Friday, August 25, 2017

Superior Plus Corp

Sound bite for Twitter and StockTwits is: Future dividend growth industrial. This stock used to be an income trust company, and was one of the ones that had to change to a corporation. All the old income trust companies are having a hard time covering dividends as a corporation. Some cut dividends, some left them level and some did both. Only the odd ones can raise dividends. See my spreadsheet on Superior Plus Corp.

I do not own this stock of Superior Plus Corp (TSX-SPB, OTC-SUUIF). I started to follow this stock as it was an income trust company that was talked about in the Money Reporter from MPL Communications. This company changed to a corporation from Income Trust (TSX-SPF.UN) in 2009.

They still cannot afford the dividends they are paying and I would suspect that they will not increase them until they can. The Dividend Payout Ratio for 2016 looks good at 35.8% but the EPS are high because of a discontinued business. The DPR for 2017 is expected to be above 100% again in 2018 at 122%. This is better than for 2015 where the DPR was 360%. The 5 year median coverage is 148%. A lot of old trust companies are having a hard time covering dividends.

However, a number of analysts feel that this company could become a dividend growth stock in the next few years. They do not see big increases, but maybe a couple of percentage points over the next two years. Analysts seem to feel that dividends will be covered by earnings by 2019. However, the further you look out the less certain the analyst's estimates are. Analysts often do not get this year's estimate right let alone a couple of years into the future.

In the meantime, the dividend yield is very good at 6.29%. So buying this stock you could collect a good dividend while waiting for future dividend increases. Once they start to increase the dividend the dividend yield is likely to go lower permanently.

The 5 year low, median and high median Price/Earnings per Share Ratios are 25.63, 29.15 and 32.68. The corresponding 10 year values are 9.99, 12.44 and 15.35. The historical values are 14.87, 17.44 and 20.02. Mainly the 5 year ratios are high because of depressed EPS. The current P/E Ratio is 19.41 based on a stock price of $11.45 and 2017 EPS estimate of $0.59. I think that this stock price test suggests that the stock price is relatively expensive.

I get a Graham Price of $9.22. The 10 year low, median and high median Price/Graham Price Ratios are 0.87, 1.17 and 1.54. The current P/GP Ratio is 1.24 based on a stock price of $11.45. This stock price testing suggests that the stock price is reasonable but above the median.

I get a 10 year median Price/Book Value per Share Ratio of 2.40. The current P/B Ratio is 1.79 based on a Book Value of $914M, BVPS of $6.40 and a stock price of $11.45. The current ratio is some 25.6% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap. This may be the best test for the stock price.

There are problem with doing stock price testing on old income trust companies based on dividend yields. Income trust companies had dividend yields that will never be met in the future. The historical median dividend yield is 10.25% a very high value. The 5 and 10 year median dividend yields are 5.91% and 9.37%. The current dividend yield of 6.29% is 6% higher than the 5 year median, but it is lower than the others. It was thought that Income Trusts would end up with dividend yields in the 4 to 5% range. Obviously this one is still rather high.

The 10 year median Price/Sales (Revenue) Ratio is 0.42. The current P/S Ratio is 0.72 a value some 74% higher. This current P/S Ratio is biased on 2017 Revenue estimate of $2,256M, Revenue per Share of $15.80 and a stock price of $11.45. This stock price testing suggests that the stock price is relatively expensive. It is rather worry some when revenue is declining, but they did sell off some business.

When I look at analysts' recommendations, I find Buy (3) and Hold (6) recommendations. Most are Hold recommendations and the consensus recommendation is a Hold. The 12 month stock price consensus is $13.58. This implies a total return of 24.89% with 6.29% from dividends and 18.60% from capital gains based on a stock price of $11.45.

There is a press release on Market Wired by the company announcing their second quarterly results for 2017. Ashwin Virk talks about this stock on Simply Wall Street. See what analysts are saying on Stock Chase. They like it, especially the 6% dividend.

I look at stuff on the internet about stocks that I am reviewing. Sometimes I wonder if they are talking about the right stock, this is especially true on Simply Wall Street. He gets the current dividend right of $0.06. However, this is paid monthly so the current rate is $0.72. He says in three years' time analyst think it will be $.492? Any analysts I looked at think dividends will go up and not down. Simply Wall Street reviews often seem to be rather superficial. He does not seem to recognize that the good EPS in 2016 is because of a sale of a discontinue business. Of course EPS will go down, but quotes for 3 years' time are closer to $0.90 rather than $0.57.

Superior Plus Corp. (Superior) is a Canada-based diversified business company. The Company operates through two segments: Energy Distribution and Specialty Chemicals. The Company's Energy Distribution operating segment provides distribution, wholesale procurement and related services in relation to propane, heating oil and other refined fuels under Canadian propane division and the United States refined fuels division. The Company's Specialty Chemicals segment is a supplier of sodium chlorate and technology to the pulp and paper industry and a regional supplier of potassium and chlor-alkali products in the United States Midwest. Its web site is here Superior Plus Corp.

The last stock I wrote about was about was Jean Coutu Group Inc. (TSX-PJC.A, OTC-JCOUF)... learn more. The next stock I will write about will be Andrew Peller Ltd. (TSX-ADW.A, OTC-ADWPF)... learn more on Monday, August 28, 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. I am on Instagram. Or you can just Google #walktoronto spbrunner8166 to see my pictures.

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