Wednesday, March 16, 2016

Richelieu Hardware Ltd

Sound bite for Twitter and StockTwits is: Stock is current a bit high. I would not buy until dividend yield goes above 1%. Insiders are also selling. Maybe they think price is rather high too? See my spreadsheet on Richelieu Hardware Ltd.

I own this stock of Richelieu Hardware Ltd (TSX-RCH, OTC-RHUHF). I initially bought this stock in 2007 because it was recommend by the Investment Reporter. It is not on any of the dividend lists, probably because they only started to pay dividends in 2000. This stock would be considered to be a dividend paying growth stock. This stock has been much recommended by MPL Communications.

Dividends are low, but the dividend growth is to me moderate. This stock often pays dividends above 1%. The current dividend yield is 0.93% based on dividends of $0.21 and a stock price of $22.99. The 5 year median dividend yield is 1.29% and historical median is 1.18%. The dividend growth over the past 5 and 10 years is 10.8% and 11.6% per year.

I discuss the implications of dividend yield and dividend growth in a blog posting I did in July 2015. See that report here and the accompanying spreadsheet is here. Personally, I do not buy any stock when the yield is below 1%.

When I bought this stock I was earning 1.74% in dividend yield. Today, after 7 years, my dividend yield on my original purchase price is 3.48%. This is slightly better than if the stock was bought some 5 or 10 years ago at a median price. In these cases the dividend yield on original purchase would be at 2.30% and 2.78%.

For the stock, the outstanding shares have been declining over the past 5 and 10 years at 1.6% and 1.7% per year. This would tend to make per share values look a bit better than they actually are. To illustrate this is I looked at revenue. The growth is revenue over the past 5 and 10 years is 10.9% and 7.9% per year. The growth in revenue per share over the past 5 and 10 years is 12.6% and 9.7% per year.

This company has a strong balance sheet. This is important as the company is in a cyclical business. The Liquidity Ratio for 2015 is 4.40. The Debt Ratio for 2015 is 5.42. For these ratios I look for values of 1.50 and higher.

I have 5 year low, median and high median Price/Earnings per Share Ratios of 15.46, 18.11 and 20.76. These are higher than the corresponding 10 year P/E Ratios of 14.03, 15.47 and 16.94. The historical median P/E Ratios is even lower at 14.49. The current P/E Ratio is 21.29. This is based on a stock price of $22.99 and 2016 EPS estimate of $1.08. This stock price testing suggests that the stock price is relatively high.

I get a Graham Price of $12.26. The 10 year low, median and high median Price/Graham Price Ratios are 1.16, 1.29 and 1.43. The current P/GP Ratio is 1.87 based on a stock price of $22.99. This stock price testing suggests that the stock price is relatively high.

If you look at dividend yields, the answer on the stock price is the same. The current dividend yield is 0.93% based on dividends of $0.21 and a stock price of $22.99. The 5 year median dividend yield is 1.29% and the historical median dividend yield is 1.18%. These values are some 28% and 21% higher than the current dividend yield. This stock price testing suggests that the stock price is relatively high.

When I look at analysts' recommendations, I find that 3 analysts are following this stock and they all give a stock recommendation of Buy. The 12 month stock price target is $25.17. This implies a total return of 10.41% with 9.48% from capital gains and 0.93% from dividends.

When I look at insider selling over the past year, I find Net Insider selling is at 0.34% of market cap. Last year it was at 0.07% of market cap. Insider selling is rather high for the past year as the median Net Insider Selling for the stocks I follow is 0.03% and 75% of the stocks have NIS at 0.11% or less.

Jane Larson on Hilltop News talk about recent earnings estimates from Scotiabank for this stock. Kay Ng of Motley Fool likes this stock. (Please note that you may have to use your arrow on your browser to exit and go back into this article to get the full article. This is the way Motley Fool articles work.) In this Newswire release, Richelieu Hardware announces its recent 3 for 1 split.

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 the TFSA account learn more . The next stock I will write about will be Enbridge Inc. (TSX-ENB, NYSE-ENB)... learn more on Friday, March 18, 2016 around 5 pm.

Also, on my book blog I have put a review of the book The Almost Nearly Perfect People by Michael Booth learn more...

This company is a distributor, importer and manufacturer of specialty hardware and complementary products. Its products are kitchen and bathroom cabinets, furniture, and window and door. It is also involved with residential and commercial woodworking industry. It has a large customer base of hardware retailers. Its web site is here Richelieu Hardware 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.

See my website for stocks followed and investment notes. Follow me on Twitter or StockTwits.

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