Sound bite for Twitter and StockTwits is: Dividend Growth Real Estate. The stock price is relatively cheap. However, dividends were decreased this year. The stock has not done well lately. Debt ratios are good. See my spreadsheet on Melcor Developments Inc .
I own this stock of Melcor Developments Inc (TSX-MRD, OTC-MODVF). This was one of the stocks on Mike Higgs' list of good dividend growth stocks. So, I looked into it and bought it. I bought this stock first in 2008 and then some more in 2009. It is a little followed real estate company from Western Canada.
When I was updating my spreadsheet, I noticed it has not been doing well lately. This is hardly surprising because the west, particularly Alberta, has not been doing well. I am keeping my stock because I hope that the west will revive. I think that we will have to wait for another Federal government for this to happen. It seems to me that Trudeau has no intention of letting the west revive. I am in Ontario and I think this. I wonder what the Albertan are saying to each other about Trudeau.
The dividend yields are moderate with dividend growth stopped. The dividend yields are moderate (2% to 4% Range) except for the current one which is good (5% and 6% ranges). The current dividend is 5.16% with 5, 10 and historical yields at 3.70%, 3.05% and 2.84%. The stock price has gone down so yields have gone up. However, they decreased the dividends by 20% this year. This is not the first time for dividends to decrease. Changes in dividend rate has been volatile. See chart below.
The Dividend Payout Ratios are fine. The DPR for EPS for 2019 was 44% with 5 year coverage at 35%. The DPR for CFPS was 45% with 5 year coverage at 48%. Because this is a real estate company the Funds from Operations (FFO) DPR counts too. The DPR for FFO for 2019 is 43% with 5 year coverage at 35%. I have been looking at Free Cash Flow lately also. The DPR for FCF for 2019 is 55% with 5 year coverage at 53%.
Debt Ratios are good. The Long Term Debt/Market Cap for 2019 is 1.70. This is not surprising as it is a company based in Western Canada. However, since this is a Real Estate company, you have to looks at the assets covering this debt. The Debt/Covering Asset Ratio is 0.48 and this is a good one. The Liquidity Ratio is not important for a RE company, but I calculated it anyway and it is good at 2.63. The Debt Ratio is also good at 2.06. The Leverage and Debt/Equity Ratios are 1.394 and 0.94 respectively in 2019.
The Total Return per year is shown below for years of 5 to 29 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. |
|---|---|---|---|---|---|
| 2014 | 5 | -2.92% | -4.37% | -7.48% | 3.11% |
| 2009 | 10 | 7.18% | 5.99% | 1.58% | 4.41% |
| 2004 | 15 | 9.98% | 12.38% | 6.61% | 5.77% |
| 1999 | 20 | 11.18% | 17.80% | 10.37% | 7.43% |
| 1994 | 25 | 11.91% | 21.05% | 10.91% | 10.14% |
| 1990 | 29 | 14.44% | 17.15% | 9.74% | 7.42% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 10.31, 11.35 and 12.39. The corresponding 10 year ratios are 6.40, 7.51 and 8.69. The corresponding historical ratios are 6.30, 7.28 and 8.42. The current ratio is 6.35 based on a stock price of $7.75 and 2020 EPS estimate of $1.22. This stock price testing suggests that the stock price is relatively cheap.
I get a Graham Price of $29.87. The 10 year low, median, and high median Price/Graham Price Ratios are 0.40, $0.43 and 0.50. The current P/GP Ratio is 0.26 based on a stock price of $7.75. 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 0.59. The current P/B Ratio is 0.24 based on a Book Value of $1,080M, Book Value per Share of $32.51 and a stock price of $7.75. The current ratio is 60% below the 10 year ratio. This stock price testing suggests that the stock price is relatively cheap.
I get an historical median dividend yield of 2.84%. The current dividend yield is 5.16% based on dividends of $0.40 and a stock price of $7.75. The current dividend yield is 82% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median dividend yield of 3.05%. The current dividend yield is 5.16% based on dividends of $0.40 and a stock price of $7.75. The current dividend yield is 69% above the 10 year median dividend yield. This stock price testing suggests that the stock price is relatively cheap.
The 10 year median Price/Sales (Revenue) Ratio is 1.98. The current P/S Ratio is 0.92 based on 2020 Revenue estimate of $281M, Revenue per Share of $8.46 and a stock price of $7.75. The current ratio is 54% below the 10 year ratio. This stock price testing suggests that the stock price is relatively cheap.
Results of stock price testing is that the stock price is probably cheap. All the testing is showing that the stock price is cheap at $7.75. This is not surprising was we are in a bear market.
Is it a good company at a reasonable price? I will continue to hold on to my shares in this company. Hopefully, at some point the west will revive. It is just hard to say when at this point.
When I look at analysts’ recommendations, I find one recommendation of Hold. The consensus would be a Hold. The 12 month stock price is $13.50. This implies a total return of 79.35% with 74.19% from capital gains and $5.16% from dividends.
See what analysts have to say on Stock Chase. There are few entries but the latest one by a shorter says he is covering his shorts. Daniel Da Costa on Motley Fool says to buy as it is one of the cheapest real estate stocks. A Writer on Simply Wall Street says it is a buy because it can cover its dividend and interest payments. A writer on Simply Wall Street says that the average real estate P/E is 13.5 and this company’s is 7.5. This means that the market is unimpressed with this company. On Rentx.ca the company talks about actions they are taking because of Covid-19.
Melcor Developments Ltd is a real estate development and asset management company. It develops and manages mixed-use residential communities, business and industrial parks, office buildings, retail commercial centers and golf courses. Its web site is here Melcor Developments Inc.
The last stock I wrote about was about was BCE Inc (TSX-BCE, NYSE-BCE) ... learn more. The next stock I will write about will be Goodfellow Inc (TSX-GDL, OTC-GFELF) ... learn more on Monday, March 30, 2020 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.
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