I own this stock of Hardwoods Distribution Inc (TSX-HDI, OTC-HDIUF). In April 2017, I asked for suggestions on what stocks I should now follow because of a number that I had followed had been bought out. This was one of the suggestions. I bought 100 shares in 2020 to try it out. When the price I feel is more reasonable, I will buy more. At this time, I look forward to the next bear market to buy more.
When I was updating my spreadsheet, I noticed that this stock had a lot more estimates last year. (Estimates for the Revenue, EPS, etc. in the coming years.) This means that more analysts are paying attention to this stock. This is a good thing that this stock is being noticed. They just raised their dividends by 17.6%. This shows that management has confidence in the future.
The dividend yields are low with dividend growth moderate. The current dividend yield is low (below 2%) at 1.25%. The 5, 10 and historical dividend yields are also low at 1.90%, 1.88% and 1.94%. The dividend increase for the last 5 years is in the moderate range (8% to 14% ranges) at 11.2% per year. The last dividend increase was good (15% or over) at 17.7%. This increase was made in 2021. The company used to be an income trust. These companies could pay high dividends. The company cut the dividend when it became a corporation and this why the 15 and 16 year dividend growths are negative.
The Dividend Payout Ratios (DPR) are good. The DPR for EPS for 2020 was 19% with 5 year coverage at 20%. The DPR for CFPS for 2020 is 7.5% with 5 year coverage at 9.3%. The DPR for Free Cash Flow was 11.6% with 5 year coverage at 15%.
Debt Ratios are good. The Long Term Debt/Market Cap Ratio for 2020 is 0.18 and is low and very good. The Liquidity is fine at 1.87. The Debt Ratio is good at 2.09. The Leverage and Debt/Equity Ratios are good at 1.92 and 0.92 respectively.
The Total Return per year is shown below for years of 5 to 16 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 | 11.20% | 8.12% | 6.74% | 1.37% |
| 2010 | 10 | 15.98% | 29.83% | 26.89% | 2.94% |
| 2005 | 15 | -7.42% | 12.53% | 9.17% | 3.36% |
| 2004 | 16 | -4.66% | 7.44% | 4.86% | 2.58% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 8.54, 10.53 and 15.44. The corresponding 10 year ratios are 8.86, 11.24 and 14.68. The corresponding historical ratios are 8.54, 10.53 and 14.21. The current P/E Ratio is 11.72 based on a stock price of $32.10 and EPS estimate for 2021 of $2.74. This current ratio between the low and median 10 year ratios. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a Graham Price of $26.99. The 10 year low, median, and high median Price/Graham Price Ratios are 0.57, 0.74 and 1.06. The current P/GP Ratio is 1.19 based on a stock price of $32.10. This ratio is above the high 10 year ratios. 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 1.27. The current P/B Ratio is 2.72 based on a stock price of $32.10, Book Value of $251.6M, and a Book Value per Share of $11.82. The current ratio is 114% 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 16.73. The current P/CF Ratio is 10.50 based on Cash Flow of the last 12 months of $65M, Cash Flow per Share of $3.06, and a stock price of $32.10. The current ratio is 37% 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 1.94%. The current dividend yield is 1.25% based on dividends of $.40 and a stock price of $32.10. The current yield is 36% below 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 1.88%. The current dividend yield is 1.25% based on dividends of $.40 and a stock price of $32.10. The current yield is 34% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively expensive.
The 10 year median Price/Sales (Revenue) Ratio is 0.31. The current P/S Ratio is 0.52 based on Revenue estimate for 2021 of $1,321M, Revenue per Share of $62.05 and a stock price of $32.10. The current ratio is 66% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
Results of stock price testing is that the stock price is probably expensive. Both the dividend yield test says this and it is confirmed by the P/S Ratio test. Some of the other tests say the same thing. I know the P/E Ratio test say it is reasonable, but I have not found this to be a reliable test. The P/CF Ratio test says the stock price is cheap, but this test is using last 12 month data I have found to be unreliable also.
Is it a good company at a reasonable price? I think that the stock price is currently expensive. I do like this company and when it at a more reasonable price, I will buy more. It is considered to be a small cap. I think that this will be a long term hold for me. I have found that paying too much for a long term hold stock really affects your total return.
When I look at analysts’ recommendations, I find Strong Buy (3), Buy (2). The consensus would be a Buy. The 12 months stock price consensus is $44.40. This implies a total return of 39.56% with 38.32% from capital gains and 1.25% from dividends.
This stock is not well followed on Stock Chase. Old reviews like this company. Robin Brown on Motley Fool thinks it is a good time to buy this cyclical stock. Christopher Liew on Motley Fool thinks now is a good time to buy this stock. The executive summary on Simply Wall Street gives this stock 4 stars out of 5 and list one risk. I do not think that there is insider selling so much as insiders are not taking up share rights and performance shares. I follow CEO, CFO and Chairman and they all slightly increased their shares over the past year. A writer on Simply Wall Street talks about the share price growing faster than the EPS.
Hardwoods Distribution Inc. HDI is a world-class distributor of architectural building products operating under multiple brands across North America. Its web site is here Hardwoods Distribution Inc.
The last stock I wrote about was about was IA Financial Corp (TSX-IAG, OTC-IDLLF) ... learn more. The next stock I will write about will be Ensign Energy Services (TSX-ESI, OTC-ESVIF) ... learn more on Monday June 7, 2021 around 5 pm.
Also, on my book blog I have put a review of the book The Fate of the West by Bill Emmott learn more...
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