Home Capital Group

Sound bite for Twitter and StockTwits is: Dividend growth stock cheap. On all my testing this stock is coming out cheap. It is an alternative bank so probably more risky than the other banks, but it is cheap. It has done relatively well with growth mostly good, but there is some moderate growth in the last 5 years. See my spreadsheet on Home Capital Group.

I do not own this stock of Home Capital Group (TSX-HCG, OTC-HMCBF). I started reviewing this company in September 2009. It is a dividend growth company and was coming up on lists of good dividend paying stocks. It is on some dividend paying companies lists that I look at.

Dividends are low to moderate and dividend growth is good. The current dividend is 3.96%. However, the 5 year median dividend yield is 1.78%, the 10 year median is 1.68% and the historical median is 1.48%. Current higher dividend caused by higher Dividend Payout Ratio and lower stock price. The Dividend Payout Ratios for EPS for 2016 is 26.4% and has a 5 year ratio of 18.6%. Dividends have growth at 20.9% and 21.9% per year over the past 5 and 10 years.

If you had this stock 5, 10 or 15 years ago, your current dividend yield would be 4.11%, 5.58% or 32.12%. If you buy at the current price of $26.27 and the dividends grow at 15% per year, then in 5, 10 or 15 years' time you could be earning 7.96%, 16.02% or 32.21% on your investment.

The debt ratio is good for a bank at 1.09. Other banks have this ratio currently at 1.06 or 1.07. Their deposit liability as a ratio to its market cap is 7.87. This is middle of the road against the other banks.

The 5 year low, median and high median Price/Earnings per Share Ratios are 6.59, 9.11 and 11.72. The corresponding 10 year ratios are 6.69, 9.06 and 11.30. The historical ratios are 6.79, 9.11 and 11.72. The current P/E Ratio is 6.47 based on a stock price of $26.27 and 2017 EPS estimate of $4.06. P/E Ratios are rather consistent over time. This stock price testing suggests that the stock price is relatively cheap.

I get a Graham Price of $46.11. The 10 year low, median and high median Price/Graham Price Ratios are 0.66, 0.91 and 1.11. The current P/GP Ratio is 0.57 based on a stock price of $26.27. This stock price testing suggests that the stock price is relatively cheap.

The 10 year median Price/Book Value per Share Ratio is 2.06. The current P/B Ratio is 1.13 a value some 45.2% lower than the 10 year median. The current P/B Ratio is based on a BVPS of $23.27 and a stock price of $26.27. This stock price testing suggests that the stock price is relatively cheap.

I get a current dividend yield of 3.96% based on dividends of $1.04 and a stock price of $26.27. The historical median dividend yield is 1.48% a values some 167% lower. This stock price testing suggests that the stock price is relatively cheap.

When I look at analysts' recommendations I find Buy, Hold and Underperform recommendations. The consensus would be a Hold recommendation. The 12 months consensus stock price is $30.20. This implies a total return of 18.92%, with 3.96% from dividends and 14.96% from capital gains.

Ryan Goldsman of Motley Fool thinks investors should seriously consider buying this bank. Joanna Charbonneau on Chaffey Breeze says that Scotia Bank has reaffirmed their sector perform rating (Hold) on these shares and has a target price of $30.00. Garry Marr in the Financial Post says that lower than lower-than-anticipated retention and renewal levels along with elevated expenses continued to drive down results at Home Capital Group Inc. He says that they are still recovering from a decline in its insured originations from 2015 when a number of brokers had falsified income documents to help clients obtain mortgages. See what analysts are saying about this stock on Stock Chase. Some have shorted this stock and others say that it is too dependent on the Canadian Housing market.

Home Capital Group Inc. operates through one subsidiary, Home Trust Company, to provide mortgage lending, deposit, retail credit and credit card issuing services. They have subprime mortgages. Its stock is widely held. Its web site is here Home Capital Group.

The last stock I wrote about was about was ARC Resources Ltd. (TSX-ARX, OTC-AETUF)... learn more . The next stock I will write about will be Manulife Financial Corp. (TSX-MFC, NYSE-MFC)... learn more on Tuesday, February 21, 2017 around 5 pm.

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.