I own this stock of Richelieu Hardware Ltd (TSX-RCH, OTC-RHUHF). I initially bought this stock in 2007 because it was recommended by the Investment Reporter. It is not on any of the dividend lists, probably because they only started to pay dividends in 2000, they are a rather small company and they did not increase dividends in 2009. This stock would be considered to be a dividend paying growth stock. In 2009, I thought I would add to what I had in this stock. This stock has been much recommended by MPL Communications.
When I was updating my spreadsheet, I noticed it has preformed as expected. I have a total return of 17.77% per year with 16.13% from capital gains and 1.64% from dividends. Dividends have paid for 26% of the cost of my stock. After 11 years I am earning 4.36% on my original purchase. A negative is that dividend increases are getting lower for the for the past 3 years. The dividend increases from 2018 to 2020 inclusive are 5.82%, 5.50% and 5.37%. Although I must admit dividend increases have varied a lot in the past.
Dividend yield is low (under 2%). The current dividend yield is 0.90%, with 5, 10 and historical dividend yields at 0.88%, 1.12% and 1.12%. The current dividend growth is low (under8%), but it has been moderate in the past (8% to 14% ranges). I should mention that they have never done consistent dividend increases.
The Dividend Payout Ratios are very good. The DPR for EPS for 2019 is 21% with 5 year coverage at 20%. The DPR for CFPS for 2019 was 17% with 5 year coverage also at 17%. The DPR for 2019 for Free Cash Flow for 2019 was 19% with 5 year coverage at 29%. The Dividend Coverage Ratio for 2019 was 5.38 with 5 year coverage at 3.42.
Debt Ratios are all very good. They do not currently have any long term debt. The Liquidity Ratio is very good at 4.65 for 2019. The Debt Ratio is very good at 5.89 for 2019. The Leverage and Debt/Equity Ratios are also very good at 1.2 and 0.20 for 2019.
The Total Return per year is shown below for years of 5 to 26 to the end of 2019. 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.|
The 5 year low, median, and high median Price/Earnings per Share Ratios are 19.44, 22.71 and 25.98. The corresponding 10 year ratios are 16.53, 19.17 and 21.80. The corresponding historical ratios are 15.09, 15.30 and 18.57. The current P/E Ratio is 22.87 based on a stock price of $29.50 and 2020 EPS estimate of $1.39. This stock price testing suggests that the stock price is relatively expensive.
I get a Graham Price of $16.08. The 10 year low, median, and high median Price/Graham Price Ratios are 1.34, 1.56 and 1.80. The current P/GP Ratio is 1.83 based on a stock price of $29.50. 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 2.97. The current P/B Ratio is 3.31 based on Book Value of $501M Book Value per Share of $8.91 and a stock price of 29.50. The current ratio is 12% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get an historical median dividend yield of 1.12%. The current dividend yield is 0.90% based on dividends of $0.27 and a stock price of $29.50. The current yield is 19% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable but above the median. The 10 year median dividend yield is also 1.12%, so testing would no different results.
The 10 year median Price/Sales (Revenue) Ratio is 1.44. The current P/S Ratio is 1.48 based on 2020 Revenue estimate of $1,118M, Revenue per share of $19.88 and a stock price of $29.50. The current ratio is 3% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
Results of stock price testing is that the stock price is reasonable to expensive. Most of the testing is showing that the stock price is reasonable but above the median. This is true of the tests of P/S Ratio testing, P/B Ratio testing and dividend yield testing. There is however, nothing wrong in any of the testing done.
Is it a good company at a reasonable price? I own this company and think it is a good long term company to own. If you are building a portfolio, companies with low dividend yields are good ones to buy. However, the current dividend yield is below 1% and I do not buy companies where the current dividend yield is below 1%.
When I look at analysts’ recommendations, I find only Hold (2) recommendations. The consensus would be a Hold. The 12 month stock price consensus is $29.75. This implies a total return of 1.75% with 0.85% from capital gains and 0.90% from dividends.
See what analysts are saying on Stock Chase. Some like it for a long term hold and some do not. Some think it is overpriced. Nelson Smith onMotley Fool says the company has a history of delivering excellent returns. A writer on Simply Wall Street talks about who owns shares in this company. A writer on Simply Wall Street say the CEO of this company gets a median pay for this size of company. Blogger on Dividend Earner reviews this stock.
Richelieu Hardware Ltd is a Canada-based company that imports, manufactures, and distributes specialty hardware and complementary products. Headquartered in Montreal, the company operates across Canada and the eastern and midwestern regions of the United States. The majority of the company's sales are derived from its operations in Canada. Its web site is here Richelieu Hardware Ltd.
The last stock I wrote about was about was Intact Financial Corp (TSX-IFC, OTC-IFCZF) ... learn more. The next stock I will write about will be ARC Resources Ltd (TSX-ARX, OTC-AETUF) ... learn more on Friday, February 14, 2020 around 5 pm. Tomorrow on my other blog I will write about Baby Boomers Investors.... learn more on Thursday, February 13, 2020 around 5 pm.
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