I do not own this stock of Chartwell Retirement Residences (TSX-CSH.UN, OTC-CWSRF). I saw this stock on a dividend investing blog and looked it up on Stock Chase. It is an unincorporated income trust.
When I was updating my spreadsheet, I noticed that they had some awful debt ratios. As I understand why we should invest in such companies is because the proportion of older people in our society is growing. So, we should invest in companies that sell to that population. However, I like companies that have their debt under control. I am inclined to like companies that can make money. I also, like companies that grow their dividends.
With this company, they are not making money, but they are growing their cash flow. Cash flow grew by 5% per year over the past 5 years, but Revenue is not growing. Revenue per Share is down 4% per year over the past 5 years. Even if you just look at revenue, it is up by 0% per year over the past 5 years. To continue to grow the Cash Flow, Revenue also has to grow. With this company, dividends are up by 2% per year over the past 5 years, but are down by 1.2% per year over the past 10 years. See chart below. No matter how you look at it, the Liquidity Ratios are awful. See below.
The dividend yields are good with dividend growth low. The current dividend yield is good (5% and 6% ranges) at 5.24%. The 5 and 10 year median yields are moderate (2% to 4% ranges) at 3.99% and 4.80%. The historical median dividend yield is good at 6.27%. The dividends have grown by 2% per year over the past 5 years. However, they do not have a good record for dividend growth. Over the past 15 years they had an increased in the dividend 6 times, but had a decreased 4 times.
The Dividend Payout Ratios (DPR) results depend on how you look at the company. The DPR for EPS for 2019 is 11,921%. Since the company is sort of like a REIT, (at least analysts and the company are looking at this way), I did look at the DPR for Funds from Operations (FFO) which for 2019 is 65%. The DPR for Adjusted Funds from Operations (AFFO) for 2019 is 69%. For FFO and AFFO, these ratios are fine. The DPR for 2019 for Free Cash Flow is not calculable because of negative FCF. The 5 year coverage for FCF is 263%.
Debt Ratios are mostly awful. The Long Term Debt/Market Cap is high but fine at 0.75. However, it would take the company some 11 years to pay back their long term debt. (Generally, analysts like the number of years to pay long term debt to be 2 to 3 years. Although, I must admit, this stock is sort of like, but it not, a REIT.). The Liquidity Ratios are awful. The Liquidity Ratio for 2019 is 0.22. When it is below 1.00 it means that current assets cannot cover current liabilities. If you add in Cash Flow after dividends it is just 0.55. Even with adding back the part of the Long Term Debt due this year, it is still low at 0.91. The problem with using current portion of long term debt in this calculation, is that in tough times, it may not be possible to roll the debt over.
The Debt Ratio is too low. The Debt Ratio for 2019 is 1.32, with a 5 year median of 1.39. I prefer this to be 1.50 or higher. The Leverage and Debt/Equity Ratios for 2019 are 4.17 and 3.17. I prefer these to be below 3.00 and 2.00.
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 | 2.03% | 8.36% | 3.76% | 4.60% |
| 2009 | 10 | -1.20% | 13.53% | 7.36% | 6.17% |
| 2004 | 15 | -3.83% | 5.32% | 0.10% | 5.22% |
| 2003 | 16 | 6.72% | 0.79% | 5.93% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 230.43, 245.40, 260.37. The Corresponding 10 year ratios are 111.48, 124.40 and 137.32. The corresponding historical ratios are all negative. The current P/E Ratio is negative with a stock price of $11.68 and EPS loss estimate for 2020 of $0.03. They have never had any meaningful EPS.
This company does give out Funds from Operations (FFO) values. The 5 year low, median, and high median Price/ Funds from Operations Ratios are 14.94, 16.08 and 17.48. The corresponding 10 year ratios are 12.61, 14.12 and 15.82. The current P/FFO Ratio is 15.37 based on a stock price of $11.68 and FFO estimate for 2020 of $0.76. This stock price testing suggests that the stock price is relatively reasonable but above the median.
This company does give out Adjusted Funds from Operations (AFFO) values. The 5 year low, median, and high median Price/ Funds from Operations Ratios are 15.82, 17.30 and 18.87. The corresponding 10 year ratios are 13.74, 15.46 and 17.08. The current P/FFO Ratio is 16.93 based on a stock price of $11.68 and FFO estimate for 2020 of $0.69. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a Graham Price of $7.77. The 10 year low, median, and high median Price/Graham Price Ratios are 1.26, 1.45 and 1.60. The current P/GP Ratio is 1.50 based on a stock price of $11.68. 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 3.20. The current P/B Ratio is 3.31 based on a current Book Value of $752M, Book Value per share of $3.53 and a stock price of $11.68. The current ratio is 3.4% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a 10 year median Price/Cash Flow per Share Ratio of 15.25. The current P/CF Ratio is 13.11 based on last 12 months Cash Flow of $189.8M, Cash Flow per Share of $0.89 and a stock price of 11.68. The current ratio is 14% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get an historical median dividend yield of 6.27%. The current dividend yield is 5.24% based on a stock price of $11.68 and dividends of $0.61. The current dividend yield is 16% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a 10 year median dividend yield of 4.80%. The current dividend yield is 5.24% based on a stock price of $11.68 and dividends of $0.61. The current dividend yield is 9% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable and below the median.
The 10 year median Price/Sales (Revenue) Ratio is 2.62. The current P/S Ratio is 2.67 based on Revenue estimate for 2020 of $932M, Revenue per Share of $4.37 and a stock price of $11.68. The current ratio is 1.9% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
Results of stock price testing is that the stock price is probably reasonable, but above the median. The dividend yield tests show the stock price as reasonable and above and below the median. The P/S shows the stock price as slightly above the median. Most of the testing shows the stock price as above the median except for the P/CF Ratio tests which shows it below the median.
Is it a good company at a reasonable price? This stock is selling at a reasonable price. However, I would not personally buy it because of the debt ratios.
When I look at analysts’ recommendations, I find Strong Buy (1), Buy (5) and Hold (1). The consensus would be a Buy. The 12 month stock price consensus is $12.46. This implies a total return of 11.92% with 6.68% from capital gains and 5.24% from dividends based on a stock price of $11.68.
Mostly analysts still like this company on Stock Chase but there are some negative comments because of elevated expenses re Covid. Karen Thomas on Motley Fool likes this stock for the safe 6% dividend. The executive summary on Simply Wall Street give this stock 2 stars out of 5 and the risk is all about debt. A writer on Simply Wall Street talks about the company being highly leveraged and its interest payments not being well covered. Ben Hobson on Stockopedia is negative on the company’s ability to make dividend payments.
Chartwell Retirement Residences is an unincorporated open-ended trust. The company is engaged in the ownership, operation, and management of retirement and long-term care communities in Canada. Its web site is here Chartwell Retirement Residences.
The last stock I wrote about was about was Richards Packaging Income Fund (TSX-RPI.UN, OTC-RPKIF) ... learn more. The next stock I will write about will be Sienna Senior Living Inc (TSX-SIA, OTC- LWSCF) ... learn more on Thursday, December 24, 2020 around 5 pm. Tomorrow on my other blog I will write about Future of Dividends.... learn more on Thursday, December 24, 2020 around 5 pm.
Also, on my book blog I have put a review of the book The Wake by Linden MacIntyre learn more...
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