I own this stock of Canadian Tire Corp (TSX-CTC.A, OTC-CDNAF). In 2000 when I first bought this stock, it was on the Investment Reporter's list of conservative Canadian stocks. I bought stock for my trading account in 2009 because I have done well with it in my Pension Account and it was a consumer stock.
When I was updating my spreadsheet, I noticed that I continue to do very well with this stock. I have had this stock since 2000 and have had a total return of 12.64% with 10.68% from capital gains and 1.96% from dividends. For the share I bought in 2000, I have a yield on my original investment of 20.4%. For the share I bought in 2009, my yield on my original investment is 8.8%. This is why I like dividend growth stocks.
The dividend yields are moderate with dividend growth moving to low. The current dividend yield is moderate (2% to 4% ranges) at 2.60%. The 5 year median dividend yield is also moderate at 2.24%. The 10 year and historical median dividend yields are low (below 2%) at 1.80% and 1.68%. The dividend growth for the last 5 year is 16.7% per year and is in the good range (15% and over). However, the last two dividend increases were lower. This has probably to do with C19 and uncertain near future. The last dividend increase was just 3.3% and in the low range (under8%) and it was for this year, 2021. The prior dividend for 2020 was in the moderate range (8% to 14% ranges) at 9.6%.
The Dividend Payout Ratios (DPR) are good. The DPR for EPS for 2020 is 37% with 5 year coverage at 31%. The DPR for CFPS for 2020 is 13% with 5 year coverage at 12%. The DPR for Free Cash Flow for 2020 is 13% with 5 year coverage at 32%. Sites again do not agree on what the FCF is.
Debt Ratios are fine. The Long Term Debt/Market Cap Ratio is good at 0.43. I also looked at how long it would take to pay off the debt with cash flow. A good answer is 3 years, and this company scores at 1.7 years. The Liquidity Ratio is good at 2.10. The Debt Ratio is a little low at 1.40 where I would like it to be at 1.50 or higher. Leverage and Debt/Equity Ratios for 2020 is 3.49 and 2.49 and a little high as I would prefer these ratios to be below 3.00 and 2.00.
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 | 16.72% | 9.68% | 7.21% | 2.47% |
| 2010 | 10 | 18.41% | 11.60% | 9.39% | 2.21% |
| 2005 | 15 | 14.72% | 7.61% | 6.03% | 1.58% |
| 2000 | 20 | 12.93% | 13.78% | 11.61% | 2.17% |
| 1995 | 25 | 10.21% | 12.11% | 10.13% | 1.98% |
| 1990 | 30 | 8.63% | 8.06% | 6.69% | 1.37% |
| 1988 | 32 | 9.63% | 8.99% | 7.43% | 1.55% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 11.24, 13.04 and 14.84. The corresponding 10 year ratios are 10.85, 12.59 and 14.70. The corresponding historical ratios are 10.27, 13.59 and 14.84. The current P/E Ratio is 13.91 based on a stock price of $180.84 and EPS estimate for 2021 of $13.00. The current ratio is between the 10 year median and high median ratios of 12.59 and 14.70. This stock price testing suggests that the stock price is relatively reasonable but above the median.
If you look at P/E Ratios compared to Total Returns for the 5, 10, 15, 20, 25, and 30 year periods, I find the following. For example, total return over the past 15 years is 7.61% per year, the starting P/E Ratio (the one from 15 years ago) was 17.47. From the point of view of this chart, a P/E Ratio of 17.47 would be high.
| Year | Tot Return | Start P/E |
|---|---|---|
| 5 | 9.68% | 13.72 |
| 10 | 11.60% | 12.26 |
| 15 | 7.61% | 17.47 |
| 20 | 13.78% | 9.84 |
| 25 | 12.11% | 10.87 |
| 30 | 8.06% | 15.00 |
I get a Graham Price of $147.11. The 10 year low, median, and high median Price/Graham Price Ratios are 0.88, 1.00 and 1.11. The current P/GP ratio is 1.23 based on a stock price of $180.84. The current ratio is above the 10 year high median ratio of 1.11. 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 1.75. The current P/B Ratio is 2.44 based on a Book Value of $4,499M, Book Value per Share of $73.99 and a stock price of $180.84. The current ratio is 40% above the 10 year median P/B 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 8.38. The current P/CF Ratio is 6.60 based on a stock price of $180.84, Cash Flow per Share estimate for 2021 of $27.40 and Cash Flow of $1,666M. The current ratio is 21% 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 1.68%. The current dividend yield is 2.60% based on dividends of $4.70 and a stock price of $180.85. The current dividend is 55% 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 1.80%. The current dividend yield is 2.60% based on dividends of $4.70 and a stock price of $180.85. The current dividend is 45% 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 0.64. The current P/S Ratio is 0.74 based on Revenue estimate for 2021 of $14,946M, Revenue per Share of $245.79 and a stock price of $180.85. The current ratio is 15% 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. The Dividend yield tests are showing the stock price as cheap, but this is not confirmed by the P/S Ratio test which says the stock price is reasonable but above the median. With the revenue, there is a great deal of uncertainty because of the C19. The rest of the tests are a mixed bag, but it is not good that the P/B Ratio testing says it is expensive.
Is it a good company at a reasonable price? The stock price is probably reasonable. I own this stock and still think it is doing well and it is a dividend growth stock. I realize there is more competition now for it, but I expect it will do fine. I intend to continue to hold my shares.
When I look at analysts’ recommendations, I find Strong Buy (2), Buy (5), Hold (4) and Sell (1). The consensus would be a Buy. The 12 month stock price consensus is $190.58. This implies a total return of 7.98% with 5.39% from capital gains and 2.60% from dividends.
Analysts on Stock Chase seem cautious about this stock. Chris MacDonald on Motley Fool thinks this stock is a current buy. The Executive Summary on Simply Wall Street gives this stock 4 stars out of 5 and list 2 risks. A writer on Simply Wall Street thinks this stock is currently fairly priced at 19% below his calculated intrinsic value. Michael Sprung on BNN discusses this stock.
Canadian Tire sells home goods, sporting equipment, apparel, footwear, automotive parts and accessories, and vehicle fuel across Canada. They operate primarily under the Mark's, SportChek, Party City, Atmosphere, PartSource and Helly Hansen. The firm also operates and holds majority ownership of a financing arm and a REIT. Its web site is here Canadian Tire Corp.
The last stock I wrote about was about was H & R Real Estate Trust (TSX-HR.UN, OTC-HRUFF) ... learn more. The next stock I will write about will be Enbridge Inc (TSX-ENB, NYSE-ENB) ... learn more on Monday, March 22, 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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