I do not own this stock of Equitable Group Inc (TSX-EQB, OTC-EQGPF). I had read a glowing report on investing on this company in 2013, so I decided to check it out. It was interesting as it was loaning money to new immigrants, a class of people who generally have a difficult time getting loans and mortgages from our regular banks. It sounded intriguing. Also, the board has two (or 20%) minority directors.
When I was updating my spreadsheet, I noticed that this stock has a low dividend yield, so it might be of interest to look at what sort of yield is now being made on investments made at 5, 10, 15years ago. The yield is shown in the table below. For example, if this stock was bought 15 years ago, the shareholder would have a current yield on the original investment of 5.62%.
Also, I like to look at what percentage of the original cost that would have been paid by dividends if the stock was purchased 5, 10, and 15 years ago. See the chart below. For example, if this stock was purchased 15 years ago, a shareholder would have covered 43.53% of the cost of the shares.
| Years | Yield | Cost Cov |
|---|---|---|
| 5 | 2.71% | 11.23% |
| 10 | 5.50% | 35.06% |
| 15 | 5.62% | 43.53% |
The dividend yields are low with dividend growth moderate. The current dividend yield is low (below 2%) at 0.98%. The 5, 10 and historical dividend yield is also low at 1.69%, 1.65%, and 1.50%. The dividend increases are moderate (8% to 14% ranges) with dividend growth over the past 5 years at 14.6% per year. The last dividend increase was lower at 5.7%. This company generally does a number of increases each year, but has not done so this year.
The Dividend Payout Ratios (DPR) are good. The DPR for EPS for 2020 is 11% with 5 year coverage at 10%. The DPR for CFPS for 2021 are 7.6% with 5 year coverage at 5.7%. The DPR for Free Cash Flow for 2020 is 8.4% with 5 year coverage at 11.5%.
Debt Ratios are fine. This is a financial stock, so we look at a Debt/Asset Ratio. You want this ratio to be under 1.00. The ratio for this financial for 2020 is fine at 0.94. The Liquidity Ratio is not important for financials, but I calculated one anyway and it is high and good for 2020 at 8.61. The Debt Ratio for 2020 is 1.06. For Financial you want one at 1.04 or higher.
The Total Return per year is shown below for years of 5 to 17 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 | 14.56% | 16.01% | 14.42% | 1.59% |
| 2010 | 10 | 13.82% | 16.66% | 14.99% | 1.67% |
| 2005 | 15 | 10.88% | 11.19% | 9.87% | 1.32% |
| 2003 | 17 | 11.95% | 10.22% | 9.04% | 1.18% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 5.08, 6.34 and 7.70. The corresponding 10 year ratios are 5.42, 6.68 and 8.40. The corresponding historical ratios are 5.49, 6.99 and 8.68. The current ratio is 9.41 based on a stock price of $151.46 and EPS estimate for 2021 of $16.10. The current ratio is above the 10 year high median ratio. This stock price testing suggests that the stock price is relatively expensive.
I get a Graham Price of $175.02. The 10 year low, median, and high median Price/Graham Price Ratios are 0.44, 0.55 and 0.69. The current P/GP Ratio is 0.87 based on a stock price of $151.46. The current ratio is above the 10 year median high ratio. 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 1.03. The current P/B Ratio is 1.79 based on a stock price of $151.46, Book Value of $1,426.8M and Book Value per Share of $84.56. The current ratio is 74% 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 0.48. The current P/CF Ratio is 7.63 based on a stock price of $151.46, Cash Flow for the last 12 months of $334.8M and Cash Flow per Share of $19.84. The current ratio is 1474% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive. You have to wonder how good this test is because the company’s P/CF Ratio varied a lot and was often negative.
I get an historical median dividend yield of 1.50%. The current dividend yield is 0.98% based on a stock price of $151.46 and a Dividend of $1.48. The current yield is 35% 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 1.55%. The current dividend yield is 0.98% based on a stock price of $151.46 and a Dividend of $1.48. The current yield is 37% 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 3.11. The current P/S Ratio is 4.43 based on Revenue estimate for 2021 of $577M, Revenue per Share of $34.19 and a stock price of $151.46. The current ratio is 42% 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 relatively expensive. All the testing points to that result. Both the dividend yield tests and the P/S Ratio test point to this.
I looked at the total return over a number of years. For P/S Ratio and P/E Ratio, the lower the ratio the cheaper the stock. For yield, the higher the yield, the cheaper the stock. In the chart below you can see that the beginning P/E Ratios for good returns are mostly lower than today. This is the same with P/S Ratio. Also, the beginning yield was higher than today.
In the following chart the total return for the 10 years to December 31, 2020 is 16.66%. The beginning yield was high at 1.60%, and the P/S Ratio and the P/E Ratio were relatively low at 3.97 and 7.39. Does this chart change my opinion of the stock price? Not really. The thing with this company is that the P/E Ratio and P/S Ratio have gone lower from the start of my spreadsheet 17 years ago.
| # Years | Total Ret | Beg P/E | Beg P/S | Beg Yield |
|---|---|---|---|---|
| 5 | 16.01% | 6.66 | 3.30 | 1.44% |
| 10 | 16.66% | 7.39 | 3.97 | 1.60% |
| 15 | 11.19% | 14.91 | 7.65 | 1.26% |
| 17 | 10.22% | 25.47 | ||
| current | 9.41 | 4.43 | 0.98% |
Is it a good company at a reasonable price? I like this financial. However, I think that the stock price is on the expensive side currently. Also, I personally do not like buying a stock when the dividend yield is currently below 1%.
When I look at analysts’ recommendations, I find Buy (6) and Hold (2) recommendations. The consensus would be a Buy. The 12 month stock price consensus is $171.25. This implies a total return of $14.02% with 13.04% from capital gains and 0.98% from dividends.
It is not well followed on Stock Chase. The last entry, which was a buy occurred in July 2020. Adam Othman on Motley Fool thinks this is a stock to watch post-election. The executive summary on Simply Wall Street gives this stock 4 stars out of 5 and list two risks. A writer on Simply Wall Street says the company is growing as expected and it is expected to faster than the wider industry. A writer on Simply Wall Street talks about insider trading. This bank on News Wire talks about selling Covered Bonds in Europe.
Equitable Group Inc is a Canadian company that operates business through Equitable Bank, the company's subsidiary. The company also runs a digital bank under the EQ Bank brand. The company operates business across Canada, with the majority of mortgage principal coming from Ontario, Alberta, and Quebec. Its web site is here Equitable Group Inc.
The last stock I wrote about was about was Medtronic PLC (NYSE-MDT) ... learn more. The next stock I will write about will be Pason Systems Inc (TSX-PSI, OTC-PSYTF) ... learn more on Wednesday, October 13, 2021 around 5 pm. Today on my other blog I will write about Go Big, Then Stop.... learn more on Tuesday, October 12, 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.
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