Rogers Sugar Inc.

Sound bite for Twitter and StockTwits is: Buy for yield. Bearish. This stock has a very good yield and it does not take a very long time to cover the cost of your stock purchase. In a lot of 10 year periods cost coverage was around 100%. A drawback is with the low dividend growth, you do not see that much dividend growth. Price seems to be relatively high. It is an interest commodity stock. See my spreadsheet on Rogers Sugar Inc.

I do not own this stock of Rogers Sugar Inc. (TSX-RSI, OTC-RSGUF). This stock was brought to my attention by Dividend Ninja. This company used to be an Income Trust (TSX-RSI.UN) but it has been converted to a corporation. On its change to a corporation, it lowered its dividend.

You would expect this stock to provide a nice dividend yield and little in the way of capital gains. The dividends would be good, but dividend growth would be expected at the rate of inflation. This is similar to expectations from Real Estate. You would buy this stock for diversification purposes.

The current dividend yield is 5.33%. The dividend growth is 2.17% over the past 5 years and is a negative 1.11% over the past 10 years. These hide a number of things. First this company used to be an income trust and when it ceased to be one it lowered its dividend by just under 30%. They then started to raise the dividend by 6.7% and 4.4% in 2012 and 2013. Since then the dividend has been flat.

The dividend has been flat because they raised the dividends to much too soon and put themselves in the position of not being able to afford their dividends. Their Dividend Payout Ratio was 184% in 2013. It has been traveling south ever since. They would have been better off if they just raised the dividend by 2% or so each year. Note that the financial year ends in September each year.

The Dividend Payout Ratio for 2016 reasonable at 56%. It is expected to be around 80% in 2017 and then fall again in 2018. The DPR for CFPS for 2016 is at 30% and this is also an acceptable ratio. The 5 year DPR for CFPS is 55% and this is too high. It needs to be 40% or less.

Book Value has declined over the past 5 and 10 years by 3% and 0.1%. A declining book value is never a good sign. The book value is fall basically because they are paying out more in dividends that they have earned.

The 5 year Low, Median and High Median Price/Earnings per Share Ratios are 14.49, 16.21 and 18.52. The corresponding 10 year values are 9.53. 10.62 and 11.89. The corresponding historical values are 8.79, 9.82 and 11.10. So it would appear that part of the capital gain for this stock is due to rising P/E Ratios. This is not uncommon for small caps. In 1999 it was worth $290M and today it is worth around $633M.

The current P/E Ratio is 15.00 based on a stock price of $6.75 and 2017 EPS estimate of $0.45. This testing suggests that the stock price might be relatively reasonable. This is based on 5 year P/E Ratios. If you look longer term, the stock is relatively expensive.

I get a Graham Price of $5.34. The 10 year low, median and high median Price/Graham Price Ratios are 0.76, 0.88 and 1.02. The current P/GP Ratio is 1.26. This stock price testing suggests that the stock price might be relatively expensive. For this sort of stock, I would suggest that on an absolute basis, the price is not good if the P/GP Ratio is above 1.00.

The problem in testing the stock price is that the Book Value per Share is declining. The 10 year median Price/Book Value per Share Ratio is 1.67. The current P/B Ratio is 2.40 a value some 43% higher. I also think that for this sort of stock the P/B Ratio of 2.40 is too high. This stock price testing suggests that the stock price is relatively expensive.

The last thing to look at is the dividend yield. This is a hard test to do on this stock because the dividends were reduced after the company became a corporation. It was expected that this sorts of stocks would end up with dividend yield in the 4 to 5% range. The stock did this as the current dividend yield is 5.33%.

Since dividend yield is not a great test, I should probably also look at P/S Ratio. The 10 year median value is 0.83. The current P/S Ratio is 0.95 a value some 14% higher. The current P/S Ratio is based on 2017 Revenue estimate of $670 or $7.14 per share. This stock price testing suggests that the stock price is relatively reasonable, but above the median.

When I look at analysts' recommendations, I find 4 analysts following this stock and all give it a Hold recommendation. The 12 month stock price is $6.56. This is 3% below the current stock price of $6.75. The total return would be 2.52% with 5.33% from dividends and a capital loss of $2.81%.

Donald Swayze on Daily Quint says that TD Securities has raised the target of this stock of $6.50 recently. Rogers has put out a Press Release of their fourth quarterly results. )...The staff at Wall Street Confidential say this stock as a Relative Strength Index of 59.15. An RSI reading over 70 would be considered overbought, and a reading under 30 would indicate oversold conditions. A level of 50 would indicate neutral market momentum. )...See what analysts are saying at Stock Chase

The last stock I wrote about was about was Royal Bank of Canada (TSX-RY, NYSE-RY)...learn more . The next stock I will write about will be Calian Group Ltd. (TSX-CGY, OTC-CLNFF)... learn more on Friday, January 13, 2017 around 5 pm. Tomorrow on my other blog I will write about Year 2016... learn more on Thursday, January 12, 2017 around 5 pm.

Rogers Sugar Inc. was established to hold all of the common shares and notes of Lantic Inc. Lantic Inc. is a refiner, processor, distributor and marketer of sugar products in Canada. Its web site is here Rogers Sugar 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.