I do not own this stock of Stella-Jones Inc (TSX-SJ, OTC-STLJF). I started a spreadsheet on this stock in mid-2009 because of a favorable report I read on this stock. It was considered to be a dividend growth stock and I am always on the lookout for dividend growth stocks.
When I was updating my spreadsheet, I noticed that this company has great debt ratios. For example, the Liquidity Ratio for 2019 was 6.34 with 5 year median at 6.70. The Debt Ratio for 2019 was 2.30 and 5 year also at 2.30. I like these ratios to be 1.50 or above. So, the ratios for this company are very good.
The dividend yields are low with dividend growth moderate. The current dividend yield is low (under 2%) at 1.33%. The 5, 10 and historical dividend yields are also low at 0.98%, 1.00% and 1.07%. The dividend growth is currently moderate (8% to 14% ranges) at 14.9%. Although the last increase, which was for 2020 was low (below 8%) at 7.14%. You can see in the chart below that in the past the dividend growth tended toward good (15% or higher).
The Dividend Payout Ratios (DPR) are good. The DPR for EPS for 2019 is 24% with 5 year coverage at 20%. The DPR for CFPS for 2019 is 12% with 5 year coverage at 11%. Site do not agree on Free Cash Flow, but they are similar. The DPR for FCF for 2019 is 175% with 5 year coverage at 36%. FCF was low in 2019. Analysts expect the DPR for FCF in 2020 to be at around 17%.
Debt Ratios are very good. The Long Term Debt/Market Cap Ratio for 2019 is 0.24. The Liquidity Ratio for 2019 is 6.54. The Debt Ratio for 2019 is 2.30. The Leverage and Debt/Equity Ratio for 2019 is 1.77 and 0.77.
The Total Return per year is shown below for years of 5 to 25 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 | 14.87% | 4.02% | 2.76% | 1.26% |
| 2009 | 10 | 20.06% | 21.13% | 19.28% | 1.85% |
| 2004 | 15 | 24.88% | 26.09% | 23.80% | 2.29% |
| 1999 | 20 | 21.23% | 24.66% | 22.72% | 1.94% |
| 1994 | 25 | 16.37% | 15.49% | 0.88% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 15.83, 20.24 and 22.30. The corresponding 10 year ratios are 15.54, 18.17 and 21.44. The corresponding historical ratios are 9.14, 12.43 and 16.03. The current P/E Ratio is 14.91 based on a stock price of $45.03 and EPS estimate for 2020 of $3.02. This stock price testing suggests that the stock price is relatively cheap.
I get a Graham Price of $38.04. The 10 year low, median, and high median Price/Graham Price Ratios are 1.22, 1.50 and 1.77. The current P/GP Ratio is 1.18 based on a stock price of $45.03. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median Price/Book Value per Share Ratio of 2.60. The current P/B Ratio is 2.11 based on a Book Value of $1,437M, Book Value per Share of $21.30 and a stock price of $45.03. The current ratio is 19% 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 21.08. The current P/CF Ratio is 11.88 based on Cash Flow per Share estimate for 2020 of $3.79, Cash Flow of $191M and a stock price of $45.03. The current ratio is 44% 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 1.07%. The current dividend yield is 1.33% based on dividends of $0.60 and a stock price of $45.03. The current dividend yield is 25% 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 1.00%. The current dividend yield is 1.33% based on dividends of $0.60 and a stock price of $45.03. The current dividend yield is 33% 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 1.55. The current P/S Ratio is 1.23 based on a stock price of $45.03, Revenue estimate for 2020 of $2,458M and Revenue per Share of $36.55. The current ratio is 21% 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 relatively cheap. This is showing the dividend yield tests and is confirmed by the P/S Ratio test. All the test but the P/B Ratio test shows the same thing. The P/B Ratio shows the stock price as close to cheap.
Is it a good company at a reasonable price? This is a dividend growth stock, which is the kind I like. The stock price is not only reasonable, but it is cheap. It also has good debt ratios which is also something I like.
When I look at analysts’ recommendations, I find Strong Buy (2), Buy (4) and Hold (2). The consensus is a Buy. The 12 month stock price target is $51.63. This implies a total return of 15.99%, with 14.66% from capital gains and $1.33% from dividends.
An analyst says on Stock Chase that this stock has not been this cheap in a decade. Christopher Liew on Motley Fool likes this stock because of its resiliency in the pandemic. A writer on Simply Wall Street likes this stock because it is a growing business and the CEO pay is reasonable. A writer on Simply Wall Street says that the company has the ability to adequately reinvest at a good rate of return.. Brian Kelly on The Sault Star talks about his investment in this stock.
Stella-Jones Inc produces and sells lumber and wood products. The company sells products in five main customer categories. The railway ties category, the utility poles category, the other three categories are residential lumber for use in housing construction, industrial products for use in marine and building industries, and logs and lumber, which sells wood products to homebuilding markets. The majority of revenue comes from the United States. Its web site is here Stella-Jones Inc.
The last stock I wrote about was about was First Capital REIT (TSX-FCR, OTC-FCRGF) ... learn more. The next stock I will write about will be Keg Royalties Income Fund (TSX-KEG.UN, OTC-KRIUF) ... learn more on Wednesday, December 9, 2020 around 5 pm. Tomorrow on my other blog I will write about Dividend Investing.... learn more on Tuesday, December 8, 2020 around 5 pm.
Also, on my book blog I have put a review of the book The Great Rupture by Viktor Shvets learn more...
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