Badger Daylighting Ltd

Sound bite for Twitter and StockTwits is: Dividend growth industrial. It would appear on a number of tests that the stock price seems rather high. There is lots of insider buying and this has to be a plus. See my spreadsheet on Badger Daylighting Ltd.

I do not own this stock of Badger Daylighting Ltd. (TSX-BAD, OTC- BADFF). I started to follow this stock after reading a couple of articles in February 2012 in the G&M that talked about the company. The first article looked at what the pros who manage small-cap funds are buying. Badger was one of 10 stocks mentioned and it looked like an interesting stock. It is a dividend paying small cap. The second article looked at why stocks might appeal to a conservative investor looking for income.

What is worthwhile to mention is the amount of insider buying. In the past year the Net Insider Buying was at 0.23% of market cap. For 2016 it was 0.08% of market cap and for 2015 it was 0.07% of market cap. This is a lot. Generally you would not expect more that 0.01% or 0.02% of market cap in NIB. This certainly is a positive sign.

This company was an income trust from 2004 to December 2010. For 2011, the dividends were decreased by some 19%. There was a 5.9% increase in dividends in 2012, then a 10% increase in 2016. They increased the dividends again this year by 15.2%. Is this stock a dividend growth stock? It is looking like it might become one.

It looks like this stock will be paying a low dividend but have moderate dividend growth. The current dividend is 1.63%. The 5 year median dividend is 1.50%. The last two increases were 10% and 15% and I consider dividend growth between 8 and 15% to be moderate.

They can afford their dividends. The Dividend Payout Ratio for EPS is 49% in 2016. It is expected to be lower in 2017 and 2018. The 5 year coverage is at 35%. The DPR for CFPS is 14% with 5 year coverage at 17%.

The debt ratios are very good. The Liquidity Ratio for 2016 is 3.76 and the 5 year median is 2.86. The Debt Ratio for 2016 is 2.56 with a 5 year median of 2.50. The Leverage and Debt/Equity Ratios are good also at 1.64 and 0.64 with 5 year medians of 1.92 and 0.92, respectively.

The Return on Equity is good with none under 10% over the past 10 years. The ROE for 2016 was 10.4% and the 5 year median is 20.1%.

The 5 year low, median and high median Price/Earnings per Share Ratios are 17.31, 23.06 and 28.78. The 10 year values are much lower at 8.99, 11.27 and 13.79. The historical values are similar to the 10 year ratios at 8.99, 10.98 and 13.79. The price part of this ratio has risen much faster than the earnings part over the past few years. The current P/E Ratio is 23.45. The current P/E Ratio is based on a stock price of $27.90 and EPS estimate for 2017 of $1.19. It would seem that the current stock price is still on the high side or relatively expensive. A P/E Ratio of 23.45 is on the high side but not exceptionally so.

I get a Graham Price of $14.35. The 10 year low, median and high median price/Graham Price Ratios are 0.93, 1.25 and 1.56. The current P/GP Ratio is 1.94 based on a stock price of $27.90. This stock price testing suggests that the stock price is relatively expensive. On an absolute basis a P/GP Ratio of 1.94 is high.

The 10 year median Price/Book Value per Share Ratio is 3.18. The current P/B Ratio is 3.63 based on Book Value of $285.3M, BVPS of $7.69 and a stock price of $27.90. The current P/B Ratio is some 14% higher than the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.

Since this was an income trust company and because when these companies became corporations their dividend policies had to change. This means that the historical median dividend yield is not very useful. However, this company changed to a corporation in 2011 about 6 years ago. The 6 year median dividend yield is 1.66%. The current dividend yield is 1.63% based on dividends of $0.456 and a stock price of $27.90. The current dividend yield is some 1.5% below the 6 year median. This stock price testing might suggest that the stock price is reasonable and just above the median.

The 10 year median Price/Sales (Revenue) Ratio is 1.50. The current P/S Ratio is 2.13 based on 2017 Revenue estimate of $485M, Revenue per Share of $13.07 and a stock price of $27.90. The current ratio is some 42% above the 10 year median. This stock price testing suggests that the stock price is relatively expensive.

When I look at analysts' recommendations, I find that they are all over the place. There are recommendations of Strong Buy, Buy, Hold and Underperform. Most recommendations are a Buy and the consensus recommendation is a buy. The 12 months stock price is $34.25. This implies a total return of 24.39% with 22.76% from capital gains and 1.63% from dividends. This is based on a current stock price of $27.90.

There is an interesting article by Geoffrey Morgan in the Financial Post about this company being targeted by short sellers and a sharp drop in the stock price ending in mid-May 2017. Bay Street staff have put out a report on Bay Street Canada. They said stock has gone up because of an improved quartet and a higher dividend. Joseph Solitro of Motley Fool says why he likes this stock. See what analysts are saying about this stock on Stock Chase. Some like the company and some are shorting it.

Badger is North America's largest provider of non-destructive excavating services. Badger traditionally works for contractors and facility owners in the utility and petroleum industries. Badger's business model involves the provision of excavating services through two distinct entities: the Operating Partners (franchisees in the United States and agents in Canada), and Badger Corporate. Its web site is here Badger Daylighting Ltd.

The last stock I wrote about was about was Andrew Peller Ltd. (TSX-ADW.A, OTC-ADWPF)... learn more. The next stock I will write about will be Chemtrade Logistics Income Fund (TSX-CHE.UN, OTC-CGIFF)... learn more on Friday, September 1, 2017 before 11 am. Tomorrow on my other blog I will write about Dividend Growth Stocks Part 2... learn more on Thursday, August 31, 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.

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