North West Company

Sound bite for Twitter and StockTwits is: Price probably reasonable. I think that the historical valuations a rather high for this stock. However, investors have done well. The 5 and 10 year total return to date is 11.01% and 10.79% with 5.69% and 4.54% from capital gains and 5.31% and 6.25% from dividends. The stock is also down by 16.7% year over year. See my spreadsheet on North West Company.

I do not own this stock of North West Company (TSX-NWC, OTC-NWTUF). I wanted to review all the income trust stocks touted in the Money Show of 2009. There was a lot of talk at this show about some of the Income Trust being currently good buys with very good yields. This stock changed from an income trust to a corporation in 2011.

This is a retail stock. As such it would have its ups and downs, but that does not mean that you should not diversify into such stocks in a well-rounded portfolio. I started with Utilities and Financials, then I diversified into consumer and industrial stock.

This company increased their dividends when it became an income trust then deceased the dividends when it became a corporation. Income trust companies could afford to pay higher dividends. Dividends were decreased in 2012 by almost 30%. After 2012 they started to increase the dividends again. Because of the dividend decrease the dividends declined by some 2.5% per year over the past 5 years.

Dividends are up by 6.7% over the past 10 years and by 5.7% over the past 4 years. The last dividend increase was for the financial year ending in January 2016 and it was for 6.9%. I would consider this stock to be dividend growth stock.

The dividend yield has always been good. The current dividend yield is 4.85% based on dividends of $1.24 and a stock price of $25.59. The 5 year median dividend yield is 4.75% and the historical median dividend yield is 6.89%. Because this company was an income trust and income trusts always had higher dividends, I doubt that the company would ever again reach the high dividend yields it has in the past as an income trust.

If you had bought this stock 5, 10 or 15 years ago at a median price, you could be earnings 6.1%, 8.5% or 24.6% per year in yield based on your purchase price. If you bought the stock today at $25.59 based on a current yield of 4.85% and dividend increases of 5% per year, in 5, 10 or 15 years you could be earning a dividend yield on this stock of 6.18%, 7.89% or 10.07%.

The Dividend Payout Ratio for the financial year ending in January 2016 for EPS was 83.9%. This is a little high but the DPR for EPS has always been in the high 70% and low 80% area. The DPR for CFPS for financial year ending in January 2016 was 36.9%. Its 5 year median DPR is 38.1%.

EPS has fluctuated. This is a retail stock and it has been a very long slow recovery that has affected adversely most retail stocks. EPS is down by 2% and up by 4.9% per year over the past 5 and 10 years. You can use per share values to look at growth for this company as the outstanding shares have not really varied over the past 5 and 10 years.

Revenue per Share is better with growth at 4.3% and 7.7% per year over the past 5 and 10 years. Cash Flow per Share has grown by 7.2% and 9.2% per year over the past 5 and 10 years.

The 5 year low, median and high median Price/Earnings per Share Ratios are 16.43, 18.54 and 20.59. The corresponding 10 year values are 13.04, 15.25 and 17.46. The historical values are 9.97, 12.44 and 14.32. It would appear that the P/E Ratios are growing. The current 5 year values are rather high for a retail stock. The current P/E Ratio is 17.29 based on a stock price of $25.59 and 2017 EPS estimate of $1.48. If you base the stock price test on 10 year and historical ratios, the stock price is relatively expensive.

I get a Graham Price of $15.35. The 10 year low, median and high Price/Graham Price Ratios are 1.32, 1.55 and 1.77. The current P/GP Ratio is 1.67 based on a stock price of $25.59. This stock price testing suggests that the stock price is reasonable, but above the median.

I get a 10 year Price/Book Value per Share of $3.51. The current P/B Ratio is 3.62 based on BVPS of $7.07 and a stock price of $25.59. The current P/B Ratio is just 3.17% above the 10 year median P/B Ratio. This stock price testing suggests that the stock price is reasonable, but above the median.

When doing a stock price test based on dividend yield, the only practical value to use is the 5 year median dividend yield which is 4.75%. The current Dividend Yield at 4.85% is 2% below the 5 year values. The current dividend yield is based on a stock price of $25.59 and dividends of $1.24. This stock price testing suggests that the stock price is reasonable and below the median.

When I look at analysts' recommendations, I find Buy and Hold Recommendations. Most of the recommendations are a Hold. The consensus recommendation is a Hold. The 12 months stock price is $29.29. This implies a total return of 19.30% with 14.48% from capital gains and 4.85% from dividends.

The Thompson Citizen has a news article about Canada subsidizing nutritional food in Northern Canada. The company put out a Market Wired press release on their second quarterly results. Will Ashworth of Motley Fool gives three reasons to own this stock. And, finally see what analysts are saying about this stock 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 that report here and here.

The last stock I wrote about was about was Equitable Group Inc. (TSX-EQB, OTC-EQGPF)... learn more . The next stock I will write about will be Pason Systems Inc. (TSX-PSI, OTC-PSYTF)... learn more on Wednesday, November 2, 2016 around 5 pm. Tomorrow on my other blog I will write about Money Show 2016 - Zaid Jasani... learn more on Tuesday, November 1, 2016 around 5 pm.

The North West Company is a leading retailer of food and everyday products and services to rural communities and urban neighborhoods in Canada, Alaska, the South Pacific and the Caribbean. North West operates 225 stores under the trading names Northern, NorthMart, Giant Tiger, AC Value Center, and Cost-U-Less. Its web site is here North West Company.

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.