Sound bite for Twitter and StockTwits is: Dividend Growth Consumer. The stock price is probably reasonable and it might be cheap. There is insider buying and that is a positive. It got to have short term problems with the closing of stores due to Covid Flu. See my spreadsheet on Leon's Furniture Ltd.
I own this stock of Leon's Furniture Ltd (TSX-LNF, OTC-LEFUF). I had some money in 2006 and this stock has been on MPL Communication's Investor Reporter list for some time. It was also on Mike Higgs' Dividend Growth Stock list. I will continue to hold this dividend growth consumer discretionary stock. I think that the company is a good one. You would buy this for diversification.
When I was updating my spreadsheet, I noticed there and has been a big difference in Basic EPS and Diluted EPS. It would seem that it is mostly to do with Convertible Debentures. It would be nice if they would just give you a chart showing the change in the outstanding shares. They give it in a narrative, but this is hard to understand. Besides that, I looked at the narrative and the change in outstanding shares do not seem to add up.
There was insider buying lately. Buying started below $15.00 a share. Net Insider Buy at 0.08% of market cap for the past year is high. You would expect this NIB to be around 0.01%. I have not done well on this stock. I first bought it in 2006. My total return to the end of February 2020 is 6.16% with 2.96% from capital gains and 3.20% from dividends. It is not just the bear market. When I look at it last year at the end of March, my total return was just 5.26%.
The dividend yields are moderate with dividend growth low. The current dividend yield is the highest it has ever been at 4.72%. This is still within the moderate range (2% to 4% ranges). The 5, 10 and historical dividend yields are lower at 2.60%, 2.65% and 2.07%. As you can see from the chart below, the dividend growth for the last 15 years has been in the low range (under 8%).
The Dividend Payout Ratios are good. The DPR for EPS for 2019 is 43% with 5 year coverage at 39%. The DPR for CFPS is 25% with 5 year coverage at 35%. The DPR for Free Cash Flow for 2019 is 22% with 5 year coverage at 27%. Dividend Coverage Ratio for 2019 is 4.62 with 5 year ratio at 3.67. Again, WSJ and Morningstar disagree on what the FCF is and I have gone with Morningstar which I get through a report I get from TD WebBroker.
Debt Ratios are fine. The Long Term Debt/Market Cap Ratio is 0.04, which is very low and very good. The Liquidity Ratio at 1.22 is normal for this company and low. It is better when you added in cash flow after dividends, which gives a ratio of 1.56 with a 5 year median also of 1.56. The Debt Ratio is good at 1.75 with the 5 year ratio also at 1.75. The Leverage and Debt/Equity Ratio for 2019 is 2.33 and 1.33 respectively with 5 year ratios at 2.24 and 1.24 respectively. These are fine.
The Total Return per year is shown below for years of 5 to 28 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 12.37, 14.56, and 15.98. The corresponding 10 year ratios are 13.43, 14.95 and 17.01. The corresponding historical ratios are 12.15, 14.56 and 16.28. The current P/E Ratio is 11.29 based on a stock price of 13.55 and an EPS estimate of $1.20. This stock price testing suggests that the stock price is relatively cheap.
I get a Graham Price of $17.86. The 10 year low, median, and high median Price/Graham Price Ratios are 0.98, 1.16 and 1.32. The current P/GP Ratio is 0.76 based on a stock price of $13.55. 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 1.88. The current P/B Ratio is 1.15 based on a stock price of $13.55, Book Value of $912M and a Book Value per Share of $11.81. The current P/B Ratio is 39% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I get an historical median dividend yield of 2.07%. The current dividend yield is 4.72% based on a stock price of $13.55 and dividends of $0.64. The current yield is 128% 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 2.63%. The current dividend yield is 4.72% based on a stock price of $13.55 and dividends of $0.64. The current yield is 75% 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 0.58. the current P/S Ratio is 0.47 based on a stock price of $13.55, 2020 Revenue estimate of $2,217M, and Revenue per Share of 28.70. The current ratio is 18% below the 10 year 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 dividend yield test puts the stock price as very cheap. However, the P/S Ratio put the stock price as reasonable and below the median. This test is saying maybe the stock is not as cheap as the other test say.
Is it a good company at a reasonable price? I still like this company and I will continue to hold it. I must admit my return has not been very good. I like my dividend growth stocks to have a total return of at least 8% per year. I probably paid too much for the stock.
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 $16.50. This implies a total return of 26.49% with 21.7 % from capital and 4.72% from dividends.
See what analysts are saying on Stock Chase. There are few recent entries, but the analysts like this stock. Daniel Da Costa Motley Fool thinks this is current a great buy. A writer on Simply Wall Street likes the dividend coverage for this stock. A writer on Simply Wall Street likes that there is insider buying. The Canadian Press reports on Bloomberg that Leon’s is temporarily laying off half their workers and closing 72 corporate stores due to Covid Flu.
Leon's Furniture Ltd is a Canada-based retailer that operates in two main segments, both involved in the sale of home furnishing, mattresses, appliances, and electronics. Leon's segment includes the 86 physical stores nationwide and the leons.ca website. The Brick, The Brick Mattress, and the Brick Outlet stores, as well as the website thebrick.com. The company also provides aftersales service for appliances through its TransGlobal Services subsidiary. Its web site is here Leon's Furniture Ltd.
The last stock I wrote about was about was Supremex Inc (TSX-SXP, OTC-SUMXF) ... learn more. The next stock I will write about will be Barrick Gold Corp (TSX-ABX, NYSE-ABX) ... learn more on Monday, April 13, 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.
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