I do not own this stock of Chesswood Group Ltd (TSX-CHW, OTC-CHWWF). A reader wrote me in 2012 that he was researching and found a company that he hoped I could give him a brief outlook on. He said that the company is Chesswood Group and they are basically a financial leasing company. From 2009 to 2012 they increased their dividends from 2.5 cents to 5.5 cents per month. This is a 120% increase.
When I was updating my spreadsheet, I noticed Revenue has not been growing well, but analysts expect better in the future. Reason for lack of growth has to do with dropping a line a business a few years ago. There is a big difference in cash flow and cash flow less working capital.
This company used to be an income trust. It changed to a corporation in 2009, but started to cut the dividends in 2008 by around 69%. Since then they have increased them some year but left them level for other years. At the end of 2016 the dividends were increase by 7.7% and then they have been flat in 2017 and 2018. There are few analysts following this stock and they make no comments on dividends.
The dividend yields are still quite high on this stock with the current yield at 7.94% and the yield since 2009 at 7.52%. Dividends reached a high of 56% in 2008 because the stock price crashed. Most old income trusts yields have come down and a lot are in the 4% to 5% range, but it depends on the business the companies were in.
The Dividend Payout Ratio for EPS has been coming down since 2012. The current one for 2017 is 61% with 5 year coverage of 69%. When I look at the DPR for CFPS (less WC), the DPR for 2017 is 16% with 5 year coverage of 22%. So as far as being able to pay their dividends I believe the answer is yes.
Since this is a financial company the Long Term Debt/Market Cap is not what you want to look at. You want to look at assets that cover long term debt. For this stock it is Finance Receivables to Long Term Debt and the ratio is 0.75 in 2017 rising to 0.81 in the third quarter of 2018. You might also like to look at the Cash Flow to Long Term Debt Ratio which basically tells you how long the company would need to pay off the debt if they used all their cash flow from operations. For this company in 2017, it is 4.86 and for the third quarter of 2018 it is 6.63.
The Liquidity Ratio on this company is low with the ratio for 2017 at 1.42 and the ratio for the third quarter of 2018 at 0.83. However, if you added in cash flow after dividends the ratios are 6.19 and 5.47, respectively. The Debt Ratio is also low for 2017 at 1.33 and for the third quarter of 2018 at 1.27. The Debt Ratios for financials tend to be much lower than other types of companies.
The Total Return per year is shown below for years of 5 to 11. 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 had some good returns in the past, but a lot was from dividends. This company used to be an income trust with very high dividend rates. As with all past income trust companies, the dividend portion of total return will be lower in the future.
| Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|
| 5 | 5.76% | 13.74% | 4.99% | 8.76% |
| 10 | -2.77% | 22.69% | 11.84% | 10.85% |
| 11 | 0.00% | 12.37% | 4.20% | 8.17% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 8.25, 9.40 and 11.29. The corresponding 10 year ratios are 7.74, 9.38 and 11.60. The corresponding historical ones are 7.74, 99.38 and 11.60. The current 8.53 based on a stock price of $10.58 with 2018 EPS estimate of $1.24. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a Graham Price of $15.86. The 10 year low, median, and high median Price/Graham Price Ratios are 0.61, 0.75 and 0.87. The current P/GP Ratio is 0.67 based on a stock price of $10.58. 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 1.32. The current P/B Ratio is 1.17 based on a stock price of $10.58, Book Value of $148.22 and Book Value per Share of $9.02. The current ratio is 11% 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 dividend yield since 2009 of 7.52%. The current dividend yield is 7.94% based on dividends of $0.84 and a stock price of $10.58. The current yield is some 5.58% above the median yield since 2009. This stock price testing suggests that the stock price is relatively reasonable and below the median.
The 10 year median Price/Sales (Revenue) Ratio is 1.17. the current P/S Ratio is 1.57 based on 2018 Revenue estimate of $111M, revenue per Share of $6.75 and a stock price of $10.58. The current ratio is some 34% above the 10 year. This stock price testing suggests that the stock price is relatively expensive.
The P/S Ratio is an important one and it is showing the stock as expensive. However, they did change their business in 2015 to be exclusively in financial. That year there was a 30% drop in revenue. However, revenue has been climbing since. All the other testing is showing this company’s price as reasonable and below the median and that is probably where it is.
When I look at analysts’ recommendations, I find Strong Buy (1) and Buy (1). The consensus would be a Buy. The 12 month stock price is $15.00. this implies a total return of 49.72% with 41.78% from capital gains and 7.94% from dividends.
Yahoo Finance quotes from a Simply Wall Street article. Well the charts are right but dividend increases have been limited. The company discusses its third quarterly results on News Wire. Gemma Cottrell on Fairfield Current talks about a recent analyst upgrade. See what analysts are saying on Stock Chase. Few analysts are following this stock and the most recent entry is rather negative.
Chesswood Group Ltd is a financial services company, which operates specialty finance industry. The company operates through two segments: U.S. Equipment Financing and Canada Equipment Financing. Its web site is here Chesswood Group Ltd.
The last stock I wrote about was about was about Quarterhill Inc. (TSX-QTRH, NASDAQ-QTRH) ... learn more. The next stock I will write about will be Northland Power Inc. (TSX-NPI, OTC-NPIFF) ... learn more on Wednesday, December 5, 2018 around 5 pm. Tomorrow on my other blog I will write about Dividend Stocks December 2018.... learn more on Tuesday, December 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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