, I find Strong Buy, Buy and Hold recommendations. Most of the recommendations are a Buy and the consensus recommendation is a Buy. The 12 month stock price consensus is $14.63. This implies a total return of 60.52% with 52.40% from capital gains and 8.13% from dividends.

A recent press release on Market Wired says Chesswood Group Ltd announced today that its subsidiary, Sherway Limited Partnership, has completed the sale of its Acura Sherway new car dealership. In a press release early in 2015 on Market Wired talks about CB Leaseco Holdings Inc. getting shares in this company in exchange for its 100% interests in Blue Chip Leasing Corporation and EcoHome Financial Inc. There are some positive comments made on this company at Stock Chase.

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.

Chesswood Group Limited is a financial services company operating primarily in the specialty finance industry. Chesswood's approach is to acquire financial services businesses. It owns Pawnee Leasing Corporation, located in Fort Collins, Colorado, is Chesswood's largest operating company. Pawnee's assets comprise approximately 75% of Chesswood's consolidated assets. Chesswood recently added Case Funding Inc., a U.S. legal finance company, to its specialty finance portfolio. Its web site is here Chesswood Group Ltd.

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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