Monday, February 6, 2017

Shaw Communications Inc.

Sound bite for Twitter and StockTwits is: Buy for diversification. You should expect some volatility in this stock because of the business it is in. The stock price is on the high side, but might be fairly reasonable. It is a dividend growth stock, but here again expect some volatility. There are negatives in the very low Liquidity Ratio and lack of dividend increases recently. See my spreadsheet on Shaw Communications Inc.

I do not own this stock of Shaw Communications Inc. (TSX-SJR.B, NYSE-SJR). I am following this stock because it was a stock on Investment Reporter's list, a MPL Communications Publication. You would buy for diversification. You should expect volatility in growth. You should expect a good dividend but some volatility in the growth of dividends.

The dividend is current good with low to good dividend growth. I have dividend information back to 1994. The current dividend is good at 4.22% based on dividends of $1.185 and a stock price of $28.07. The 5 year median dividend is 4.32%, the 10 year median dividend is 4.17%, but the historical median dividend yield is just 1.2%. That is because dividends started off very low.

The dividend growth is 5.7% and 17.4% per year over the past 5 and 10 years. The last dividend increase occurred near the beginning of 2015 and it was for 7.7%. There have been no increases since then. Analysts seem to feel that there could possibly an increase in the 2018 and/or 2019 financial years. I have records from 1994 and since then they have never deceased dividends, but there were years of no increases.

The Dividend Payout Ratio for the 2016 Financial Year for EPS was 47%. The financial year end is in August each year. The 5 year DPR for EPS is 42%. The DPR for EPS for 2017 is expected to be 102% in 2017, but reducing in 2018. The DPR for CFPS was 36% in 2016 and the 5 year one was 33%.

The lower earnings in for the first quarter of 2017 are due to loss provisions for the company's investment in Shomi. This would be a one off charge that is unlikely to affect future earnings. However, the earnings for this company tend to be somewhat volatile.

This company has vulnerability is the very low Liquidity Ratio. For the 2016 financial year the Liquidity Ratio was 0.48 and its 5 and 10 year median values are 0.54 and 0.57. If you added cash flow after dividends, the ratio goes to 1.08. This is still a low value as I like to ratio to be at least 1.50. If you exclude current long term debt and add in cash flow after dividends the ratio only goes to 1.40.

When the Liquidity Ratio is below 1.00, it means that current assets cannot cover current liabilities. This company relies on cash flow to pay current liabilities. The risk is that they could be short of cash in bad times. These ratios got very low in 2000, with the Liquidity Ratio at just 0.17 and addition of cash flow brought to 0.54 and adding back in current portion of long term debt made the ratio to 0.79. It is still under 1.00 so they could not cover current debt.

The 5 year low, median and high median Price/Earnings per Share Ratios are 12.31, 14.10 and 15.19. The 10 year corresponding ratios are 13.18, 14.83 and 17.36. The historical ratios are 13.36, 15.53 and 17.69. It would seem that the current P/E Ratios are lower today than they have been in the past.

The current P/E Ratio is 24.20 based on a stock price of $28.07 and 2017 EPS estimate of $1.16. The EPS for 2017 is expected to be some 54% lower than in 2016. This is possible as the first quarterly EPS is at $0.18 compared to $0.43 of 2016, a drop of some 58%. This stock price testing suggests that the stock price is relatively expensive.

I get a Graham Price of $17.09. The 10 year low, median and high median Price/Graham Price Ratios are 1.24, 1.43 and 1.59. The current P/GP Ratio is 1.64 based on a stock price of $28.07. This stock price testing suggests that the stock price is relatively expensive.

I get a 10 year Price/Book Value per Share Ratio of 2.95. The current P/B Ratio is 2.51 a value some 14.9% lower. The current P/B Ratio is based on BVPS of $11.19 and a stock price of $28.07. This stock price testing suggests that the stock price is relatively reasonable and below the median.

The historical dividend yield is 1.20%. The current dividend yield is 4.22% based on a stock price of $28.07 and dividends of $1.185. This stock price testing suggests that the stock price is cheap. There are some problems with this testing. Dividends on this stock started very low (below 1%) and then were rammed up between 2004 and 2009 into the 4% range. Other Telecoms have similar yields with BCE at 4.75% and Rogers at 3.40% currently. So this may not be the best test. However, it does suggest that the stock price is relatively cheap. On the other hand, the current stock price is at the top end of the stock price for this stock.

When I look at analysts' recommendations, I find Buy, Hold and Underperform recommendations. Most of the recommendations are a Buy or a Hold recommendation. The consensus recommendation would be a Hold. The 12 month stock price consensus is $28.46. This implies a total return of 5.61% with 1.39% from capital gains and 4.22% from dividends based on a current stock price of $28.07.

Emily Jackson in the Financial Post says that Shaw reported choppy results in the first quarterly results of 2017. Joey Frenette of Motley Fool thinks that Shaw is the best of the telecoms to buy. See what analysts are saying on Stock Chase. Some do not like this company.

Shaw Communications Inc. is a diversified communications company whose core business is providing broadband cable television, Internet, digital phone and satellite direct-to-home services. Industry: Communications & Media (Cable). Its web site is here Shaw Communications Inc.

The last stock I wrote about was about was Valener Inc. (TSX-VNR, OTC-VNRCF)... learn more . The next stock I will write about will be AGF Management Ltd. (TSX-AGF.B, OTC-AGFMF)... learn more on Monday, February 6, 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.

No comments:

Post a Comment