I own this stock of Alaris Equity Partners Income Trust (TSX-AD.UN). This is a stock that Dividends in Hand Blogger has bought in July 2016. It was also recommended by Acumen Capital report in a report by Brian Pow and Oliver Shao via Investor’s Digest.
When I was updating my spreadsheet, I noticed there was insider buying by the CEO, CFO and Chairman among others. I have not done well on this stock with a total return of just 2.42% per year. They had trouble in 2020 and cut the dividends. With the change to a income trust, the dividends will no longer be taxed as dividends but be classified as either Trust income, capital gain, return of capital, eligible dividend, or a combination thereof.
The dividend yields are high with dividend growth being restarted. The current dividend yield is high (7% and over) at 7.64%. The 5 and historical median dividend yields are high at 7.77% and 7.32%. the 10 year median dividend yield is good (5% and 6%) at 6.79%. The company changed the dividend payments from monthly to quarterly in 2020. They also raised the quarterly dividend in 2020. They also changed from a corporation to an income trust in 2020. They seem committed to providing a growing dividend.
The Dividend Payout Ratios (DPR) need to be improved and this is expected. The DPR for EPS for 2020 is 205% with 5 year coverage at 144%. The DPR for EPS is expected to drop to 64% in 2021. The DPR for CFPS for 2020 is 45% with 5 year coverage at 64%. The DPR or CFPS is expected to remain high in 2020 at 67%. The DPR for Free Cash Flow for 2020 is 84% with 5 year coverage at 82%. The FCF is expect to be negative this year and very low in 2022, so this is not going to improve anytime soon.
Debt Ratios are all good. The Long Term Debt/Market Cap Ratio for 2020 is good at 0.39. The Liquidity Ratio for 2020 is 1.98. The Debt Ratio for 2020 is 2.72. The Leverage and Debt/Equity Ratios for 2020 are 1.58 and 0.58.
The Total Return per year is shown below for years of 5 to 13 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 | -5.86% | -0.73% | -8.45% | 7.72% |
| 2010 | 10 | 2.15% | 13.41% | 2.64% | 10.77% |
| 2007 | 13 | 1.37% | 12.59% | 3.23% | 9.36% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 11.16, 19.86 and 22.80. The corresponding 10 year ratios are 14.12, 19.53 and23.01. The corresponding historical ratios are 11.71, 17.48 and 21.90. The current P/E Ratio is 8.37 based a stock price of $16.23 and EPS estimate for 2021 of $1.94. This stock price testing suggests that the stock price is relatively cheap.
I get a Graham Price of $26.02. The 10 year low, median, and high median Price/Graham Price Ratios are 0.85, 1.08 and 1.45. The current P/GP Ratio is 0.62 based on a stock price of $16.23. The current is below the low median 10 year ratio. 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 1.32. The current P/B Ratio is 1.05 based on a Book Value of $605M, Book Value per Share of $15.51 and a stock price of $16.23. 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 a 10 year median Price/Cash Flow per Share Ratio of 14.86. The current P/CF Ratio is 8.73 based on Cash Flow per Share estimate for 2021 of $1.86, Cash Flow of $72.5M and a stock price of $16.23. The current ratio is 41% 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 7.32%. The current dividend yield is 7.64% based on dividends of $1.24 and a stock price of $16.23. The current dividend yield is 4.4% 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 6.79%. The current dividend yield is 7.64% based on dividends of $1.24 and a stock price of $16.23. The current dividend yield is 12% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively cheap.
The 10 year median Price/Sales (Revenue) Ratio is 10.28. The current P/S Ratio is 4.52 based on Revenue estimate for 2021 of $$140M, Revenue per Share of $3.59 and a stock price of $16.23. The current ratio is 56% 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. Both the dividend yield tests and the P/S Ratio test is showing the stock price as cheap. All the tests are saying the same thing.
Is it a good company at a reasonable price? First the stock price is reasonable, even cheap. Unfortunately, it is cheap for a reason. They were paying out more in dividends than they were earning and they were also hurt by the pandemic. However, the new format of it as an income trust should bring some benefits. However, the distributions will no longer be taxed as dividends but distributions from the Trust will be classified as either trust income, capital gain, return of capital, eligible dividend, or a combination thereof. This stock will be better held in a registered account. I have mine in a TFSA account.
When I look at analysts’ recommendations, I find Strong Buy (2), Buy (5) and Hold (1). The consensus would be a Buy. The 12 month stock price consensus would be $20.38. This implies a total return of 33.21% with 25.57% from capital gains and 7.64% from dividends based on a current stock price of $16.23.
Analyst on Stock Chase thinks this company is best held in a registered account. Daniel Da Costa on Motley Fool thinks this company should be avoid until after the pandemic. The Executive Summary on Simply Wall Street gives this stock 4 stars out of 5 and lists 3 risks. A writer on Simply Wall Street wonders about the dividend. The blogger Dividend Earner recently reviewed this stock. He would not buy this stock.
Alaris Equity Partners Income Trust is an open ended trust. The company invests in lower middle market companies in North America through non-control, preferred equity investments. Its web site is here Alaris Equity Partners Income Trust.
The last stock I wrote about was about was Sun Life Financial Inc (TSX-SLF, NYSE-SLF) ... learn more. The next stock I will write about will be Toromont Industries Ltd (TSX-TIH, OTC-TMTNF) ... learn more on Monday, April 12, 2020 around 5 pm.
Also, on my book blog I have put a review of the book Machine Platform Crowd: Harnessing Our Digital Future by Andrew McAfee and Erik Brynjolfsson learn more...
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