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 insiders have stopped selling shares, but in the past year there was no buying either. The company has a mixed history. It used to be an income trust. When it converted to a corporation, they did a 100 to 1 consolidation. They have stopped increasing their dividends which points the fact that management is not optimistic about the near future.
Dividend yield go very high in the past topping out over 56%. They are still quite high with a current yield of 7.75%. The 5, 10 and historical dividend yields are 7.18%, 7.68% and 8.22%. In the past dividends have both increased and decreased. Currently they are flat.
The Dividend Payout Ratios are fine. The DPR for EPS for 2018 is 61% with 5 year coverage at 65%. EPS is expected to drop this year and the DPR for EPS for 2019 is expected to be 102% with 5 year coverage at 67%. The DPR for CFPS for 2018 is 15% with 5 year coverage at 20%.
Debt Ratios are fine for this sort of company. Since this company is in the financial services, I do not compare the long term debt to the market cap, but look at the Financial Receivables compared to Long Term Debt. That ratio is fine at 0.83 for 2018. The Liquidity Ratio is 2.34 with 5 year median at 1.70. The Debt Ratio is 1.25 with a 5 year median at 1.38. Debt Ratios for financial service sector companies are lower than the other non-financial sector companies. The Leverage and Debt/Equity Ratios for 2018 are 5.00 and 4.00 with 5 year medians at 3.19 ad 2.19.
The Total Return per year is shown below for years of 5 to 12 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 chart below.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2013 | 5 | 3.27% | -5.02% | -11.14% | 6.11% |
| 2008 | 10 | 4.21% | 42.97% | 21.35% | 21.62% |
| 2006 | 12 | 0.00% | 11.55% | 2.99% | 8.57% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 7.43, 9.36 and 10.55. The corresponding 10 year ratios are 7.74, 9.38 and 11.60. The corresponding historical ratios are 7.43, 9.36 and 11.29. The current P/E Ratio is 13.22 based on a stock price of $10.84 and 2019 EPS estimate of $0.82. This stock price testing suggests that the stock price is relatively expensive.
I get a Graham Price of $12.87. 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 0.84 based on a stock price of $10.84. 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 1.32. The current P/B Ratio is 1.21 based on a Book Value of $146M, Book Value per Share of $8.98 and a stock price of $10.84. The current ratio is 8.7% below the 10 year 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 8.22%. The current dividend yield is 7.75% based on dividends of $0.84 and a stock price of $10.84. The current yield is 5.7% below the historical yield. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a 10 year median dividend yield of 7.68%. The current dividend yield at 7.75% is 0.9% higher. 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 1.44. The current P/S Ratio is 1.39 based on 2019 Revenue estimate of $127M, Revenue per Share of $7.82 and a stock price of $10.84. The current ratio is 3.4% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
Results of stock price testing is that the stock price is probably reasonable. The best test is the P/S Ratio test and this shows the stock price to be reasonable and below the median. The problem with the dividend yield test is that the company used to be an income trust and these companies have much higher dividend yields than other companies. However, the test with the 10 year median dividend yield shows the same results as the P/S Ratio. The P/B Ratio test shows the same results also.
Is it a good company at a reasonable price? The stock price is probably reasonable. This is a small company into specialty finance, so it is risky. However, after two years of slightly declining stock prices, the stock price has gone up this year by 4%, so this is positive. A dividend increase would be nice. If you can afford to take the risk, this is a small company in which you might make some money.
When I look at analysts’ recommendations, I find a Buy (1) recommendation. The 12 month stock price consensus is $11.50. This implies a total return of $13.84% with 6.09% from capital gains and 7.75% from dividends.
See what analysts are saying on Stock Chase. Analysts like the management but think they will be problems in the future. Daniel Da Costa on Motley Fool says the company is one of the best high yielding financial companies. A writer on Simply Wall Street thinks there are potentially better dividend companies to investment in. A writer on Simply Wall Street talks about who owns shares in this company. Institutions hold only around 6%. Alice Vandehei on Slater Sentinel says researchers at Cormark has lowered EPS estimates for 2020.
Chesswood Group Ltd is a financial services company operating primarily in the specialty finance industry. They own Pawnee Leasing Corporation, located in Fort Collins, Colorado and Blue Chip Leasing Corporation and NorthStar Leasing Corporation located in Canada. Its web site is here Chesswood Group Ltd .
The last stock I wrote about was about was 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 December 2, 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.
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