I own this stock of Richelieu Hardware Ltd (TSX-RCH, OTC-RHUHF). This company is a dividend paying stock on the Investment Reporter stock list. In 2009, I bought this stock for my trading account and I still have it in this account.
When I was updating my spreadsheet, I noticed I had done very well in this stock. My total return to date is 18.8% with 17.3% from capital gains and 1.5% from dividends. On my original investment I am getting a dividend yield of 4.57%. When I bought this, the dividend yield was at 1.74%.
The dividend yields are low with dividend growth low. The current dividend yield is low (below 2%) at just 0.72%. The 5, 10 and historical median dividend yields are also low at 0.80%, 1.02% and 1.10%. Strictly speaking, dividend increases for the past 5 years is just 0.01% per year. However, because of the uncertainty of the pandemic, the company missed one dividend payment in 2020. If that payment had been made, the dividend growth for the past 5 years would have been 5.93% per year (and also be higher for the other durations).
The Dividend Payout Ratios (DPR) are good. The DPR for EPS for 2020 is 13% with 5 year coverage at 19%. If they had made four payments of dividends in 2020, the DPR for EPS for 2020 would have been 18% with 5 year coverage at 20%. The DPR for CFPS for 2020 is 9% with 5 year coverage at 14%. The DPR for Free Cash Flow for 2020 is 8% with 5 year coverage at 19%. (Until very recently, the sites I looked at agreed on the FCF.)
Debt Ratios are very good. They acquired a long term debt in 2020, but it is so small I do not have a ratio (i.e., ratio is 0.00.) They have had long term debt at different times in the past, but none amounted to much. The Liquidity Ratio for 2020 is very good at 3.60 as is the Debt Ratio at 3.56. The Leverage and Debt/Equity Ratios are also very good at 1.39 and 0.39, respectively
The Total Return per year is shown below for years of 5 to 27 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 | 0.01% | 8.74% | 7.87% | 2.88% |
| 2010 | 10 | 5.25% | 13.66% | 12.49% | 2.15% |
| 2005 | 15 | 7.60% | 11.04% | 10.01% | 2.53% |
| 2000 | 20 | 9.89% | 15.69% | 14.27% | 2.21% |
| 1995 | 25 | 17.84% | 16.47% | 2.21% | |
| 1993 | 27 | 16.33% | 15.22% | 2.21% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 19.44, 22.71 and 26.39. The corresponding 10 year ratios are 16.53, 19.82 and 23.11. The corresponding historical ratios are 15.09.15.80 and 19.20. The current P/E Ratio is 23.48 based a stock price of $38.98 and EPS estimate for 2021 of $1.66. This stock price testing suggests that the stock price is relatively expensive.
I get a Graham Price of $19.19. The 10 year low, median, and high median Price/Graham Price Ratios are 1.34, 1.64 and 1.97. The current P/GP Ratio is 2.03 based on a stock price of $38.89. This stock price testing suggests that the stock price is relatively expensive.
I get a 10 year median Price/Book Value per Share Ratio of 3.11. The current P/B Ratio is 3.68 based on a Book Value of $551M, Book Value per Share of $9.86 and a stock price of $38.89. The current P/B Ratio is 27% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
I get a 10 year median Price/Cash Flow per Share Ratio of 18.87. The current P/CF Ratio is 14.95 based on Cash Flow for the last 12 months of $145.7M, Cash Flow per Share of $2.61 and a stock price of $38.98. The current ratio is 21% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap. However, this should be treated with caution as Cash Flow is up a lot over the past two years and higher than it has been historically. This means that P/CF Ratios are lower than they have been also.
I get an historical median dividend yield of 1.10%. The current dividend yield is $0.72 based on dividends of $0.25 and a stock price of $38.89. The current dividend yield is 35% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively expensive.
I get a 10 year median dividend yield of 1.02%. The current dividend yield is $0.72 based on dividends of $0.25 and a stock price of $38.89. The current dividend yield is 29% above the 10 year median dividend yield. This stock price testing suggests that the stock price is relatively expensive.
The 10 year median Price/Sales (Revenue) Ratio is 1.50. The current P/S Ratio is 1.75 based on a stock price of $38.89, Revenue estimate for 2021 of $1,247M and Revenue per Share of $22.31. The current ratio is 16% 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 on the expensive side. The dividend yield tests show this, but the P/S Ratio testing is showing that the stock price is relatively reasonable but above the median. Other tests, except for the P/CF Test is showing the stock price as relatively expensive.
Is it a good company at a reasonable price? First, I own shares in this company and I have no intention of selling them. I think it is a good company and it is a dividend growth company. The problem is that at the moment the stock price is on the expensive side.
When I look at analysts’ recommendations, I find only Hold (2) recommendations. The consensus would be a Hold. The 12 month stock price consensus is $38.25. This implies a Total Return loss of 1.15% with a capital loss of 1.87% and dividends of $0.72%.
The most recent entry says this company is their top picks on Stock Chase. Ambrose O'Callaghan on Motley Fool is still bullish on this stock. Executive Summary on Simply Wall Street gives this stock 3 stars out of 5 and list no risks. A writer on Simply Wall Street likes companies where the debt is not a risk, like this company. Stephen Takacsy discusses Richelieu Hardware discuss the company on BNN. He thinks it is a well-managed company but currently too expensive.
Richelieu Hardware Ltd is a Canada-based company that imports, manufactures, and distributes specialty hardware and complementary products. Headquartered in Montreal, the company operates across Canada and the eastern and midwestern regions of the United States. The majority of the company's sales are derived from its operations in Canada. Its web site is here Richelieu Hardware Ltd. https://simplywall.st/stocks/ca/capital-goods/tsx-rch/richelieu-hardware-shares
The last stock I wrote about was about was Canadian National Railway (TSX-CNR, NYSE-CNI) ... learn more. The next stock I will write about will be Allied Properties Real Estate Investment Trust (TSX-AP.UN, OTC-APYRF) ... learn more on Monday, February 15, 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.
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