Thursday, April 13, 2017

Barclays PLC ADR

Sound bite for Twitter and StockTwits is: Buy for diversification. I bought this to diversity internationally. It is the only international stocks I own however, some of my Canadian stocks do business internationally. If the P/B Ratio stock price test is used the stock price is relatively reasonable and below the median. See my spreadsheet on Barclays PLC ADR.

I own this stock of Barclays PLC ADR (LSE-BARC, NYSE-BCS). I bought this stock when Barrett took over in 2000. Barrett used to run Bank of Montreal in Canada. At that time it was a good dividend paying stock and I thought it would give me some geographical diversifications. It has not performed well lately but a lot of banks, especially ones outstand Canada have not performed very well since 2008.

This bank has just finishing up its restructuring that they expect will make the bank better and a better investment for the future. Jes Staley the CEO of Barclays talks about the restructuring.

This is a UK bank that reports in UK pounds and pays dividends in UK pounds. I bought it off the NYSE in US$ as an American Depositary Receipt (ADR) stock. The information on this stock is reported in US$ in my US account. This bank does its reporting in UK£. It is rather complicated to follow as my spreadsheets has to deal with three currencies, US$, CDN$ and UK£.

Dividends are paid differently for non-Canadian (or non-US) companies. We are used to four equal dividend payments although there are companies that pay semi-annually. With Barclays they always paid a big dividend at the beginning of the year based on how good the results were for the prior year and then a smaller dividend near the end of the year. In 2010 they switched to quarterly dividends however the first dividend payment was always bigger than the other 3. In 2016 they switched back to semi-annual dividends with the first one bigger than the one at the end of the year.

Also, this bank got into difficulties in 2008 and dividends were cut 97% in 2009. Dividends were increased in 2010 some 350%, but they were still some 86% lower than where they had been in 2008. The dividends were still some 80% in 2015. In 2016 they decreased the dividends again and this time by 54%.

The bank expects that as earnings pick up, so will the distribution of dividends. Analysts also expect dividends to increase. They do not expect much for 2017, but expect higher dividends for 2018 and beyond. In 2016 analysts expected earnings of £0.089 but got earnings of £0.103. So the bank did better than they expected. It would seem that dividend decreases are now over.

The 5 year low, median and high median Price/Earnings per Share Ratio (US$) are negative and are of no use. The corresponding 10 year values are 3.96, 7.69 and 10.52. These are also affected by recent negative earning years and are too low for a bank. The historical ones are 8.38, 10.05 and 12.87. The current P/E Ratio is 15.68 based on a stock price of $10.65 and 2017 EPS estimate of $0.68. This stock price testing suggests that the stock price is relatively expensive. Note that doing this testing using UK£ I will get similar but not exact results. This would be due to exchange rate fluctuations. Often the P/E Ratio test is not the best one to use to judge the stock price.

The 10 year median Price/Book Value per Share Ratio is 0.75 (US$). The current P/B Ratio is 0.63 a values some 16% lower. The current P/B Ratio is based on BVPS of $17.00 US$ and a stock price of $10.65 US$. This stock price testing suggests that the stock price is relatively reasonable and below the median.

I get a Graham Price of $16.12 US$. The 10 year low, median and high median Price/Graham Price Ratios are .050, 0.64 and 0.79 in US$. The current P/GP Ratio is 0.66 based on a stock price of $10.65. This stock price testing suggests that the stock price is relatively reasonable but above the median.

Because of the fluctuations in dividends that is they have been up and down a lot lately, doing a dividend yield test would not be a very good one. However, the historical median dividend yield is 3.41%. The current dividend yield is just 1.40% which is lower by 59%. Certainly the current dividend yield is way off the historical median.

The 10 year median P/S Ratio is 1.34 US$. The current P/S Ratio is 1.64 US$ based on 2017 Revenue estimates of $27,493M or $6.48 US$ per share. The current P/S Ratio is some 23% above the 10 year median. This stock price testing suggests that the stock price is relatively expensive.

I have used a number of methods to try to see if the stock price is reasonable or not. Most of the tests are telling different stories. However, if you have to pick which ones to use I like the P/GP Ratio and P/B Ratio tests the best. The good thing about the P/B Ratio test is that you are not using any estimates.

When I look at analysts' recommendations I find Strong Buy, Buy, Hold, Underperform and Sell. In other words they are all over the place. Most of the recommendations are either a Buy or Hold recommendation. The consensus recommendations would be a Hold. The 12 months stock price consensus is £2.39. This implies a total return of 13.08% with 1.40% from dividends and 11.68% from capital gains. Since this is in UK pounds, what is made in US$ on the NYSE could vary because of changes in the exchange rate.

Amilia Stone on Directors Talk Interviews talks about HSBC reiterating their Buy recommendation on this stock. Colin Frost on Top Chronicle feels that Barclays shares are currently overvalued. That is that the price is too high. On a more troubling note Ben Martin in the Telegraph talks about Barclays Bank CEO Jes Staley attempts to learn the identity of a whistleblower. The board of Barclays still has faith in Staley as do other shareholders and analysts. Rupert Hargreaves of Motley Fool UK is rather negative about this stock.

One of the largest financial services groups in the United Kingdom, Barclays is engaged in banking, investment banking and asset management worldwide. Its web site is here Barclays PLC ADR.

The last stock I wrote about was about was Pembina Pipelines Corp. (TSX-PPL, NYSE-PBA)... learn more . The next stock I will write about will be Canadian Natural Resources (TSX-CNQ, NYSE-CNQ)... learn more on Tuesday, April 18, 2017 around 5 pm. Today on my other blog I will write about Dividend Changes... learn more on Thursday, April 13, 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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