Friday, January 29, 2016

Rogers Sugar Inc.

Sound bite for Twitter and StockTwits is: Yield is great. If you go by the yield, the stock price looks quite attractive. If you use valuation since the company has become a corporation, it looks rather cheap. Insider buying is relatively high at 0.09% of market cap. See my spreadsheet on Rogers Sugar Inc.

I do not own this stock of Rogers Sugar Inc. (TSX-RSI, OTC-RSGUF). This stock was brought to my attention by Dividend Ninja. This company used to be a Unit Trust (TSX-RSI.UN) but it has recently converted to corporation. On change to a corporation, it lowered its dividend.

This is not a dividend growth stock. When they switched to a corporation they decreased dividends as a lot of other companies that made that switch did. However, I have dividend information going back to 1998 and dividends have both increased and decreased in the past.

They are still paying out more in dividends than they can afford. The Dividend Payout Ratio for EPS rose last year from 116% to 148%. It is not expected to be below 100% for the next 3 years. Another point is that the book value is going down, because they are paying out more in dividends than they can afford.

This stock has a high dividend yield. The current dividend yield is 8.6% and has a 5 year median dividend yield of 6.2%. An 8.6% yield on your money is quite good. With no analyst suggesting that this dividend will be cut, this is currently a very good return on your money.

The 5 and 10 years total return is 4.45% and 12.49% per year. The portion of this total return attributed to dividends is at 8.94% and 11.21% per year. The portion of this total return attributed to capital loss is at 4.49% over the past 5 years and to capital gain is at 1.28% over the past 10 years.

Since a peak in 2012, this stock's price has been moving south. The stock lost 10% in 2013, 11.9% in 2014 and 10.4% in 2015. So far this year the stock is down by 1.4%. If the price drop moderates then you could earn a nice dividend return. This stock is never going to earn much in the way of capital gains.

The 5 year low, median and high median Price/Earnings per Share Ratios are 14.49, 16.21 and 18.52. The corresponding 10 year ratios are a lot lower at 9.59, 10.71 and 11.89. The historical median P/E Ratio is 9.84 and much closer to the 10 year values. The current P/E Ratio is 11.94. This P/E Ratio is based on a stock price of $4.18 and 2016 EPS estimate of $0.35.

If you use the last 5 years of valuations, this stock price is relatively cheap. If you use the 10 year valuations, the current P/E Ratio shows that the stock price is relatively expensive. I find this interesting. It probably has to do with the fact that the company changed from an income trust to a corporation. We should probably use the valuations of the last 5 years.

I get a Graham Price of $4.47. The 10 year low, median and high median Price/Graham Price Ratios are 0.76, 0.87 and 0.97. The current P/GP Ratio is 0.93. This is based on a stock price of $4.18. This stock price testing would suggest that the stock price is relatively reasonable but above the median.

If I use dividend yield in checking the stock price, I see that the 5 year median 6.18% against the current dividend yield of 8.61%. There is a 39% difference and this testing would suggest that the stock price is relatively cheap.

However, if you use the historical median dividend yield, which is 10.01%, you again get a test that suggests that the stock price is relatively reasonable but above the median. There is a 14% difference between the current dividend yield of 8.61% and the historical dividend yield.

The thing is that the dividend yield would have been quite high in the past as this stock was an Income Trust since 1997 when it was listed and 2011. The yield at first came down to the 4% to 6% range. However, it has been climbing again in recent years.

There are 4 analysts' following this stock and all the recommendations are a Hold. The 12 month stock price consensus is $4.31. This implies a total return of 11.72% with 8.61% from dividends and 3.11% from capital gains.

Timberwolf Equity Research on Seeking Alpha basically says the same thing I am, good dividend and limited growth. James Dunn on OCTA Finance talks about National Bank rating this stock at Sector Perform in November 2015. Sector Perform is the same as a Hold.

I will have only one entry for this stock this year. However, I did a more complete report on this company in 2015 and you can see those reports here and here

Rogers Sugar Inc. was established to hold all of the common shares and notes of Lantic Inc. Lantic Inc. is a refiner, processor, distributor and marketer of sugar products in Canada. Its web site is here Rogers Sugar 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.

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