I do not own this stock of North West Company (TSX-NWC, OTC-NWTUF). I wanted to review all the income trust stocks touted in the Money Show of 2009. There was a lot of talk at this show about some of the Income Trust being currently good buys with very good yields. This stock changed from an income trust to a corporation in 2011. They had converted to an income trust in 1997.
When I was updating my spreadsheet, I noticed that I always have to go searching for the number of Variable Voting Shares. Why can they not just tell what they are where they show the change in the number of shares. This is a rather small company out of Winnipeg.
The dividend yields are moderate with dividend growth low. The current dividend yield is moderate (2% to 4% ranges) at 4.33%. The 5, 10 and historical median dividend yields are also moderate at 4.36%, 4.51% and 4.82%. The dividend increases are low (below 8%) over the past 5 years are 2.83% per year. The last dividend increase was in 2021 and it was for 2.78%.
The Dividend Payout Ratios (DPR) are fine. The DPR for EPS for 2021 is 49% with 5 year coverage at 71%. The DPR for CFPS for 2021 is 23% with 5 year coverage at 31%. The DPR for Free Cash Flow for 2021 is 168% with 5 year coverage at 146%. However, there is a big difference in what sites say the FCF is.
Debt Ratios are fine. The Long Term Debt Market Cap Ratio is good at 0.11. The Liquidity Ratio for 2021 is low at 1.26. However, if you add in cash flow after dividends it is good at 2.12. The Debt Ratio is good at 1.74. The Leverage and Debt/Equity Ratios are fine at 2.42 and 1.40, respectively.
The Total Return per year is shown below for years of 5 to 32 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 | 2.83% | 6.81% | 2.50% | 4.31% |
| 2010 | 10 | 0.15% | 9.42% | 4.64% | 4.78% |
| 2005 | 15 | 5.40% | 13.81% | 6.85% | 6.96% |
| 2000 | 20 | 6.39% | 22.81% | 11.25% | 11.57% |
| 1995 | 25 | 9.85% | 21.13% | 10.79% | 10.34% |
| 1990 | 30 | 8.91% | 17.81% | 9.96% | 7.85% |
| 1988 | 32 | 8.55% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 15.41, 18.05 and 19.66. The corresponding 10 year ratios are 15.94, 18.09 and 20.12. The corresponding historical ratios are 9.97, 12.82 and 15.19. The current P/E Ratio is 11.84% based on a stock price of $33.28 and EPS estimate for 2022 of $2.81. The current ratio is below the low of the 10 year median ratios. This stock price testing suggests that the stock price is relatively cheap.
I get a Graham Price of $26.25. The 10 year low, median, and high median Price/Graham Price Ratios are 1.50, 1.71 and 1.87. The current P/GP Ratio is 1.27 based on a stock price of $33.28. The current ratio is below the low of the 10 year median ratios. 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 3.58. The current P/B Ratio is 3.05 based on a Book Value of $529.7M, Book Value per Share of $10.90 and a stock price of $33.28. The current ratio is 15% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 10 year median Price/Cash Flow per Share Ratio of 9.94. The current P/CF Ratio is 7.51 based on Cash Flow per Share estimate for 2022 of $4.43, Cash Flow of $215.4M and a stock price of $33.28. The current ratio is 24% 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 4.82%. The current dividend yield is 4.45% based on a dividend of $1.48 and a stock price of $33.28. The current yield is 8% below the historical dividend yield. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a 10 year median dividend yield of 4.51%. The current dividend yield is 4.45% based on a dividend of $1.48 and a stock price of $33.28. The current yield is 1% below the historical dividend yield. This stock price testing suggests that the stock price is relatively reasonable but above the median.
The 10 year median Price/Sales (Revenue) Ratio is 0.71. The current P/S Ratio is 0.74 based on Revenue estimate for 2022 of $2,179M, Revenue per Share of $44.82 and a stock price of $33.28. The current ratio is 4% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
Results of stock price testing is that the stock price is reasonable but above the median. Both the dividend yield tests say this and the P/S Ratio test confirms this. Other tests say the stock price is relatively cheap or reasonable and below the median.
I look 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 following chart the total return for the 10 years to December 31, 2020 is 9.42%. The beginning yield was at 6.73%, and the P/S Ratio and the P/E Ratio were at .70 and 11.84. Does this change my opinion of the stock price? I do not think so. The P/E Ratio and P/S Ratios are lower than for the lowest return and the dividend yield is higher than the lowest return. The lowest return is for the past 5 years.
| # Yrs | Total Ret | Beg P/E | Beg P/S | Beg Yield |
|---|---|---|---|---|
| 5 | 6.81% | 20.05 | 0.82 | 3.93% |
| 10 | 9.42% | 13.05 | 0.70 | 6.73% |
| 15 | 13.81% | 13.48 | 0.71 | 5.01% |
| 20 | 22.81% | 6.85 | 0.29 | 12.00% |
| 25 | 21.13% | -23.47 | 0.30 | 4.39% |
| 30 | 17.81% | |||
| current | 11.84 | 0.74 | 4.39% |
Is it a good company at a reasonable price? The price seems reasonable, but a bit on the high side of the reasonable range. Shareholders have had dividends and increasing capital gains returns over the years.
When I look at analysts’ recommendations, I find Buy (1) and Hold (4). The consensus would be a Hold. The 12 month stock price consensus is $38.80. This implies a total return of 21.03% with 16.59% from capital gains and 4.45% from dividend based on a current stock price of $33.28.
It is not well followed on Stock Chase but the last entry in 2021 rates it a Buy and other analysts in the past have rated it a Buy. Christopher Liew on Motley Fool says this stock can be part of a 3 stock portfolio with Keyera stock (TSX-Key), and North West Healthcare stock TSX-NWH.UN). The Executive Summary on Simply Wall Street gives this stock 4 stars out of 5 and list 2 risks. Sometimes this site mistakes dividends paid in Canadian dollars as unstable dividends. A writer on Simply Wall Street says the fair value of this stock is $49.68. The company talks about its second quarter of 2021on Global News Wire.
The North West Co Inc is a Canada-based company that is principally engaged in retail business in underserved rural communities and urban neighborhoods. The company operates business in Northern Canada, Western Canada, rural Alaska, the South Pacific islands, and the Caribbean, with around two thirds of the company's total revenue coming from the Canadian market. Its web site is here North West Company.
The last stock I wrote about was about was Trigon Metals Inc (TSX-TM, OTC-PNTZF) ... learn more. The next stock I will write about will be Medtronic PLC (NYSE-MDT) ... learn more on Friday, October 08, 2021 around 5 pm. Tomorrow on my other blog I will write about Something to Buy October 2021.... learn more on Thursday, October 7, 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.
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