Tuesday, September 6, 2016

Chemtrade Logistics Income Fund

Sound bite for Twitter and StockTwits is: Probably reasonably priced. On the stock price tests the P/B Ratios tests looks the best to my mind. Although some suggest that stock because of its high dividends, I prefer stocks with increasing dividends, even if the increase is low. It does not take much nowadays to have increase above inflation. See my spreadsheet on Chemtrade Logistics Income Fund .

I do not own this stock of Chemtrade Logistics Income Fund (TSX-CHE.UN, OTC-CGIFF). I decided to investigate this stock after reading an article in the G&M in February 2012 about investing in small cap stocks that pay dividends. This was one of the stocks mentioned that I had never heard of before.

In 2007 this company decreased its dividend just over 16%. Since then it has held the dividend flat. It was late in 2006 that the government announced the changes to income trusts to take effect in 2011. They have a problem in that they cannot afford their dividends from the point of view of their earnings. They say it is fine looking at distributable cash.

The Dividend Payout Ratio for EPS for 2015 is negative because the EPS was negative. However, the 5 year running average for DPR for EPS is 271%. It is expected to be 316% in 2016. Their coverage by CFPS is better with the 2015 value at 35% and the 5 year median at 37%.

The company still puts out Funds from Operations (FFO) or Distributable Cash and Adjusted Funds from Operations (AFFO) measuring their payout. In 2015 the DPR for FFO was 60.9% and for AFFO was 44%.

Because the outstanding shares have increased by 17.6% and 7.5% over the past 5 and 10 years, I would be interested in the per share values. Revenue growth looks good at 19.6% and 12.4% per year growth over the past 5 and 10 years. However, the Revenue per Share growth is just 1.7% and 4.5% for the past 5 and 10 years.

Growth is better in Cash Flow with the Cash Flow growth at 32.4% and 17.4% per year and CFPS at 12.6% and 9.2% per year over the past 5 and 10 years. Since the EPS was negative this year, there is no growth here. The Comprehensive Income was high at $120.6M and with an ROE of 13.7%. However, this was all from foreign exchange.

They struggle with the Liquidity Ratio. The Liquidity Ratio is 1.05 for 2015 with a 5 year median of just 0.98. If you add in cash flow after dividends the ratio becomes 1.36 with a 5 year median of 1.36. This is a vulnerability and I prefer to see Liquidity Ratios of 1.50 and above for safety's sake.

The 5 year low, median and high median Price/Earnings per Share Ratios are 15.40, 16.79 and 18.17. The 10 year corresponding values are 10.56, 12.78 and 15.00. Historical values are 13.90, 15.19 and 16.73. The current P/E Ratio is 47.00 based on a stock price of $17.86 and 2016 EPS estimate of $0.38. This suggests that the stock price is relatively expensive.

The 5 year low, median and high median Price/ Funds from Operations Ratios are 8.24, 9.71 and 10.55. The corresponding 10 year values are 6.38, 7.44 and 8.51. The current P/FFO Ratio is 8.67 based on 2016 FFO estimate of $2.06 and a stock price of $17.86. This could suggest that the stock price is relatively reasonable and below the median when viewed over the past 5 years.

I get a Graham Price of $9.83. The 10 year low, median and high median Price/Graham Price Ratio is 0.98, 1.11 and 1.27. The current P/GP Ratio is 1.82 based on a stock price of $17.86. This suggests that the stock price is relatively expensive.

The 10 year median Price/Book Value per Share Ratio is 1.66. The current P/B Ratio is 1.58 based on BVPS of $11.30 and a stock price of $17.86. The current P/B Ratio is 4.75 lower than the 10 year median. This could suggest that the stock price is relatively reasonable and below the median.

Since this stock used to be an income trust company the stock price testing using dividend yield does not work well. These companies will not have such high dividends again as they had as income trusts. The 5 year median dividend yield is 6.73%, just marginally higher than the current dividend yield of 6.72% which is based on dividends of $1.20 and a stock price of $17.86. This is implies that the stock price is reasonable and around the median, at least for the past 5 years. However, the dividend yield is still rather high as the old income trust were expected to have future dividend yields in the 4 to 5% range.

When I look at analysts' recommendations, I find Buy and Hold recommendations, but most recommendations are Hold recommendations. The consensus recommendation would be a Hold. The 12 month stock price is $19.08. This implies a total return of 13.55% with 6.83% from capital gains and 6.72% from dividends based on a current stock price of $17.86.

Chemtrade Logistics Income Fund announced via Market Wired that they have completed a $143.75 Million Public Offering of Convertible Debentures Bought Deal . Chemtrade will use the net proceeds of the offering to repay existing indebtedness under its credit facility and for general trust purposes. Jared Coughlin on Community Financial News talks about recent analysts' reports. A couple has lowered their target prices. Joseph Solitro of Motley Fool likes this stock for its dependable dividend. I prefer dividend growth stocks.

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 that report here.

The last stock I wrote about was about was Badger Daylighting Ltd. (TSX-BAD, OTC- BADFF)... learn more. The next stock I will write about will be Alimentation Couche-Tard Inc. (TSX-ATD.B, OTC-ANCUF)... learn more on Wednesday, September 7, 2016 around 5 pm. Today on my other blog I will write about Dividend Stocks September 2016... learn more.

Chemtrade Logistics Income Fund is a global supplier of sulphuric acid, liquid sulphur dioxide and sodium hydrosulphite and a processor of spent acid, particularly in the U.S. Gulf Coast region. Chemtrade is also a regional supplier of sulphur, sodium chlorate and phosphorus pentasulphide, and also produces zinc oxide at three North American locations. Its web site is here Chemtrade Logistics Income Fund.

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. I have three blogs. The first talks only about specific stocks and is called Investment Talk. The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter or StockTwits.

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