I do not own this stock of North West Company (TSX-NWC, OTC-NWTUF). I wanted to review all the income trust stocks touted in the Money Show of 2009. There was a lot of talk at this show about some of the Income Trust being currently good buys with very good yields. This stock changed from an income trust to a corporation in 2011.
When I was updating my spreadsheet, I noticed the Selling and Admin expenses are growing faster than Revenue for the past year and this is also true for the past 5 years. Revenue grew last year at 5.95%, but Expenses grew by 11.51%. Over the past 5 years revenue has grown by 29.08%, but expenses by 35.61%. This has happened 4 out of the past 5 years.
I also noted that the financial year ends at the end of January each year. However, the annual statement dated January 31, 2018 is showing online as the annual statement for 2017.
Dividend yields are good (4% to5% range). The current dividend yield is 4.53% with 5, 10 and historical median dividend yields at 4.49%, 4.78% and 5.14%. The dividend yields were higher in the past because this company spent time as an income trust. It changed to a corporation in 2011 and decreased the dividends by almost 30%. It seems to have changed to an income trust in 1996 but there was no big increase in dividends until 1999.
The dividend growth has been low lately. The 5 to 15 year growth rates are affected by the drop in dividends in 2011 of 30%. However, the increases have also been low 2005 and in the 3% range. The last increase was in 2018 and was for 3.2%. The 20 to 26 durations dividend growth rates are affected by the 153% increase in 1999. The low recent growth might be due to high current Dividend Payout Ratio.
The Dividend Payout Ratio for this company seems to have been high since 2000. They have been able to cover their dividends but payout was in the 70 and 80% ranges. The DPR for EPS for 2018 is 94% with 5 year coverage at 86%. I would like to see this lower. The DPR for CFPS is better with the one for 2018 at 36% with 5 year coverage at 37%. I like to see this coverage at 40% or less.
The Long Term Debt/Market Cap Ratio is low at 0.22 (anything below 1.00 is fine). The Liquidity Ratio is good at 1.96 for the 2018 financial year. The 5 year median ratio is 2.10. The Debt Ratio for 2018 is 1.70 and its 5 year median is 1.83. For both these ratios you want them to be at 1.50 or higher. So, these ratios are good.
The Leverage and Debt/Equity Ratios are fine at 2.52 and 1.48 respectively for 2018 with 5 year medians of 2.20 and 1.20. These ratios are normal for this sort of company.
The Total Return per year is shown below for years of 5 to 26. 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.
The shareholders have done very well by this stock. Long term shareholders certainly have with 26 year total return of 11.38%.
| Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|
| 5 | 4.24% | 10.85% | 6.08% | 4.77% |
| 10 | 2.20% | 8.77% | 3.69% | 5.08% |
| 15 | 6.47% | 18.61% | 10.28% | 8.33% |
| 20 | 12.04% | 19.97% | 10.72% | 9.25% |
| 25 | 9.93% | 12.39% | 7.40% | 4.99% |
| 29-26 | 9.19% | 11.38% | 6.85% | 4.54% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 17.12, 18.89 and 20.67. The corresponding 10 year ratios are 15.45, 17.65 and 19.75. The corresponding historical ratios are 9.96, 12.67 and 15.03. The current P/E Ratio is 16.53 based on a stock price of $28.27 and 2019 EPS estimate of 1.71. This stock price testing suggests that the stock price is relatively reasonable and probably below the median.
I get a Graham Price of $17.36. The 10 year low, median, and high median Price/Graham Price Ratios are 1.47, 1.68 and 1.84. The current P/GP Ratio is 1.63 based on a stock price of $28.27. 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 3.56. The current B/P Ratio is 3.61 based on Book Value of $381M, Book Value per Share of $7.83 and a stock price of $28.27. The current ratio is 1.39% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and around the median.
I get an historical median dividend yield of 4.98%. The current dividend yield is 4.53% based on dividends of $1.28 and a stock price of $28.27. The current dividend yield is 9.08% below the historical one. This stock price testing suggests that the stock price is relatively reasonable but above the median.
Since this stock used to be an income trust and income trust tend to have higher dividend yields it would be better to do this test from the time the company became a corporation which is 2011. This dividend yield median is 4.53%. The current yield is the same at 4.53%. This stock price testing suggests that the stock price is relatively reasonable and around the median.
The 10 year median Price/Sales (Revenue) Ratio is 0.70. The current P/S Ratio is 0.69 based on 2019 Revenue estimate of $1992M, Revenue per Share of $40.91 and a stock price of $28.27. The current P/S Ratio is 1.74% below the 10 year ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
When I look at analysts’ recommendations I find Buy (2) and Hold (4) recommendations. The consensus recommendation out be a Hold. The 12 month stock price is $32.17. this implies a total return of 18.32% based on capital gains of 13.80% and dividends at 4.53% based on a current stock price of $28.27.
The company on Market Wired talks about the change in shares to variable and common voting shares. Erna Eldridge on Simply Wall Street talks about dividends, but I have no idea where he gets his information from as he said they have paid a dividend for 1 years, but my records shows at least 29 years of dividends. Will Ashworth of Motley Fool likes this stock. See what analysts are saying about this stock on Stock Chase. They have various comments, but one says that they bought an Airline (June 2017). I missed that.
The North West Co Inc is a retailer of food and everyday products and services to rural communities and urban neighborhoods in Canada, Alaska, the South Pacific, and the Caribbean. Its web site is here North West Company.
The last stock I wrote about was about was Equitable Group Inc. (TSX-EQB, OTC-EQGPF) ... learn more. The next stock I will write about will be Pason Systems Inc. (TSX-PSI, OTC-PSYTF) ... learn more on Friday, October 26, 2018 around 5 pm. Tomorrow on my other blog I will write about Money Show 2018 – Susan Mallin.... learn more on Thursday, October 25, 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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