Monday, March 11, 2019

Canadian Tire Corp

Sound bite for Twitter and StockTwits is: Dividend Growth Consumer. It would seem that the stock price is reasonable and around the median. A problem is the lack of adequate growth in book value. Dividend Payout Ratio is increasing, but good increases in dividends suggest that management see a good future. See my spreadsheet on Canadian Tire Corp.

I own this stock of Canadian Tire Corp (TSX-CTC.A, OTC-CDNAF). In 2000 when I first bought this stock, it was on the Investment Reporter's list of conservative Canadian stocks. I bought stock for my trading account in 2009 because I have done well with it in my Pension Account and it was a consumer stock.

When I was updating my spreadsheet, I noticed that the Dividend Payout Ratio has been increasing since 2008. DPR has grown from 18% to 34%. The dividends did not change between 1991 and 2003.

The dividend yield is low to moderate. The current dividend is moderate at 2.85%. The 5, 10 and historical median yields are all low at 1.71%, 1.73 % and 1.70% respectively. Long term dividend growth is moderate, but it has been good for the good for the last 15 years. Moderate growth is over 8% to 14% range and good is 15% and over.

The Dividend Payout Ratios are fine. The DPR for EPS for 2018 is 33.8% with 5 year coverage at 26.7%. The DPR for CFPS is 13.5% with 5 year coverage at 12.8%.

Debt Ratios are acceptable. The Long Term Debt/Market Cap Ratio for 2018 is 0.65. The Liquidity Ratio is good at 1.76. The Debt Ratio is a little low at 1.46, but 5 year median is 1.60. I like this ratio at 1.50 or higher. The Leverage and Debt/Equity Ratios for 2018 are 3.19 and 2.19. The 5 year median ratios are better at 2.63 and 1.63. It would be nice if these ratios were under 3.00 and under 2.00, respectively.

The Total Return per year is shown below for years of 5 to 28 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.

From Years Div. Gth Tot Ret Cap Gain Div.
2013 5 20.79% 9.61% 7.49% 2.13%
2008 10 15.67% 14.79% 12.63% 2.16%
2003 15 15.78% 10.62% 8.95% 1.67%
1998 20 11.61% 7.71% 6.44% 1.27%
1993 25 9.19% 12.44% 10.41% 2.03%
1990 28 8.36% 7.88% 6.57% 1.31%

The 5 year low, median, and high median Price/Earnings per Share Ratios are 12.65, 14.32 and 15.89. The 10 year corresponding ratios are 10.75, 12.59 and 14.70. The corresponding historical ratios are 11.23, 13.68 and 15.55. The current P/E Ratios 11.01 based on a stock price of $145.38 and 2019 EPS estimate of $13.20. This stock price testing suggests that the stock price is relatively cheap.

I get a Graham Price of $145.58. The 10 year low, median, and high median Price/Graham Price Ratios are 0.78, 0.92 and 1.07. The current P/GP Ratio is 1.01 based on a stock price of $145.38. This stock price testing suggests that the stock price is relatively reasonable, but above the median.

I get a 10 year median Price/Book Value per Share Ratio of 1.51. The current ratio is 2.09 based on a stock price of $145.38, Book Value of $,5415 and Book Value per Share of $69.41. The current ratio is 39% 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 1.70%. The current dividend yield is 2.83% based on dividends of $4.15 and a stock price of $145.38. The current yield is 68% above the historical median yield. This stock price testing suggests that the stock price is relatively cheap.

The 10 year median Price/Sales (Revenue) Ratio is 0.62. The current P/S Ratio is 0.62 based on a stock price of $145.38, 2019 Revenue estimate of $14,795M, and Revenue per Share of $235.21. The current ratio is the same and the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and around the median.

Results of stock price testing is I think is that the stock price is reasonable and around the median, which is what the P/S Ratio testing is showing. It is interesting that tests are all over the place. The problem with the P/B Ratio is that Book Value is not growing much. This seems to be the results of share buybacks and new accounting rules.

When I look at analysts’ recommendations, I find Buy (7), Hold (5) and Underperform (1). The consensus would be a Hold. The 12 month stock price consensus is $175.17. This implies a total return of 23.35%, with 20.49% from capital gains and 2.85% from dividends.

See what analysts are saying on Stock Chase. The company is liked but many mentioned that retail is tough and everyone is having trouble with Amazon. Andrew Button on Motley Fool says the company is long term market beater. A writer at Simply Wall Street says this stock is undervalued. The Canadian Press via the Financial talks about the company’s fourth quarterly results.. Dividend Earner on Seeking Alpha has a positive view on this stock.

Canadian Tire sells home goods, sporting equipment, apparel, footwear, automotive parts and accessories, and vehicle fuel through a 1,700-store network of company, dealer, and franchisee-operated locations across Canada. Aside from the namesake banner, stores operate primarily under the Mark's, SportChek, Atmosphere, and PartSource monikers. The firm also operates and holds majority ownership of a financing arm (Canadian Tire Financial Services. Its web site is here Canadian Tire Corp.

The last stock I wrote about was about was H & R Real Estate Trust (TSX-HR.UN, OTC-HRUFF) ... learn more. The next stock I will write about will be Goodfellow Inc. (TSX-GDL, OTC-GFELF) ... learn more on Wednesday, March 13, 2019 around 5 pm. Tomorrow on my other blog I will write about Canadian Dividend Stocks.... learn more on Tuesday, March 12, 2019 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.

See my website for stocks followed and investment notes. I have three blogs. The first talks only about specific stocks and is called Investment Talk. The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter or StockTwits. I am on Instagram. Or you can just Google #walktoronto spbrunner8166 to see my pictures.


  1. Whatever you have provided for us in these posts really appreciative.

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  2. Even watching ca Madison tire for a while. Walk into a store and see what’s going on. Decent but not impressive traffic in store near me. Huge amount of SKUs. I would bet impact if amazon is real. Real estate arm could be the ticket, and mostly owned by parent - huge properties.