I do not own this stock of Equitable Group Inc (TSX-EQB, OTC-EQGPF). I had read a glowing report on investing on this company in 2013, so I decided to check it out. It was interesting as it was loaning money to new immigrants, a class of people who generally have a difficult time getting loans and mortgages from our regular banks. It sounded intriguing.
When I was updating my spreadsheet, I noticed that the stock price has fallen a lot this year by some 27.8%. Because of this, the Total Return to date is lower than the Total Return to the end of last year. This company hit its highest every level in November 2019 at $118.98.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2014 | 5 | 13.07% | 10.69% | 8.93% | 1.76% |
| 2009 | 10 | 11.80% | 14.06% | 12.20% | 1.86% |
| 2004 | 15 | 11.45% | 9.57% | 8.09% | 1.48% |
| 2003 | 16 | 8.81% | 7.48% | 1.33% |
The dividend yields are low with dividend growth moderate. The current dividend yield is low (below 2%) at 1.87%. The 5, 10 and historical dividend yields are also low at 1.50%, 1.55% and 1.47%. The dividend growth is moderate (8% to 14% range) with the last 5 years increase at 13.07% per year. The most recent increase was for 2020 and it was for 5.7%. In the past they have had more than one increase in a year. The first increase in 2020 was for 6.1%.
The Dividend Payout Ratios (DPR) are good. The DPR for EPS for 2019 is 10% with 5 year coverage also at 10%. The DPR for CFPS for 2019 is 7% with 5 year coverage at 5%. The DPR for Free Cash Flow for 2019 is 9% with 5 year coverage at 10%.
Debt Ratios are fine but Leverage and Debt/Equity Ratios could be improved. Because this is a financial, I am looking at Cash and Investment Coverage of the long term Debt. The Ratio is fine at 0.93. I get a Liquidity Ratio of 5.97, but this is basically unimportant for a financial. The Debt Ratio for 2019 is 1.05 and that is fine for a financial. The Leverage and Debt/Equity Ratios at 19.34 and 18.34 are a bit high even for a bank.
The Total Return per year is shown below for years of 5 to 16 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 | 13.07% | 11.90% | 10.74% | 1.16% |
| 2009 | 10 | 11.80% | 19.36% | 17.80% | 1.56% |
| 2004 | 15 | 11.45% | 12.41% | 11.19% | 1.21% |
| 2003 | 16 | 11.25% | 10.18% | 1.07% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 5.41, 6.43 and 7.70. The 10 year corresponding ratios are 5.46, 6.88 and 8.03. The corresponding historical ratios are 5.58, 7.10 and 8.57. The current P/E Ratio is 7.31 based on a stock price of $79.00 and 2020 EPS estimate of 10.80. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a Graham Price of $143.63. The 10 year low, median, and high median Price/Graham Price Ratios are 0.45, 0.55 ad 0.66. The current P/GP Ratio is 0.55 based on a stock price of $79.00. This stock price testing suggests that the stock price is relatively reasonable and at the median.
I get a 10 year median Price/Book Value per Share Ratio of 1.03. The current P/B Ratio is 0.93 based on a Book Value of $1,426.83, Book Value per Share of $84.89 and a stock price of $79.00. The current ratio is 9.7% 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 0.48 (because of years with negative. If you only look at positive figures, the P/CF Ratio is 6.04. The current ratio is P/CF Ratio 3.24. The current ratio is 46% below the 10 year median ratio of positive values. This stock price testing suggests that the stock price is relatively
I get an historical median dividend yield of 1.47%. The current dividend yield is 1.87% based on a stock price of $79 and dividends of $1.48. The current dividend yield is 27% 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 1.55%. The current dividend yield is 1.87% based on a stock price of $79 and dividends of $1.48. The current dividend yield is 20.8% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively cheap.
The 10 year median Price/Sales (Revenue) Ratio is 3.24. The current P/S Ratio is 2.69 based on Revenue estimate for 2020 of $493M, Revenue per Share of $29.33 and a stock price of $79.00. The current ratio is 16.8% below the 10 year median 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 and below the median. Both the dividend yield tests are showing the stock price as relatively cheap, but this is not confirmed by the P/S Ratio test which is showing the stock price as relatively reasonable and below the median. There are not problems with the other tests.
Is it a good company at a reasonable price? I think that the stock price is currently reasonable. This financial stock is riskier that other Canadian Banks, but might have a place in a dividend growth stock portfolio as long as people understand the risk.
When I look at analysts’ recommendations, I find Buy (4), Hold (2) and Underperform (1). The consensus would be a Buy. The 12 month stock price is $91.25. This implies a total return of 17.38% with 1.87% from dividends and 15.51% from capital gains.
The latest entry says Buy on Stock Chase but Stock Chase gives it only 3 stars out of 5. Jed Lloren Motley Fool thinks this stock should be part of a dividend growth portfolio. The site Simply Wall Street gives this stock 4 starts out of 5. A writer on Simply Wall Street talks about the CEO’s remuneration. CEO talks about his company on BNN Bloomberg. You have to sit through two short commercials first, but it is worth hearing what the CEO has to say.
Equitable Group Inc is a Canadian company that operates business through Equitable Bank, the company's subsidiary. It owns several business lines, including single-family lending services, commercial lending services; securitization financing, and deposit services, and deposit notes. The company also runs a digital bank under the EQ Bank brand. The company operates business across Canada, with the majority of mortgage principal coming from Ontario, Alberta, and Quebec. Its web site is here Equitable Group Inc.
The last stock I wrote about was about was Medtronic PLC (NYSE-MDT) ... learn more. The next stock I will write about will be North West Company (TSX-NWC, OTC-NWTUF) ... learn more on Monday, October 19, 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.
No comments:
Post a Comment