Leon's Furniture Ltd.

Sound bite for Twitter and StockTwits is: Stock price is cheap to reasonable. I still think that this stock is a good long term buy in the consumer discretionary sector. I often wonder if analysts have heard that you are supposed to buy good stocks when they are cheap. See my spreadsheet on Leon's Furniture Ltd.

I own this stock of Leon's Furniture Ltd. (TSX-LNF, OTC-LEFUF). I had some money in 2006 and this stock has been on MPL Communication's Investor Reporter list for some time. It was also on Mike Higgs' Dividend Growth Stock list. I bought some in 2006 and then some more in 2008, 2009 and 2010.

This stock used to be a dividend growth stock and it maybe that again. However, dividends have not increased since 2013 and we are in the fourth year or no dividend increases. The analyst that follows this stock does not see any increase in dividends over the next two years.

When the dividends stopped increasing, the Dividend Payout Ratios had grown to higher than normal values. The DPR for EPS in 2012 was 85% and for CFPS was 87%. The 10 years median values for DPR for EPS is 45% and CFPS is 44%. In 2015, the DPR for EPS was 41% and for CFPS was 37%. So from my point of view, they could increase dividends again.

They have been inconsistent in the past in dividend increases. They have never increased the dividend every year, but 4 years is a little long to wait for an increase. In the past every once in a while they have paid special dividends.

I have had this stock since 2006, but the returns have been mediocre. My total return is 6.01% per year with 3.14% per year from dividends and 2.87% per year from capital gains. I prefer stocks to have a total return per year of around 8%. However, this last recovery from a recession has been slow and long and there are a number of retailers that are having a hard time.

Stock prices are back to where they were in 2010. The 5 and 10 year total return are not great with them at 6.98% per year and 4.50% per year. The 5 and 10 years return attributable to dividends is at 3.27% and 2.98% per year and attributable to capital gains is at 3.71% and 1.52% per year.

There is good news. Leon's seems to have absorbed The Brick fine, its debt ratios are decent, it can afford their dividend payments and every once in a while, when they can afford to, the company gives out special dividends.

The 5 year low, median and high median Price/Earnings per Share Ratios are 14.16, 16.63 and 19.76. These are similar to the 10 year values of 13.43, 15.79 and 18.26. The historical values are lower at 12.15, 14.79 and 16.90. The current P/E is at 14.17, based on a stock price of $14.88 and 2016 EPS estimate of $1.05. This stock price testing suggests that the stock price is relatively reasonable and below the median.

I get a Graham price of $14.01. The 10 year low, median and high median Price/Graham Price Ratios are 1.04, 1.21 and 1.41. The current P/GP Ratio is 1.06. This stock price testing suggests that the stock price is relatively cheap.

When I look at dividend yield, I find that the 5 year median is 2.70% which is almost the same as the current dividend yield of 2.69% based on a stock price of $14.88 and dividends of $0.40. The historical median dividend yield is 1.87%. This is some 44% below the current dividend yield of 2.69% and suggests that the stock price is getting relatively cheap.

Ryan Vanzo of Motley Fool thinks that this is a great buy and hold stock. Darron Kloster of the Times Colonist of Victoria talks about Leon's taking over a number of Sears Home stores. This Press Release talks about recent management changes at Leon's..

There seems to be only one analyst following this stock and the recommendation is a Hold. The 12 month stock price is $15.00. The 12 month stock price implies a total return of 3.49% with 2.69% from dividends and 0.81% from capital gains.

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.

The last stock I wrote about was about was Barrick Gold Corp. (TSX-ABX, NYSE-ABX)... learn more . The next stock I will write about will be Barclays PLC ADR (LSE-BARC, NYSE:-BCS)... learn more on Wednesday, April 20, 2016 around 5 pm.

Also, on my book blog I have put a review of the book The City by Joel Kotkin learn more...

Leon's Furniture Limited is a Canada-based company is retailer of home furnishings, electronics and appliances across Canada from Alberta to Newfoundland and Labrador. Leon's sells under several banners including Leon's, The Brick, Appliance Canada and United Furniture Warehouse. Its web site is here Leon's Furniture 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.