I own this stock of Melcor Developments Inc (TSX-MRD, OTC-MODVF). This was one of the stocks on Mike Higgs' list of good dividend growth stocks. So, I looked into it and bought it. I bought this stock first in 2008 and then some more in 2009. It is a little followed real estate company from Western Canada.
When I was updating my spreadsheet, I noticed there was a lot of insider buying in the past year. Insider buying was at 0.29% of outstanding shares. You would expect it closer to 0.01%. Insider bought shares at just above $6.00 up to $10.90. I have not done well in this stock. My total return after some 13 years is only 4.28% with a capital loss of 0.67% and dividends at 4.95%.
The dividend yields are moderate with dividend growth variable. The current dividend is moderate (2% to 4% ranges) at 3.34%. The 5, 10 and historical dividend yields are also moderate at 3.63%, 3.23% and 2.90%. I have data on this company going back 30 years and they have raised the dividend 20 times and decreased it 5 times with the rest of the years with a flat dividend. The dividend was decreased by 38% in 2019 and 2020. It was increased 25% in 2021.
The Dividend Payout Ratios (DPR) are fine. The DPR for EPS for 2020 is 100% with 5 year coverage at 42%. The DPR for 2021 is expected to be 43%. The DPR for CFPS for 2020 is 22% with 5 year coverage at 31%. The DPR for Free Cash Flow for 2020 was 19% with 5 year coverage at 40%.
Debt Ratios are fine. This is a real estate company, so I am looking at Debt/Assets coverage and for 2020 it is 0.46. This shows that assets adequately cover their debt. The Liquidity Ratio for 2020 is 3.34. The Debt Ratio is 2.17. The Leverage and Debt/Equity Ratios for 2020 are 1.86 and 0.86 respectively.
The Total Return per year is shown below for years of 5 to 30 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 | -10.74% | -4.50% | -8.34% | 3.84% |
| 2010 | 10 | -0.29% | -0.44% | -4.45% | 4.01% |
| 2005 | 15 | 5.61% | 2.53% | -1.52% | 4.05% |
| 2000 | 20 | 8.22% | 16.61% | 8.26% | 8.35% |
| 1995 | 25 | 10.20% | 22.41% | 9.30% | 13.11% |
| 1990 | 30 | 12.47% | 16.50% | 8.14% | 8.36% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 11.31, 13.42 and 14.69. The corresponding 10 year ratios are 6.40, 7.51 and 8.69. The corresponding historical ratios are 6.31, 7.32 and 8.43. The current P/E Ratio is 12.72 based on a stock price of $11.96 and EPS estimate for 2021 of $0.94. This stock price testing suggests that the stock price is relatively expensive. However, a 12.72 ratio is not an expensive ratio and fits will with the 5 year P/E Ratios.
I get a Graham Price of $26.19. The 10 year low, median, and high median Price/Graham Price Ratios are 0.37, 0.45 and 0.50. The current P/GP Ratio is 0.46 based on a stock price of $11.96. The current ratio of 0.46 is between the median and high median ratios. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a 10 year median Price/Book Value per Share Ratio of 0.53. The current P/B Ratio is 0.37 based on a Book Value of $1,077M, Book Value per Share of $32.43 and a stock price of $11.96. 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 13.24. The current P/CF Ratio is 7.48 based on last 12 months Cash Flow of $53.1M, Cash Flow per Share of $1.60 and a stock price of $11.96. The current ratio is 43% 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 2.90%. The current dividend yield is 3.34% based on dividends of $0.40 and a stock price of $11.96. The current dividend yield is 15% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 10 year median dividend yield of 3.23%. The current dividend yield is 3.34% based on dividends of $0.40 and a stock price of $11.96. The current dividend yield is 4% above the historical median dividend yield. 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 1.94. The current P/S Ratio is 1.45 based on Revenue estimate for 2021 of $274M, Revenue per Share of $8.25 and a stock price of $11.96. The current ratio is 25% 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 dividend yield tests just say the stock is relatively reasonable and below the median, but the company has both increased and decreased dividends lately. So, the dividend yield tests are not the best tests currently. The P/S Ratio test says the stock price is cheap. The P/B Ratio says the same thing. Other tests have different results.
Is it a good company at a reasonable price? I own this stock and I intend to continue to hold it. I have not done well with this stock, but it is from Alberta and they have lots of current problems, so I do not mind being patient. I think it is a good company at a reasonable price, but investing in this company is not for everyone. There are risks involved.
When I look at analysts’ recommendations, I find Hold (1) recommendation. The consensus would be a Hold. The 12 month stock price consensus is $12.50. This implies a total return of $7.86% with 4.52% from capital gains and 3.34% from dividends based on a current stock price of $11.96.
This stock is not well followed by analysts and the last entry on Stock Chase was in 2016. Nikhil Kumar on Motley Fool is very positive about this company’s future. The Executive Summary on Simply Wall Street gives this stock 2 stars out of 5 and list 5 risks. A writer on Simply Wall Street talks about who owns shares in this company. A writer on Simply Wall Street talks about the company’s dividend.
Melcor Developments Ltd is a real estate development and asset management company. It develops and manages mixed-use residential communities, business and industrial parks, office buildings, retail commercial centers and golf courses. They are an Alberta company operating in of Canada and US. Its web site is here Melcor Developments Inc.
The last stock I wrote about was about was BCE Inc (TSX-BCE, NYSE-BCE) ... learn more. The next stock I will write about will be Goodfellow Inc (TSX-GDL, OTC-GFELF) ... learn more on Monday, April 5, 2021 around 5 pm.
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