Gluskin Sheff + Associates Inc.

Sound bite for Twitter and StockTwits is: Cheap with problems. The problem is that if the founders get what they want in arbitration, this would be some approximately 3 to 4 years of profit for the company. This would be very material to current shareholders and to the company. See my spreadsheet on Gluskin Sheff + Associates Inc.

I own this stock of Gluskin Sheff + Associates Inc. (TSX-GS, OTC-GLUSF). I started to review some of the stock recommended by Jennifer Dowty from a column she wrote and I reviewed in February 2010 on Dividends and Special Dividends. I had money in my TFSA to buy stock. GS's price was relatively below the median and it gives out special dividends all the time. I also wanted to try out a high yield, low capital gain stock.

First I have a couple of remarks. There is the near-term overhang of the co-founders litigation issue where the company expects to pay $12.2M and the co-founders are asking for $185M. Some analysts expect this to be settled closer to what the company expects. There is arbitration on this in December. Also analysts expected a dividend increase this quarter and there was not one.

This company went public in 2006 and started to pay dividends in their financial year ending June 30, 2007. Also since their financial year ending June 30, 2008, the company has paid a special dividend each year. Until this financial year they had raised their dividends every year. The dividend yield is good and the dividend increases are moderate. The special dividends have varied greatly from $0.10 to $2.80.

The current dividend yield is 6.18% based on dividends of $1.00 and a stock price of $16.17. The dividends have grown by 12.7% and 15% per year over the past 5 and 9 years. They pay out a high percentage of their earnings. In the financial year ending June 30, 2016 the Dividend Payout Ratio for EPS was 97.7%. The DPR for CFPS was 58%.

Because of the high dividends, if you had bought this stock 5 year ago and paid a median price you would have received dividend equal to 55.5% of the stock's price. If you had bought this stock 10 years ago and paid a median price, you would have received dividend equal to 74.2% of the stock's price.

A problem is that not only has this company got the suit from the founders hanging over its head, but Assets under Management, Revenue, Earnings and Cash Flow are all down for this financial year ending June 2016. This is not a great showing.

The 5 year low, median and high median Price/Earnings per Share Ratios are 13.95, 16.67 and 19.40. The corresponding 10 year values are 10.41, 15.57 and 18.49. The current P/E Ratio is 12.25. This stock price testing suggests that the stock price is relatively reasonable and below the median. It may even be relatively cheap.

I get a Graham Price of $10.70. The 10 year low, median and high median Price/Graham Price Ratios are 1.49, 2.07 and 2.55. The current P/GP Ratio is 1.51 based on a stock price of $16.17. This stock price testing suggests that the stock price is relatively reasonable and below the median.

The 10 year median Price/Book Value per Share Ratio is 6.29. The current P/B Ratio is 4.20 based on BVPS of $3.85 and a stock price of $16.17. The current P/B Ratio is some 33% lower than the 10 year P/B Ratio. This stock price testing suggests that the stock price is relatively cheap.

The current Dividend Yield is 6.18% based on dividends of $1.00 and a stock price of $16.17. The historical median Dividend Yield is 3.05%. The current Dividend Yield is 103% higher. The 5 year Dividend Yield is 3.88% and this is some 59% lower than the current Dividend Yield. This stock price testing suggests that the stock price is relatively cheap.

When I look at analysts' recommendations I find Buy and Hold recommendations. The consensus recommendation is a Buy. The 12 months target price of $19.69. This implies a total return of $27.95% with 21.77% from capital gains and 6.18% from dividends based on a current price of $16.17.

Christina Pellegrini of the Globe and Mail talks about the company's dispute with the founders. Peter Koven and Barry Critchley of the Financial Post also talk about the company's dispute with the founders. Also, the founders put out a Press Release on this subject. See what analysts are saying at Stock Chase.

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 Medtronic Inc. (NYSE-MDT)... learn more. The next stock I will write about will be Equitable Group Inc. (TSX-EQB, OTC-EQGPF)... learn more on Friday, October 28, 2016 around 5 pm. Tomorrow on my other blog I will write about Money Show 2016 - Warren MacKenzie... learn more on Thursday, October 27, 2016 around 5 pm.

Gluskin Sheff is an independent investment firm that manages portfolios for high net-worth individuals and institutional clients. Its web site is here Gluskin Sheff + Associates 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. 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.