I own this stock of Home Capital Group (TSX-HCG, OTC-HMCBF). I started reviewing this company in September 2009. It is a dividend growth company and was coming up on lists of good dividends paying stocks. It is on some dividend paying companies lists that I look at.
When I was updating my spreadsheet, I noticed that there is lots of insider buying this year as there was last year. This year NIB is at 0.14% with last year at 0.15%. Normal would be around 0.01% or 0.02%. The company is also buying back shares. Last year they bought back almost 23% of the outstanding shares. I do not generally agree with buybacks, but at least they are buying back shares at a low price.
After they got into trouble in 2017, they cancelled their dividends. Analysts do expect that dividends will be reinstated. Some thought it would be in 2018 but since that did not happen, they are giving 2019 as the year for dividend reinstatements.
Prior to 2017 they could afford their dividends. The Dividend Payout Ratio for 2016 for EPS was 26% with 5 year coverage at 19%. The DPR for 2016 for CFPS was 23% with 5 year coverage at 14%.
Debt Ratios are fine on this stock. As with other financials, you do not look at Long Term debt/Market Cap Ratios for at Deposit/Asset Ratios. You want to make sure that they can cover their deposits with assets. For this stock the Deposit/Asset Ratio is 0.74. This is good. I do Liquidity Ratio which is 2.62 and good. However, analysts do ignore this ratio for banks and some other financials. The Debt Ratio is 1.10. For this sort of company, you want this ratio at 1.04 or higher.
The Total Return per year is shown below for years of 5 to 23 to the end of 2018. 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.
It would seem that long term investors have not done badly. It is just recent investors, like me, that have done poorly.
|From||Years||Div. Gth||Tot Ret||Cap Gain||Div.|
The 5 year low, median, and high median Price/Earnings per Share Ratios are 7.61, 9.38 and 11.89. The corresponding 10 year ratios are 7.15, 9.15 and 11.02. The corresponding historical ratios are 7.50, 9.11 and 11.72. The current P/E Ratio is 8.09 based on a stock price of $17.15 and 2019 EPS estimate of $2.12. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a Graham Price of $35.51. The 10 year low, median, and high median Price/Graham Price Ratios are 0.66, 0.86 and 1.07. The current P/GP Ratio is 0.48 based on a stock price of $17.15. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median Price/Book Value per Share Ratio of 1.77. The current P/B Ratio is 0.65 based on Book Value of $1,641M, Book Value per Share of $26.45 and a stock price of $17.15. The current ratio is 63% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I cannot do an historical median dividend yield test as dividends have been suspended.
The 10 year median Price/Sales (Revenue) Ratio is 5.31. The current P/S Ratio is 2.76 based on 2019 Revenue estimate of $386M, Revenue per Share of $6.22 and a stock price of $17.15. The current P/S Ratio is 48% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
Results of stock price testing is saying that the stock is relatively cheap. The P/E Ratio test does not say this, but that is my least favourite test.
When I look at analysts’ recommendations, I find Hold Recommendations (7) only. The consensus recommendations would therefore be a Hold. The 12 month stock price consensus is $18.86. This implies a total return of 9.97% all from capital gain and based on a current stock price of $17.15.
See what analysts are saying on Stock Chase. They think the company has challenges. Karen Thomas on Motley Fool thinks this stock is too risky to buy. Jacob Boyd on Simply Wall Street notes that analysts expect a big increase in earnings. Lisa Matthews on Fairfield Current talks about CIBC raising their target price on this stock. .
Home Capital Group Inc is a specialty finance company that offers residential and commercial mortgage lending, securitization of insured mortgage products, consumer lending, and credit card services. The company also offers deposits via brokers and financial planners, and through its direct-to-consumer deposit brand, Oaken Financial. Home Capital's mortgage lending focuses on homeowners who typically do not meet all the lending criteria of traditional financial institutions. Its web site is here Home Capital Group.
The last stock I wrote about was about was Emera Inc. (TSX-EMA, OTC-EMRA) ... learn more. The next stock I will write about will be Bombardier Inc. (TSX-BBD.B, OTC-BDRBF) ... learn more on Friday, March 1, 2019 around 5 pm. Tomorrow on my other blog I will write about Banks and Other Things.... learn more on Thursday, February 28, 2019 around 5 pm.
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