Chesswood Group Ltd

Sound bite for Twitter and StockTwits is: Maybe cheap, but is risky. It has a very high dividend yield. I would think the dividend is current safe. It is a different kind of financial service firm so there could be money to be made here. However, it also could be quite risky. See my spreadsheet on Chesswood Group Ltd.

I do not own this stock of Chesswood Group Ltd. (TSX-CHW, OTC-CHWWF). A reader wrote me in 2012 that he was researching and found a company that he hoped I could give him a brief outlook on. He said that the company is Chesswood Group and they are basically a financial leasing company. From 2009 to 2012 they increased their dividends from 2.5 cents to 5.5 cents per month. This is a 120% increase.

Sometimes people miss what may really be happening. For example, this company decreased the dividends by 70% between 2008 and 2009. Since 2010 dividends have increased each year except for 2015. They increased the dividends for the very end of 2016. Dividend growth is at 11.6% per year for the past 5 years, but dividends have declined by 0.8% per year over the past 9 years. So dividend history is rather mixed.

The Dividend Yield is good (very good) currently at 7.27% based on dividends of $0.84 and a stock price of $11.55. This stock has an historical high dividend yield of over 54% and a historical median dividend yield of 8.5%. The current dividend yield is 7.27%. This suggests that the market thinks the stock is risky or will cut it dividends.

It would seem to me that the company can afford its dividends even though the payout ratios are currently a bit high. The Payout Ratio is high with the Dividend Payout Ratio for EPS at 5 year median of 82%. The DPR for 2015 is low at 67%. It is expected that the DPR for 2016 will be over 100%, but then reducing to 62% in 2017. The DPR for CFPS is lower with the rate for 2015 at 28%. Over the past 5 years the DPR for CFPS is a bit high at 47%.

They have been able to grow their revenue, but this depends on you look at Revenue. As a Financial Services firm which it is now considered they are growing their Revenue at some 250% over the past 9 years. They are also currently growing earnings and cash flow.

Their shares have grown at 12% and 131% per year over the past 5 and 9 years. If you want to look at growth you have to look at per share growth. If you take a look at Revenue, Revenue per Share has grown at 51.8% over the past 9 years compared to Revenue growth of 250% over the same time period.

The 5 year low, median and high median Price/Earnings per Share Ratios are 10.06, 12.76 and 11.96. The corresponding 10 year ratios are 7.74, 9.70 and 11.96. Do not forget this company used to be considered a Consumer Discretionary stock. The current P/E Ratio is 9.79 based on 2016 EPS estimate of $1.18 and a stock price of $11.55. This testing probably suggests that the stock price is relatively cheap.

I get a Graham Price of $15.30. The 10 year low, median and high median Price/Graham Price Ratios are 0.59, 0.77 and 0.92. The current P/GP Ratio is 0.76 based on a stock price of $11.55. This testing suggests that the stock price is relatively reasonable and below the median. For P/GP Ratio, a stock is considered cheap if the ratio is at or below 1.00.

I get a 10 year median Price/Book Value per Share Ratio of 1.16. The current P/B Ratio is 1.31 a value some 13% higher. The current P/B Ratio is based on BVPS of $13.19 and a stock price of $11.55. These P/B Ratios are rather low as a good ratio is considered to be around 1.50. This stock price testing suggests that the stock price is relatively reasonable but above the median.

The company has very high dividend yields. You have to wonder if doing dividend yield testing on a stock with an historical high of over 54% is valid. However, the historical median is 8.55%. The current dividend yield is some 15% below this. This stock price testing suggests that the stock price is relatively reasonable but above the median.

When I look at analyst's recommendations, I find Strong Buy, Buy and Hold recommendations of 4 analysts. The consensus recommendation is a Buy recommendation. The 12 month stock price consensus is $14.25. This implies a total return of 30.65% with 23.38% from capital gains and 7.27% from dividends. This total return assumes a current stock price of $11.55.

There is some analysis of this stock on Highland Digest. There is more interesting analysis of this stock on Stock Newsweek. There are some analysts' comments 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.

The last stock I wrote about was about was WiLan Inc. (TSX-WIN, OTC-WILN)... learn more . The next stock I will write about will be Northland Power Inc. (TSX-NPI, OTC-NPIFF)... learn more on December 9, 2016 around 5 pm. Tomorrow on my other blog I will write about Something to Buy December 2016... learn more on Tuesday, December 8, 2016 around 5 pm.

Chesswood Group Limited is a financial services company operating primarily in the specialty finance industry. Chesswood's approach is to acquire financial services businesses. Its web site is here Chesswood Group 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. 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.