I own this stock of Transcontinental Inc (TSX-TCL.A, OTC-TCLAF). This is a dividend growth stock. It was on a number of dividend lists. However, it fell on hard times after 2008, but currently seems to be recovering. It is was on the Canadian Dividend Aristocrats Index when I bought it in 2015.
When I was updating my spreadsheet, I noticed that this stock has earned money for shareholders, but it is underperforming what I would like to see. I like a dividend growth stock to have a total return of at least 8% per year, but this is below that lately, with 5 and 10 year total returns at 7.93% and 7.01%. So, it does not quite make the 8% total return when judged year-end to year-end. Personally, I have had this stock since 2015 and I have made a total return of 8.40% per year with 3.72% from capital gains and 4.68% from dividends.
The dividend yields are moderate with dividend growth low. The current dividend yield is moderate (2% to 4% ranges) at 4.32%. The 5 and 10 year median dividend yields are also moderate at 3.84% and 3.97%. The historical median dividend yield is low (below 2%) at 1.40%. The dividend increases for the past 5 year was low (under 8%) at 5.96% per year. were increase. The last dividend increase was for 2.27% and was in 2020. Until the company got into trouble in 2008, the dividend yields were low and the dividend increase were good (15% and above). This is why the historical median dividend yield is low.
The Dividend Payout Ratios (DPR) are fine. The DPR for EPS for 2020 was 59% with 5 year coverage at 39%. The DPR for CFPS for 2020 was 16% with 5 year coverage at 18%. The DPR for FCF for 2020 is 24% with 5 year coverage at 25%. (For FCF, site disagree, but not greatly.)
Debt Ratios are fine. The Long Term Debt/Market Cap Ratio for 2020 is 0.57. I also looked at Goodwill and Intangible assets to Market Cap. For this company the Goodwill, Intangible/Market Cap Ratio is very high at 1.78 for 2020, but decreasing to 1.29 in 2021. The Liquidity Ratio for 2020 is 1.51 and is fine. The Debt Ratio is 1.93 and is fine. The Leverage and Debt/Equity Ratios for 2020 at fine at 2.07 and 1.07.
The Total Return per year is shown below for years of 5 to 32 to the end of 2020. 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. |
|---|---|---|---|---|---|
| 2015 | 5 | 5.96% | 7.93% | 3.51% | 4.42% |
| 2010 | 10 | 9.84% | 7.01% | 2.51% | 4.49% |
| 2005 | 15 | 4.71% | 3.58% | 0.51% | 3.07% |
| 2000 | 20 | 11.58% | 7.80% | 4.50% | 3.30% |
| 1995 | 25 | 11.42% | 8.51% | 5.50% | 3.01% |
| 1990 | 30 | 9.90% | 13.24% | 9.36% | 3.88% |
| 1983 | 32 | 10.08% | 7.26% | 2.82% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 7.03, 8.74 and 10.49. The corresponding 10 year ratios are 6.70, 8.59 and 10.02. The corresponding historical ratios are 8.56, 12.74 and 12.50. (There were some very high P/E ratios and big negative ratios in the past.) The current P/E Ratio is 11.83 based on a stock price of $20.82 and EPS estimate for 2021 of $1.76. This stock price testing suggests that the stock price is relatively expensive.
I get a Graham Price of $27.94. The 10 year low, median, and high median Price/Graham Price Ratios are 0.57, 0.75 and 0.89. The current P/GP Ratio is 0.75 based on a stock price of $20.82. This stock price testing suggests that the stock price is relatively reasonable but above the median and almost expensive.
I get a 10 year median Price/Book Value per Share Ratio of 1.35. The current P/B Ratio is 1.06 based on a stock price of $20.82, Book Value of $1733M, and a Book Value per share of $19.71. The current P/B Ratio is 22% below the 10 year median 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 3.63. The current P/CF Ratio is 4.98 based on a stock price of $20.82, Cash Flow per Share estimate for 2021 of $4.18 and a Cash Flow of $367.5M. The current ratio is 37% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
I get an historical median dividend yield of 1.40%. The current dividend yield is 4.32% based on dividends of $0.90 and a stock price of $20.82. The current dividend yield is 208% above the historical median dividend. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median dividend yield of 3.97%. The current dividend yield is 4.32% based on dividends of $0.90 and a stock price of $20.82. The current dividend yield is 8.8% above the historical median dividend. 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 0.56. The current P/S Ratio is 0.72 based on Revenue estimate for 2021 of $2,532, Revenue per Share of $28.80 and a stock price of $20.82. The current ratio is 29% above the 10 year ratio. This stock price testing suggests that the stock price is relatively expensive.
Results of stock price testing is that the stock price could be reasonable. The stock price testing is all over the place. The historical median dividend yield is low because dividend yields were low prior to 2008. So, I think the 10 year test is the better one. Unfortunately, the dividend yield test is not confirmed by the P/S Ratio test. The stock price has risen a lot since the year-end of October 2020 (by 32%). The P/B Ratio test, which uses no estimates says that the stock price is cheap.
Is it a good company at a reasonable price? The company is probably selling at a reasonable price. This is an old company and has been reinventing itself. I am invested in it. It would be a good investment for diversification. I do not expect it to be a high flyer by any means, but I do expect to earn, in the long term a reasonable total return of 8% per year.
When I look at analysts’ recommendations, I find Strong Buy (2), Buy (4) and Hold (2). The consensus would be a Buy. The 12 month stock price consensus is $24.25. This implies a total return of 20.80% with 16.47% from capital gains and 4.32% from dividends.
Analysts at Stock Chase do not care for this stock much. The site gives it 3 stars out of 5. Christopher Liew on Motley Fool thinks this is a good stock for your TFSA investment in 2021. The Executive Summary on Simply Wall Street gives this stock 4 stars out of 5 and lists one risk for 3 rewards. A writer on Simply Wall Street does not like this stock because of declining EPS. However, EPS has always been volatile for this stock. Total EPS when looking at 5 year periods, is growing. The Blogger Dividend Earner recently reviewed this stock.
Transcontinental Inc or TC Transcontinental, is a Canadian printer and flexible packaging provider that operates in three segments: packaging, printing, and other. Its web site is here Transcontinental Inc .
The last stock I wrote about was about was Canadian Imperial Bank of Commerce (TSX-CM, NYSE-CM) ... learn more. The next stock I will write about will be Sylogist Ltd (TSX-SYZ, OTC-SYZLF) ... learn more on Monday, January 25, 2021 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