Sound bite for Twitter and StockTwits is: Financial Stock. The stock price is relatively cheap. The dividend has been suspended, but I expect that at some point in the near future dividends will be restarted. They have restarted their share buyback program. See my spreadsheet on Home Capital Group.
I own this stock of Home Capital Group (TSX-HCG, OTC-HMCBF). I started reviewing this company in September 2009. It is a dividend growth company and was coming up on lists of good dividends paying stocks.
When I was updating my spreadsheet, I noticed that the company is improving. They had problems dated back to 2015 (see Wikipedia article). The originator of this company, Gerry Soloway, was in the end, forced to resign. Dividends were suspended in 2018, but analysts expect them to restart. They expected this to happen in 2020, but I am still waiting for this.
The dividend yields are 0% with dividend growth currently non-existent. The dividends on this stock were suspended in 2018. Analysts keep expecting the dividends to be restarted, but that has not happened yet. When it was paying dividends, the dividend yield was low (under 2%). The 5 year dividend yield is 0%. The 10 year and historical dividend yields are low at 1.51% and 1.38%. Dividend growth was good. The average increase in the last 20 years was almost 15%.
The Dividend Payout Ratios (DPR) were good prior to the dividend being suspended. DPR for EPS for this stock prior to 2018 was at a 5 year coverage of 21%. The 5 year coverage for DPR for CFPS prior to 2018 was 21% also. These are good and low DPRs
Debt Ratios are good. Because this is a financial institution, what I want to look at is a Long Term Debt/Coverage Assets Ratio. For 2020, the ratio is good at 0.76. This is good coverage of Long Term Debt. Although the Liquidity Ratio is not important for financials, I still calculated one and I got a ratio for 2020 of 2.00. The Debt Ratio for 2020 is fine at 1.10 because this is a financial ratio and you expect one to be at 1.04 or higher.
The Total Return per year is shown below for years of 5 to 25 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 | 0.00% | 2.92% | 1.98% | 0.93% |
| 2010 | 10 | 0.00% | 2.96% | 1.38% | 1.58% |
| 2005 | 15 | 0.00% | 5.53% | 3.86% | 1.67% |
| 2000 | 20 | 0.00% | 20.00% | 16.10% | 3.90% |
| 1995 | 25 | 0.00% | 40.02% | 29.11% | 10.91% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 6.29, 9.38 and 11.15. The corresponding 10 year ratios are 6.69, 9.22 and 11.43. The corresponding historical ratios are 7.50, 9.11 and 11.89. The current P/E Ratio is 7.74 based on a stock price of $32.21 and EPS estimate for 2021 of $4.16. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a Graham Price of $55.08. The 10 year low, median, and high median Price/Graham Price Ratios are 0.61, 0.80 and 0.99. The current P/GP Ratio is 0.58 based on a stock price of $32.21. 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 1.43. The current P/B Ratio is 0.99 based on a stock price of $32.21, Book Value of $1.680M and Book Value per Share of $32.42. The current ratio is 30% 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 4.14. The current P/CF Ratio is 9.44 based on last 12 months Cash Flow of $176.9M, Cash Flow per Share of $3.41 and a stock price of $32.21. The current ratio is 128% above the 10 year ratio. This stock price testing suggests that the stock price is relatively expensive. However, as with all banks, there is a lot of volatility in the cash flow for this bank.
I cannot do any dividend yield testing as the dividend has been suspended.
The 10 year median Price/Sales (Revenue) Ratio is 4.23. The current P/S Ratio is 2.91 based on Revenue estimate for 2021 of $573M, Revenue per Share of $11.05 and a stock price of $32.21. The current ratio is 31% 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 probably cheap. The P/S Ratio testing and the P/B Ratio testing says this. The P/E Ratio says it is reasonable and below the median with the P/GP Ratio testing show the stock as cheap.
Is it a good company at a reasonable price? I own this company and intend to hold on to my shares. I believe it will become a dividend payer again. It has restarted its share buyback program. However, I prefer dividends to share buybacks.
When I look at analysts’ recommendations, I find Strong Buy (1), Buy (4) and Hold (3). The consensus would be a Buy. The 12 month stock price consensus is $38.14. This implies a total return of 18.41%, all from capital gains.
The analysts seem to on Stock Chase to giving more Do Not Buy than Buy recommendations. Ambrose O'Callaghan on Motley Fool is upbeat on this stock. The executive summary on Simply Wall Street gives this stock 4 stars out of 5 and no risk items. A writer on Simply Wall Street likes the company’s growing EPS.
Home Capital Group Inc is a specialty finance company that offers residential and commercial mortgage lending, securitization of insured mortgage products, consumer lending, and credit card services. The company also offers deposits via brokers and financial planners, and through its direct-to-consumer deposit brand, Oaken Financial. Its web site is here Home Capital Group.
The last stock I wrote about was about was Bombardier Inc (TSX-BBD.B, OTC-BDRBF) ... learn more. The next stock I will write about will be RioCan Real Estate (TSX-REI.UN, OTC-RIOCF) ... learn more on Tuesday, March 16, 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.
Hello Susan,
ReplyDeleteWould you consider doing an analysis of the 2 Brookfield stocks BIP.UN (Brookfield Infrastructure Partners) and BEP.UN (Brookfield Infrastrucure Partners)? Thanks!