I do not own this stock of Chemtrade Logistics Income Fund (TSX-CHE.UN, OTC-CGIFF). I decided to investigate this stock after reading an article in the G&M in February 2012 about investing in small cap stocks that pay dividends. This was one of the stocks mentioned that I had never heard of before.
When I was updating my spreadsheet, I noticed high dividend yield, but no dividend growth. Also, there is a lot of red ink which is confided mostly to 5 year running averages and some per share growth. The outstanding shares have grown a lot with 17% and 11% per year over the past 5 and 10 years.
This company did growth their dividends when they first started out as a trust. They are classified as a Mutual Fund Trust, so the distributions are taxed depending on source as Other Income, Dividends other than Eligible Dividends and Foreign Non-Business Income. If you want to buy this stock it would be a good idea to see what happened in past years to understand how you will be taxed after any purchase if this is for a unregistered account. The company has this information on their site.
This company has kept their distributions at $1.20 per year per year since 2007. Analysts seem to feel that they will start to increase the distribution beginning in 2018. However, I cannot see anywhere this is stated by the company. Frankly, I do not see this. If we are to judge the distributions based on Funds from Operations (FFO) and Adjusted Funds from Operations (AFFO) both these dropped a lot in the second quarter of 2018.
The Dividend Payout Ratio for 2017 based on AFFO is 56% with 5 year coverage at 48%. The DPR for 2017 for FFO is 88% with 5 year coverage at 69%. If you compare the AFFO for the 12 month period to the end of the second quarter to the 12 mnth period ending at December 2017, it is down by 46%. The FFO drop is even higher at 55%.
The Long Term Debt/Market Cap Ratio for 2017 was 0.71. However, the current one is 0.88. Mind you, you one tends not to worry about this until is approaches 100%. The Liquidity Ratio for 2017 was low at 1.37 and 5 year median at 1.04. If you add in cash flow after distributions this ratio becomes 1.53 with 5 year median at 1.36. Not stellar but probably acceptable.
The Debt Ratio is 1.63 with 5 year median at 1.57. Leverage and Debt/Equity Ratios are 2017 are 2.60 and 1.60 with 5 year median at 2.74 and 1.78. A little high but acceptable.
The Total Return per year is show below for years of 5 to 16. 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.
Shareholders have done well, but most of the total return is in dividends. The capital gains returns are relatively low.
| Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|
| 5 | 0.00% | 10.42% | 3.52% | 6.90% |
| 10 | 0.00% | 18.94% | 8.42% | 10.52% |
| 15 | 0.17% | 16.36% | 4.50% | 11.86% |
| 16 | 5.68% | 14.82% | 3.18% | 11.64% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 11.18, 12.11 and 13.04. The corresponding 10 year ratios are 8.05, 10.33 and 13.01. The corresponding historical ratios are 12.42, 14.57 and 16.47. The current P/E Ratio is 18.31 based on a stock price of $16.30 and EPS estimates of $0.89. This stock price testing suggests that the stock price is relatively expensive.
Since this is a trust we should repeat this test with FFO and AFFO. The 5 year low, median, and high median, Price/AFFO Ratios are 6.66, 7.24 and 8.07. The corresponding 10 year ratios are 5.70, 6.82 and 7.67. The current P/AFFO Ratio is 14.09 based on last 12 month AFFO of $1.16 and a stock price of $16.30. This stock price testing suggests that the stock price is relatively expensive.
I get a Graham Price of $15.32. The 10 year low, median, and high median Price/Graham Price Ratios are 0.98, 1.11 and 1.27. The current P/GP Ratio is 1.06 based on a stock price of $16.30. 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 Ratio of 1.66. The current P/B Ratio is 1.39 based on a stock price of $16.30, Book Value of $1085M and Book Value per Share of $11.73. the current ratio is some 16% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get an historical median dividend yield of 8.09%. The current dividend yield is 7.36% based on dividends of $1.20 and a stock price of $16.30. The current dividend yield is some 9% lower than historical median. 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 0.80. The current P/S Ratio is 0.91 based on 2018 Revenue estimate of $1667M, Revenue per Share of $18.00 and a stock price of $16.30. the current ratio is some 13% above the 10 year median. This stock price testing suggests that the stock price is relatively reasonable but above the median.
When I look at analysts’ recommendations I find Buy (7) and Hold (2). The consensus would be a Buy. The 12 month stock price consensus is $19.08. This implies a total return of 24.42% with 17.06% from capital gains and 7.36% from dividends based on a current stock price of $16.30.
The company announced on News Wire the results of their second quarter of 2018. Michelle Swanson on Press Oracle talks about some analysts that have lower the target stock price on this stock. Brian Paradza of Motley Fool thinks this is a good stock for your watch list. See what analysts are saying about this stock on Stock Chase. They think it is a decent company with a great dividend yield.
Chemtrade Logistics Income Fund provides industrial chemicals and services to customers in North America and around the world. It owns nearly 62 production facilities in North America. Its web site is here Chemtrade Logistics Income Fund.
The last stock I wrote about was about was Badger Daylighting Ltd. (TSX-BAD, OTC- BADFF) ... learn more. The next stock I will write about will be Alimentation Couche-Tard Inc. (TSX-ATD.B, OTC-ANCUF) ... learn more on Tuesday, September 4, 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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