I do not own this stock of Richards Packaging Income Fund (TSX-RPI.UN, OTC-RPKIF). A member of one of my investment club suggested this stock.
When I was updating my spreadsheet, I noticed the company has a complicated structure. There is a Board of Directors for Richards Packaging and a Board of Trustees for Richards Packaging Income Fund. It would also appear that some people have special voting shares. There is also a lot of insider selling over the past year. Net Insider selling is at 8% where normal is around 0.01% to 0.02%.
Because of the odd set up of their Balance Sheet, I missed that the Exchangeable Shares could be current or non-current liabilities and so had to go back when I had finished the spreadsheet to fix this section. This sort of thing really annoys me. Also, I am not exactly clear on the company’s set up. There appears to a Board of Directors and a Board of Trustees. Another odd thing is that, at least for Canadians, the distributions are all taxed as Return of Capital.
This stock has paid dividends since it appeared on the TSX in 2004. The dividend yield is good with growth that has varied. Dividends were cut by 75% in 2009 and only 4 distributions occurred in 2009. Then distributions were flat until 2014 when the company started to raise them again. The current yield is good at 4.22%. This company used to be an income trust so the dividend yields were very high in the past and they are still relatively high.
Affordability of dividends is calculated very differently on income trust companies. Currently they are getting the Dividend Payout Ratios down to a proper level. The DPR for EPS for 2017 is 85% with 5 year coverage at 111%. For 2018 the DPR for EPS is expected to be 75% with 5 year coverage at 95%. The DPR for CFPS for 2017 is good at 35% with 5 year coverage at 35% also.
All the debt ratios currently seem fine. The Long Term Debt/Market Cap Ratio is quite low at just 0.10 in 2017. The Liquidity Ratio is a bit low in in 2017 and even lower at the end of the third quarter of 2018 with ratios of 1.43 and 1.38 respectively. The 5 year median is better at 1.73. The Debt Ratio is good at 1.92 with 5 year median at 1.95. Leverage and Debt/Equity Ratios for 2017 are 2.09 and 1.09 respectively with 5 year median at 2.05 and 1.05.
The Total Return per year is shown below for years of 5 to 13 to the end of 2017. 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.
| Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|
| 5 | 10.65% | 36.58% | 29.56% | 7.02% |
| 10 | 1.51% | 18.54% | 12.86% | 5.68% |
| 13 | 5.37% | 14.34% | 8.42% | 5.92% |
The Total Return to date is not quite as good as to the end of 2017. Stock price is up marginally in 2017 by 0.42%.
| Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|
| 5 | 10.65% | 31.14% | 24.37% | 6.77% |
| 10 | 1.51% | 25.26% | 18.16% | 7.10% |
| 13 | 5.37% | 16.79% | 10.11% | 6.68% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 15.46, 17.92 and 20.37. The corresponding 10 year ratios are 13.69, 15.65 and 17.48. The historical ratios are 13.2, 15.53 and 17.48. The current P/E Ratio is 17.68 based on a stock price of $31.30 and last 12 months EPS of $1.77. This stock price testing suggests that the stock price is relatively reasonable to expensive.
I get a Graham Price of $18.93. The 10 year low, median, and high median Price/Graham Price Ratios are 0.86, 0.98 and 1.09. The current P/GP Ratio is 1.65 based on a stock price of $31.30. This stock price testing suggests that the stock price is relatively expensive.
I get a 10 year median Price/Book Value per Share Ratio of 1.26. The current P/B Ratio is 3.48 based on Book Value of $98M, Book Value per Share of $9.00 and a stock price of $31.30. The current ratio is some 177% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
I get an historical median dividend yield of 8.67%. Since this used to be an income trust, I looked at the median dividend yield since 2011. In this case the yield is still very high at 7.31%. The current yield is 4.22% based on dividends of $1.32 and a stock price of $31.30. Testing the current dividend against the historical or the one since 2011 shows a broad spread from 51% to 42% between the testing yields and the current yields with the current yield being the much lower one. This stock price testing suggests that the stock price is relatively expensive.
The 10 year median Price/Sales (Revenue) Ratio is 0.50. The current P/S Ratio is 1.10 based on the last 12 months of Revenue at $309M, Revenue per Share of $28.34 and a stock price of $31.30. The current P/S Ratio is 121% above the 10 year median ratios. This stock price testing suggests that the stock price is relatively expensive.
When I look at analysts’ recommendations, I find none. There seems like there are no analysts following this stock.
On an absolute basis a P/E Ratio 17.68 shows a stock price that is probably relatively reasonable. However, all the other tests are showing that the stock price is relatively expensive. The stock price has been holding well this year with very little movement while the Canadian Index is down.
Caroline Biscotti on Essex Caller says the Piotroski F-Score is 8 and therefore shows a strong balance sheet on this stock. Mat Litalien on Motley Fool thinks that this stock will be on the Canadian Dividend Aristocrats list in 2019 but also thinks that it will not continue to rise the dividends. See what analysts are saying about this company on Stock Chase. They like the company but one analyst is worried about liquidity in trading.
The Fund owns Richards Packaging Inc. the leading packaging distributor in Canada, and third largest in North America. Richards Packaging is a full-service packaging distributor targeting small- and medium-sized North American businesses. Richards Packaging has operated since 1912 and currently serves over 14,000 regional companies from 18 locations throughout North America. Its web site is here Richards Packaging Income Fund.
The last stock I wrote about was about was Magna International Inc. (TSX-MG, NYSE-MGA) ... learn more. The next stock I will write about will be Bird Construction Inc. (TSX-BDT, OTC- BIRDF)... learn more on December 28, 2018 around 5 pm. Tomorrow on my other blog I will write about Top Dividend Definitions.... learn more on December 27, 2018 around 5 pm.
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