Friday, March 24, 2017

Melcor Developments Inc.

Sound bite for Twitter and StockTwits is: Buy for Diversification. This is a small cap real estate stock and is on the risky side. Most of the stock price testing says that the stock price is relatively cheap to reasonable. See my spreadsheet on Melcor Developments Inc.

I own this stock of Melcor Developments Inc. (TSX-MRD, OTC-MODVF). This was one of the stocks on Mike Higgs' list of good dividend growth stocks. So I looked into it and bought it. I bought this stock first in 2008 and then some more in 2009. It is a little followed real estate company from Western Canada.

How have I done? I have this stock for around 9 years. My total return is 8.32% per year with 4.13% from dividends and 4.19% from capital gains. Considering it is from Alberta, I probably have not badly on this stock. I have hopes for the future.

The dividend yield is moderate. The historical median dividend yield is 2.76%, the 5 year median dividend yield is 3.02% and the 10 year median dividend yield is 2.97%. The dividends have increased over the past 5 and 10 years by 3.7% and 4.8% per year. The problem is that they have decreased their dividends by 20% in 2016. The dividend growth figures include this dividend decrease.

The company has been growing its dividend over the longer term, but it has decreased as well as increased its dividends over the past 27 years I have dividend data. There are 3 years with dividend deceases and 19 years of increases and 4 years when dividends did not change. It could probably be considered to be dividend growth company.

The Dividend Payout Ratio for 2016 was 46%. The DPR for CFPS was 23% (although it was 60% in 2015). If you look at DPR for CFPS excluding the change in working capital, the ratio is 52% (with a 5 year value of 68%). The CFPS excluding change in working capital is probably the one to pay attention to.

A problem with this company is that for the past 6 years the EPS has been higher than the CFPS. This is a concern. Studies have shown that companies with the EPS/CF Ratio below 1.00 outperform companies with EPS/CF Ratio above 1.00. In 2016 this company EPS/CF Ratio was 1.14 and it has a 5 year median of 1.32. This is just a cautionary note.

Debt/Market Cap Ratio is 1.26. This is too high. It means that the company's long term debt is higher than the company's market cap. I get a Liquidity Ratio of 4.96. This is the coverage of current assets by current liabilities. The Debt Ratio is 2.11. This is a good value. Leverage and Debt/Equity Ratios are also good at 1.90 and 0.90.

The 5 year low, median and high median Price/Earnings per Share ratios are 5.40, 6.91 and 8.43. The 10 year ratios are 5.38, 8.10 and 9.33. The historical P/E Ratios are 5.40, 7.16 and 8.40. The current P/E Ratio is 13.86 based on 2017 EPS estimate of $1.15 and a stock price of $15.94. This stock price testing suggests that the stock price is relatively expensive.

I get a Graham Price of $27.78. The 10 year low, median and high median Price/Graham Price Ratios are 0.36, 0.56 and 0.68. The current P/GP Ratio is 0.55 based on a stock price of $15.94. This stock price testing suggests that the stock price is relatively reasonable and around the median.

I get a 10 year Price/Book Value per Share Ratio of 0.73. The current P/B Ratio is 0.53 based on BVPS of $29.83 and a stock price of $15.94. The current P/B Ratio is 27% below the 10 year median ratio and this stock price testing suggests that the stock price is relatively cheap.

I get an historical dividend yield of 2.76. The current dividend yield is 3.01% based on dividends of $0.48 and a stock price of $15.94. The current yield is higher than the historical yield by 9.1%. This stock price testing suggests that the stock price is relatively reasonable and below the median.

There is only one analyst following this stock. The recommendation is a Hold and therefore the consensus would be considered a Hold. The 12 month stock price is $16.00. The total return would be 3.39% with 3.01% from dividends and 0.38% from capital gains based on a current stock price of $15.94.

This company put out a Market Wired item saying the current CEO resigned and that the Board appointed Darin Rayburn as President and CEO effective April 15, 2017. Cole Patterson on Simply Wall Street feels that Melcor Developments has a concerning amount of debt on its balance sheet. The company highlights 2016 annual results on News Wired via Yahoo .

This company is primarily engaged in the acquisition of land for development and sale of residential communities, multi-family sites and commercial sites. It operates western Canada and the US. The company also develops, owns and manages commercial income properties, as well as four golf courses. Melcor owns a well-diversified portfolio of assets in Alberta, Saskatchewan, British Columbia, Arizona and Colorado. Its web site is here Melcor Developments Inc.

The last stock I wrote about was about was AltaGas Ltd (TSX-ALA, OTC-ATGFF)... learn more . The next stock I will write about will be BCE Inc. (TSX-BCE, NYSE-BCE)... learn more on Monday, March 27, 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.

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