I own this stock of Mullen Group Ltd (TSX-MTL, OTC-MLLGF). I like to look at recommended small cap dividend paying stock to see if they would be a possible good investment now or in the future. The other thing to mention about this stock is that it converted from an income trust and decreased it dividends. The reduction in dividend brought the Dividend Payout Ratios down to a place that would allow for the company to begin growing dividends again.
When I was updating my spreadsheet, I noticed that I have lost money lately on this stock. My loss is at 15.86% per year for this stock I have held for 5 years. There is lots of insider buying going on including with directors and CFO.
The dividend yields have been mostly in the moderate to good ranges with dividend growth low to non-existent. The current dividend yield is high (above 6%) at 11.11%. The 5, 10 and historical dividend yields fall into the moderate range (2% to 4% ranges) at 4.13%, 4.60% and 4.06%.
The company started as an income trust and when they became a corporation, they cut the dividend over 70%. They started dividend increases again in 2011, but probably too fast and too soon. They started dividend cutting again in 2014. For this year they said they will not be paying dividends for the 3 months of April, May, and June. It is a monthly dividend.
The Dividend Payout Ratios (DPR) are fine, but DPR for EPS needs to improve. The DPR for EPS for 2019 was 87% with 5 year coverage at 215%. The DPR is expected to rise to 562% this year because they are not expected to earn much. The DPR for CFPS for 2019 was 31% with 5 year coverage at 31% also. This is a good rate. The DPR for Free Cash Flow for 2019 is 66% with 5 year coverage at 62%. Although Morningstar and Wall Street Journal do not agree on what the FCF is.
Debt Ratios are good. The Long Term Debt/Market Cap Ratio for 2019 is 0.48. The Liquidity Ratio for 2019 is current quite high and therefore quite good at 3.29. The Debt Ratio is high and good at 2.10. Leverage and Debt/Equity Ratios are low and good at 1.91 and 0.91 respectively.
The Total Return per year is shown below for years of 5 to 22 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 | -12.94% | -11.05% | -15.34% | 2.88% |
| 2009 | 10 | 1.84% | 0.94% | -5.52% | 2.15% |
| 2004 | 15 | 8.91% | 3.99% | -3.82% | 2.53% |
| 1999 | 20 | 8.24% | 11.09% | 1.79% | 2.21% |
| 1997 | 22 | 8.77% | 1.28% | 2.21% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 23.17 27.50 and 31.83. The corresponding 10 year ratios are 13.46, 15.78 and 18.72. The corresponding historical ratios are 11.82, 14.90 and 18.58. The current P/E Ratio is 67.50 based on a stock price of $5.40 and 2020 EPS estimate of $0.08. This stock price testing suggests that the stock price is relatively is relatively expensive.
I get a Graham Price of $3.93. The 10 year low, median, and high median Price/Graham Price Ratios are 1.06, 1.30 and 1.54. The current P/GP Ratio is 1.37 based on a stock price of $5.40. 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 1.95. The current P/B Ratio is 0.63 based on a stock price of $5.40, Book Value per Share of $8.60, and Book Value of $893M. The current P/B Ratio is 68% below the 10 year ratio. This stock price testing suggests that the stock price is relatively is relatively cheap.
I get an historical median dividend yield of 4.06%. The current dividend yield is 11.11% based on dividends of $0.60 and a stock price of $5.40. The current dividend yield is 174% above the historical dividend yield. This stock price testing suggests that the stock price is relatively is relatively cheap. Even if you use the planned dividend for 2020 of $0.45 (missing 3 months of dividends), the current dividend yield is still 105% above the current dividend yield and the stock price is still relatively cheap.
I get a 10 year median dividend yield of 4.60%. The current dividend yield is 11.11% based on dividends of $0.60 and a stock price of $5.40. The current dividend yield is 142% above the historical dividend yield. This stock price testing suggests that the stock price is relatively is relatively cheap.
The 10 year median Price/Sales (Revenue) Ratio is 1.33. The current P/S Ratio is 0.51 based on a stock price of $5.40, 2020 Revenue estimate of $1107M, and Revenue per share of $10.66. The current ratio is 62% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively is relatively cheap.
Results of stock price testing is that the stock price is relatively cheap. The dividend yield testing is showing the stock price is relatively cheap and this is confirmed by the P/S Ratio test. The P/B Ratio test is also showing the stock price as cheap. Both the P/E Ratio test and the P/GP Ratio tests have problems.
There problems with the P/E Ratio test. First the stock price will only fall so far because of low earnings. This can cause the P/E Ratios to be unrealistically high as in this stock for the 5 year ratios. The 2020 EPS is expected to be very low, so we have a very high EPS. The P/E Ratio falls to a lower level in 2021 of 18.62 and even lower in 2020 at 14.21 because of better expected EPS. The P/GP Ratio test has similar problems.
Is it a good company at a reasonable price? The stock price is certainly cheap. I think that they raised the dividends too fast after becoming a corporation. Hopefully they have learned from this. They seem to be back on track and I will hold on to my shares at present.
When I look at analysts’ recommendations, I find Strong Buy (1), Buy (5) and Hold (6). The consensus would be a Buy. The 12 month stock price is $6.83. This implies a total return of 37.59% with 11.11% from dividends and 26.48% from capital gains.
Analysts on Stock Chase have a few entries from 2019. Christopher Liew comments on Motley Fool about this company. Adam Othman on Motley Fool thinks this company is a long term buy. A writer on Simply Wall Street talks about ownership for this company. The company talks about the effect of Covid 19 on their company on Newswire.
Mullen Group Ltd supplies trucking and logistics services to the oil and natural gas industry in Canada and the United States. The company comprises two business segments: trucking/logistics and oilfield services. Its web site is here Mullen Group Ltd.
The last stock I wrote about was about was Hammond Power Solutions Inc (TSX-HPS.A, OTC-HMDPF) ... learn more. The next stock I will write about will be Canadian Utilities Ltd (TSX-CU, OTC-CDUAF) ... learn more on Monday, May 18, 2020 around 5 pm.
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