Wednesday, March 2, 2016

Home Capital Group

Sound bite for Twitter and StockTwits is: Stock at good price. They have a good dividend record and stock is reasonable. However, I think this bank is also riskier than other banks, like our big 5 banks. See my spreadsheet on Home Capital Group.

I do not own this stock of Home Capital Group (TSX-HCG, OTC-HMCBF). I started reviewing this company in September 2009. It is a dividend growth company and was coming up on lists of good dividend paying stocks. It is on some dividend paying companies lists that I look at.

There is a relatively high amount of insider selling. Net Insider selling is at 0.12% of market cap. For the stocks that I cover, the median NIS is at $0.02% and 75% have NIS at 0.11% or lower. Stock options are on the high side also. The outstanding shares were increased by 32% in 2015 for stock options and by 0.91% last year. For the stocks that I cover outstanding shares were increased at a median of 22% and 75% of the stocks had increased shares of 0.50% or less.

All the other banks I cover had lower NIS and lower increases of shares due to stock options except for Barclays Bank. One positive is that it has a higher Debt Ratio than the other banks at 1.09. Other bank Debt Ratios are around 1.06 and 1.07.

This stock has a good record of dividends. They started to pay dividends in 1999 so they are in their 18th year of paying dividends. They have raised dividends in all but one year of 2003. The dividends have grown at 21.7% and 26.3% per year over the past 5 and 10 years. The last dividend increase was in 2016 and it was for 9.1%.

The dividends have grown over the years. Dividends started off being under 1%. In the last 5 years dividends have been low to moderate. The 5 year median Dividend yield is 1.6%. The current dividend yield is 2.86%. It is only in 2015 that dividends were moderate.

They can afford their dividends. The Dividend Payout Ratio for 2015 for EPS was 21.5% and for CFPS was 20.8%. The 5 year median DPR for EPS was 14.8% and for CFPS was 20.1%.

The 5 year low, median and high median Price/Earnings per Share Ratios are 6.79, 9.19 and 11.72. The corresponding 10 years values are close at 7.15, 9.15 and 11.81. The historical median P/E Ratio is 9.15. The current P/E Ratio is 7.70 based on a stock price of $33.58 and 2016 EPS estimate of $4.36. This stock price testing suggests that the stock price is reasonable and below the median.

I get a Graham Price of $47.84. The 10 year low, median and high median Price/Graham Price Ratios are 0.72, 0.93 and 1.14. The current P/GP Ratio is 0.70 based on a stock price of $33.58. This stock price testing suggests that the stock price is relatively cheap.

Last year was not a great year for this stock. The stock value fell some 44% in 2015. It has picked up this year and the stock price is up around 25% so far. The 5 and 10 year total return is at 8.94% and 8.88% per year. The portion of this total return attributable to dividends is at 2.47% and 1.96% per year. The portion of this total return attributable to capital gains is at 6.46% and 6.92% per year.

When I look at analysts' recommendations, I find Buy and Hold recommendations. All but one recommendation is a Buy and the consensus recommendation would be a Buy. The 12 month stock price target is $34.60. This implies a total return of 5.90% with 2.86% from dividends and 3.04% from capital gains. Obviously, analysts do not think there is much more growth in this stock this year.

This is an article about Larry Soloway, the founder and chair of this company who is set to retire. Analysts expect that the current President Martin Reid is a likely and capable successor. Here is a news release for the latest dividend increase for this company. In some years they have increased the dividends more than once in a year. This article in the Business Standard Tribute talks about a recent stock run up and what analysts are saying about this stock.

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.

On my other blog I wrote yesterday about My Portfolio and SPY learn more . The next stock I will write about will Canadian Real Estate Investment Trust (TSX-REF.UN, OTC- CRXIF)... learn more on Friday, March 4, 2016.

Also, on my book blog I have put a review of the book The Voice, The Word, The Books by F. E. Peters. learn more...

Home Capital Group Inc. operates through one subsidiary, Home Trust Company, to provide mortgage lending, deposit, retail credit and credit card issuing services. They have subprime mortgages. Its web site is here Home Capital 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.

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