I do not own this stock of Chemtrade Logistics Income Fund (TSX-CHE.UN, OTC-CGIFF). I decided to investigate this stock after reading an article in the G&M in February 2012 about investing in small cap stocks that pay dividends. This was one of the stocks mentioned that I had never heard of before.
When I was updating my spreadsheet, I noticed that the growth in Revenue per Share is so much lower than the growth in Revenue. The 5 and 10 year Revenue growth is 5% and 11%. The 5 and 10 year Revenue per Share growth is negative at 1.2% and 0.7%. This because of the growth in shares. As a shareholder, the figure you want to look at the Revenue per Share.
The dividend yields are high with dividend growth non-existent. The dividend yield is high (7% and above) at 9.87%. The 5, 10 and historical dividend yields are also high at 7.12%, 7.36% and 8.19%. The dividends were cut in 2007 and they have remained flat until this year, 2020, when the dividends were cut again.
The Dividend Payout Ratios (DPR) need improving. I cannot calculate the DPR for EPS because of earning losses. The DPR for CFPS for 2019 is fine at 38% with 5 year coverage at 41%. They still give out Distributional Income, for which the 2019 DPR is 135% with 5 year running average at 98%. The DPR for AFFO for 2019 is 67% with 5 year running average at 60%. The DPR for Free Cash Flow for 2019 is 247.33% with 5 year coverage at 106%.
This company started out as an income fund. However, the legislation of 2006 says that all income trust must pay tax from 2011. This company certainly is currently a tax paying corporation. So, the DPR for EPS counts. They do have the cash flow to cover their dividends. The lack of good coverage of dividends is probably why the dividends were decreased by 50% in 2020. A problem is that they are not expected to make a profit either this year or next.
Debt Ratios need to improve. The Long Term Debt/Market Cap for 2019 is 0.85. The current ratio is 1.43 because of an increase in debt by 8% and a decreased in stock price of 45%. The Liquidity Ratio for 2019 is 1.35. If you add in cash flow after dividends it is 1.43. The Debt Ratio for 2019 is 1.38. Both the Liquidity Ratio and Debt Ratio are low. I prefer them to be at 1.50 or higher. The Leverage and Debt/Equity Ratios are a bit too high at 3.66 and 2.66. I prefer them to be below 3.00 and 2.00.
The Total Return per year is shown below for years of 5 to 18 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 | 0.00% | -4.41% | -11.83% | 7.42% |
| 2009 | 10 | 0.00% | 10.91% | 0.02% | 10.89% |
| 2004 | 15 | -0.63% | 3.99% | -3.99% | 7.97% |
| 2001 | 18 | 5.03% | 13.26% | -0.35% | 13.61% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are all negative. The corresponding 10 year ratios are 8.05, 10.01 and 11.85. The corresponding historical ratios are 11.18, 12.11 and 13.28. The current P/E Ratio is negative as is the P/E Ratio for 2021. This test cannot be done.
My best guess for a Graham Price is $16.24. The problem is the negative EPS and EPS is part of the Graham Price calculation. The 10 year low, median, and high median Price/Graham Price Ratios are 0.98, 1.11 and 1.27. The current P/GP Ratio is 0.37 based on a stock price of $6.08. This stock price testing suggests that the stock price is relatively cheap. Possible problem is in the Graham Price calculation.
I get a 10 year median Price/Book Value per Share Ratio of 1.57. The current P/B Ratio is 0.79 based on a Book Value of $709M, Book Value per Share of $7.66 and a stock price of $6.08. The current ratio is 49% below the 10 year ratio. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median Price/Cash Flow per Share Ratio of 7.06. The current P/CF Ratio is 4.25 based on 2020 Cash Flow per Share estimate of $1.43, Cash Flow of $132M and a stock price of $6.08. The current ratio is 40% 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 8.19%. The current dividend yield is 9.87% based on a stock price of $6.08 and dividends of $0.60. The current dividend is 20% above the historical dividend yield. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 years median dividend yield of 7.38%. The current dividend yield is 9.87% based on a stock price of $6.08 and dividends of $0.60. The current dividend is 34% above the historical dividend yield. This stock price testing suggests that the stock price is relatively cheap.
The 10 year median Price/Sales (Revenue) Ratio is 0.87. The current P/S Ratio is 0.59 based on a stock price of $6.08, 2020 Revenue estimate of $1,447M and Revenue per Share of $15.63. The current ratio is 55% below the 10 year median 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 relatively cheap. Both the dividend yield tests say that the stock price is relatively cheap and this is confirmed by the P/S Ratio test. There is nothing wrong with the P/B Ratio test and the P/CF Ratio tests. These also say that the stock price is relatively cheap.
Is it a good company at a reasonable price? The stock price seems to be cheap. However, I would think that this is a rather risky investment. I think that both the Dividend Payout Ratios and Debt Ratios could be improved. They have no positive EPS over the last two years and analysts do not think that they will over the next two years. There is insider buying.
When I look at analysts’ recommendations, I find Buy (1) and Hold (5). The consensus would be a Hold. The 12 month stock price is $7.18. This implies a total return of 27.96% with 18.09% from capital gain and 9.87% from dividends.
Analyst on Stock Chase think this stock is too risky. Adam Othman on Motley Fool says high yield could add good income for your TFSA. Mat Litalien, on Motley Fool says to approach this high yield stock with caution. Writers on Simply Wall Street seem to have lost interest in this stock as all their reports are from 2018 and before. This company on Globe Newswire announces the recent sale of debentures. The company talks about their second quarterly results for 2020 on Globe Newswire.
Chemtrade Logistics Income Fund provides industrial chemicals and services to customers in North America and around the world. The company organized into four main operating segments: Sulphur Products and Performance Chemicals (SPPC), Water Solutions and Specialty Chemicals (WSSC), Electrochemicals, and Corporate. Its web site is here Chemtrade Logistics Income Fund.
The last stock I wrote about was about was Aecon Group Inc (TSX-ARE, OTC-AEGXF) ... learn more. The next stock I will write about will be Alimentation Couche-Tard Inc (TSX-ATD.B, OTC-ANCUF) ... learn more on Monday, August 24, 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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