I do not own this stock of TMX Group Ltd (TSX-X, OTC-TMXXF). I looked at this stock in 2008 after I found it on a list of Strongest Dividend Growth stocks. I am interested in such stocks. However, this has not turned out not to be a strong dividend growth stock after all.
When I was updating my spreadsheet, I noticed that insiders have few if any shares even though they have stock options and rights. For example, both the CEO and Chairman have hold no shares. The Net Insider Selling is at 0.06%. This is high, but it seems that insiders are not taking up their options in shares.
The dividend yield is moderate with the current dividend at 2.70%. The 5, 10 and historical median dividend yields are 3.04%, 3.44% and 3.18% respectively. While there was some very high dividend growth in the beginning, between 2008 and 2013 inclusive there were no dividend increases.
As you can see from the chart below there has not been much dividend growth lately. However, the last increase was in 2018 and it was for 16%. For 2017 there was also a good dividend increase for 11%. Analysts expect the company to also raise dividends in 2019, but at a lower rate of 4.3%.
Currently they can afford their dividends. For 2017 the Dividend Payout Ratio was 30% with 5 year coverage at 63%. However, in 2016 DPR was 46% with 5 year coverage at 107%. Analysts expect that the company will have lower earnings next year and have a DPR of around 45%. The problem is that their earnings have been all over the place. In such a situation the 5 year coverage is the most important figure.
The debt ratio that I do not like is the Liquidity Ratio. This is an important ratio because it looks at the coverage of current liabilities by current assets. The problem with a very low one is that in bad times a company can get into serious trouble with a low Liquidity Ratio. The Liquidity Ratio for 2017 is 0.97. That means that the current assets cannot cover the current liabilities. If you add in cash flow after dividends it only rises to 0.98. If you take off current debt it becomes just 1.02.
This means that the company is dependent on cash flows and being able to roll over current debt to pay for current liabilities. This makes this stock quite vulnerable. This is especially true because a lot of economists think that the next recession will hit companies that are vulnerable because of debt.
The Long Term Debt/Market Cap Ratio is 0.14 and this is a good ratio. The Debt Ratio rather low at 1.14 but financials tend to have low Debt Ratios. Leverage and Debt/Equity Ratios for 2017 are high at 8.05 and 7.05 but here again financials tend to have rather high ratios.
The Total Return per year is show below for years of 5 to 15. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See charts below.
Depending on when this stock has been bought, it would seem shareholders can get a good Total Return. The Total Return has been inconsistent and has most items for this stock.
| Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|
| 5 | 4.04% | 9.69% | 6.79% | 2.90% |
| 10 | 2.52% | 5.62% | 2.92% | 2.69% |
| 15 | 13.05% | 21.42% | 13.42% | 7.99% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 10.09, 15.18 and 20.27. The corresponding 10 year ratios are 11.09, 15.12 and 20.68. The corresponding historical ratios are 15.35. 21.41 and 25.02. The current P/E Ratio is 17.44 based on a stock price of $85.98 and 2018 EPS estimate of $4.93. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a Graham Price of $81.02. The 10 year low, median, and high median Price/Graham Price Ratios are 0.97, 1.19 and 1.31. The current P/GP Ratio is 1.06 based on a stock price of $85.98. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 10 year median Price/Book Value per Share of 1.14. The current P/B Ratio is 1.45 based on Book Value of $3,285M, Book Value per Share of $59.18 and a stock price of $85.98. A problem here is that the book value has only gained some 1.9% per year over the past 5 years and this is very low and not a good development. The current P/B Ratio is some 27% above the 10 year median. This stock price testing suggests that the stock price is relatively expensive.
I get an historical median dividend yield of 3.18%. The current dividend yield is 2.70% based on dividends of $2.32 and a stock price of $85.98. The current dividend yield is 15% below the historical dividend yield. This stock price testing suggests that the stock price is relatively reasonable but above the median.
The 10 year median Price/Sales (Revenue) Ratio is 4.52. The current P/S Ratio is 5.83 based on 2018 Revenue estimate of $818M, Revenue per Share of $14.74 and a stock price of $85.98. The current ratio is some 29% higher than the 10 year median. This stock price testing suggests that the stock price is relatively expensive.
When I look at analysts’ recommendations I find Buy (3) and Hold (3). The consensus would be a Buy. The 12 month stock price is $87.00. This implies a total return of 3.88% with 1.19% from capital gains and 2.70% from dividends. This implied total return suggests that the stock price is relatively high.
You can see trading statistics for June 2018 for this group on News Wire. Ambrose O'Callaghan on Motley Fool thinks that now may not be a good time to buy the stock as it has hit an all-time high. See what analysts are saying about this stock on Stock Chase. Most analysts, except one, things that the stock is undervalued. There is one analyst that believes stock price is excessive.
TMX Group Ltd is engaged in the financial services domain. The company operates cash and derivatives markets for equities and fixed income. Most of its revenue is in the form of trading and clearing fees. Its web site is here TMX Group Ltd.
The last stock I wrote about was about was Inter Pipeline Ltd (TSX-IPL, OTC-IPPLF) ... learn more. The next stock I will write about will be Artis REIT (TSX-AX.UN, OTC-ARESF) ... learn more on Wednesday, July 18, 2018 around 5 pm. Tomorrow on my other blog I will write about Another Source of Income 2.... learn more on Tuesday, July 17, 2018 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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