I do not own this stock of Hardwoods Distribution Inc (TSX-HDI, OTC-HDIUF). In April 2017, I asked for suggestions on what stocks I should now follow because of a number that I had followed had been bought out. This was one of the suggestions.
When I was updating my spreadsheet, I noticed there is a lot of insider buying. I looked at the Chairman, CEO and CFO and they all are buying. Debt has increased a lot lately.
The dividend yields are currently low to moderate with dividend growth moderate to good. This company used to be an income trust. Income trust have much higher dividend yields and can afford to payout more than corporations. When this stock changed to a corporation it suspended its dividend for a couple of years.
The current dividend yield is moderate (2% to 4% ranges) at 2.35%. The 5 and 10 year median dividend yields are low (below 2%) at 1.36% and 1.72%. The historical median dividend yield is moderate at 2.05%. When the dividends were restarted in 2010, the dividend increases were good (15% and over) until 2018 when they became lower and into the low range (Under 8%). The last dividend increase was for 2020 and it was for 6.25%.
The Dividend Payout Ratios (DPR) are good. The DPR for EPS for 2019 is 23% with 5 year coverage at 19%. The DPR for CFPS is 9% with 5 year coverage at 10%. The DPR for Free Cash Flow for 2019 was 8% with 5 year coverage at 17%. This is some agreement on Free Cash Flow for this company.
Debt Ratios are good but debt has recently increased a lot. Long Term Debt has recently increased a lot. However, the Long Term Debt/Market Cap Ratio is good at 0.24 with the current ratio at 0.28. The Liquidity Ratio for 2019 is 1.72 and it has always been good. The Debt Ratio for 2019 is 1.99 and this ratio has also always been good. The Leverage and Debt/Equity Ratio for 2019 is higher than it has ever been at 2.01 and 1.01 with the current ratios better at 1.96 and 0.96.
The Total Return per year is shown below for years of 5 to 15 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 | 13.49% | 9.13% | 7.19% | 1.95% |
| 2009 | 10 | 15.36% | 26.20% | 23.34% | 2.85% |
| 2004 | 15 | -5.34% | 5.07% | 2.15% | 2.92% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 9.73, 12.55 and 15.38. The corresponding 10 year ratios are 9.46, 12.26 and 14.68. The corresponding historical ratios are 8.86, 10.65 and 14.09. The current P/E Ratio is 23.31 based on a stock price of $14.45 and 2020 EPS estimate of $0.62. This stock price testing suggests that the stock price is relatively expensive.
I get a Graham Price of $13.39. The 10 year low, median, and high median Price/Graham Price Ratios are 0.64, 0.82 and 1.04. The current P/GP Ratio is 1.08 based on a stock price of $14.45. 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 1.25. The current P/B Ratio is 1.12 based on a stock price of $14.45, Book Value per Share of $12.86, and a Book Value of $275M. The current ratio is 10% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 10 year median Price/Cash Flow per Share Ratio of 16.73. The current P/CF Ratio is 3.83 based on a stock price of $14.45, Cash Flow for the last 12 months of $79.8M, Cash Flow per share of 3.77. The current ratio is 77% 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 2.05%. The current dividend yield is 2.35% based on dividends of $0.34 and a stock price of $14.45. The current dividend yield is 15% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 10 year median dividend yield of 1.72%. The current dividend yield is 2.35% based on dividends of $0.34 and a stock price of $14.45. The current dividend yield is 37% 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 0.31. The current P/S Ratio is 0.26 based on a stock price of $14.45, Revenue estimate for 2020 of $1,164M and Revenue per Share of $55.04. 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 relatively reasonable and below the median. The historical dividend yield says that the stock price is reasonable and below the median and this is confirmed by the P/S Ratio testing. The 10 year median dividend yield test says the stock price is relatively cheap. The P/B Ratio test agrees with the P/S Ratio test and there is nothing wrong with this test.
The problem with the P/E Ratio test is that analyst expect a big drop in EPS for 2020. The P/E Ratio for 2020 and 2022 are 9.90 and 7.90 respectively. The big drop in EPS estimate for 2020 will also adversely affect the P/GP Test. The problem with the P/CF Ratio tests is that for 2019 there is a big change in Working Capital.
Is it a good company at a reasonable price? I do like this company. It is a dividend growth stock having increased their dividend every year for the past 8 years. The stock price seems to be reasonable.
When I look at analysts’ recommendations, I find Strong Buy (2), Buy (1) and Hold (2). The consensus would be a Buy. The 12 month stock price consensus would be $14.90. This implies a total return of 5.47% with 3.11% from capital gains and 2.35 from Dividends.
This stock is not well covered by Stock Chase but the entries are positive. Robin Brown on Motley Fool says that this little know stock is now a bargain. A writer on Simply Wall Street says that the higher than 1.00 beta score shows that this stock will rise quicker than the markets in times of optimism, but fall faster in times of pessimism . A writer on Simply Wall Street says that this company has been growing their dividends but has a low payout ratio and this makes it attractive. Ben Hobson reviews this stock for Stockopedia.
Hardwoods Distribution Inc is a Canadian company which operates a network of distribution centers in Canada and the US engaged in the wholesale distribution of hardwood lumber and related sheet goods and specialty products. Its web site is here Hardwoods Distribution Inc.
The last stock I wrote about was about was IA Financial Corp (TSX-IAG, OTC-IDLLF) ... learn more. The next stock I will write about will be Ensign Energy Services (TSX-ESI, OTC-ESVIF) ... learn more on Wednesday, June 06, 2020 around 5 pm. Tomorrow on my other blog I will write about Dividend Stocks June 2020.... learn more on Tuesday, June 05, 2020 around 5 pm.
Also, on my book blog I have put a review of the book Inheritors of the Earth by Chris Thomas learn more...
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