I do not own this stock of Stella-Jones Inc (TSX-SJ, OTC-STLJF). I started a spreadsheet on this stock in mid-2009 because of a favorable report I read on this stock. It was considered to be a dividend growth stock and I am always on the lookout for dividend growth stocks.
When I was updating my spreadsheet, I noticed that this company has done well for its shareholders over time. The recent past is not great, but a lot of companies are having trouble in the pandemic and lockdowns. However, I do like companies that actually do things or produce things. I think that this is a great stock to put in your TFSA or Trading Account for long term appreciation and increasing dividends for people building a portfolio. Let compounding work for you.
If the company increases the dividend at the same rate as they used per year over the past 5 years of 13.40%, then in 25 years’ time, the dividend yield on your original investment would be at 21.24%.
| Div Yd | Years | At IRR | Div Inc |
|---|---|---|---|
| 3.22% | 5 | 13.40% | 87.50% |
| 6.04% | 10 | 13.40% | 251.56% |
| 11.33% | 15 | 13.40% | 559.18% |
| 21.24% | 20 | 13.40% | 1135.96% |
| 39.82% | 25 | 13.40% | 2217.43% |
If the company increases the dividend at the same rate as they used this year of 20%, then in 25 years’ time, the dividend yield on your original investment would be at 163.93%.
| Div Yd | Years | At IRR | Div Inc |
|---|---|---|---|
| 4.28% | 5 | 20.00% | 148.83% |
| 10.64% | 10 | 20.00% | 519.17% |
| 26.48% | 15 | 20.00% | 1440.70% |
| 65.88% | 20 | 20.00% | 3733.76% |
| 163.93% | 25 | 20.00% | 9439.62% |
Another way to look at this information is to use past data, and look at dividend yield on original investments after 5 to 25 years. I am also looking at how much of the stock cost is covered by dividends after 5 to 20 years. In the chart below I show the numbers for this stock. For example, if you bought this stock 10 years ago at the median price, you would have a current yield on your original investment of 7.81% and 45% of your original cost would have.
| Years | Yield | Cost Cov |
|---|---|---|
| 5 | 1.60% | 6.23% |
| 10 | 7.81% | 45.07% |
| 15 | 15.48% | 99.14% |
| 20 | 132.41% | 869.43% |
| 25 | 171.94% | 1133.13% |
The dividend yields are low with dividend growth is currently moderate. The current dividend yield is low (below 2%) at 1.77%. The 5, 10 and historical dividend yields are also low at 1.07%, 1.00% and 1.17%. The dividend increases are currently moderate (8% to 14% ranges) at 13.40% per year over the past 5 years. The last dividend increase was for 20% and it occurred in 2021. This was after a lower than normal increase in 2020 of 7.14%. For 2020 this was rather normal as a lot of companies were cautious about dividend increases in 2020 due to the uncertainty of the pandemic and lockdowns.
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 was 10% with 5 year coverage at 11%. The DPR for Free Cash Flow for 2020 is 33% with 5 year coverage at 29%. The different sites do not agree on what the FCF is, but the variance is small.
Debt Ratios are all good. The Long Term Debt/Market Cap Ratio is good and low at 0.09. The Liquidity Ratio is quite high and good at 6.05. The Debt Ratio is high and good at 2.30. The Leverage and Debt/Equity Ratios are low and good at 1.77 and 0.77.
The Total Return per year is shown below for years of 5 to 26 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 | 13.40% | -1.50% | -2.49% | 1.00% |
| 2010 | 10 | 20.24% | 20.48% | 18.72% | 1.76% |
| 2005 | 15 | 23.60% | 20.42% | 18.78% | 1.64% |
| 2000 | 20 | 20.45% | 26.92% | 24.53% | 2.38% |
| 1995 | 25 | 21.23% | 19.98% | 1.25% | |
| 1994 | 26 | 16.65% | 15.78% | 0.87% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 15.83, 18.54 and 21.24. The corresponding 10 year ratios are 15.54, 18.17 and 21.44. The corresponding historical ratios are 9.05, 12.00 and 14.99. The current P/E Ratio is 11.79 based on a stock price of $40.67 and EPS estimate for 2021 of $3.45. The current P/E Ratio is lower than the 10 year median low ratio. This stock price testing suggests that the stock price is relatively cheap.
I get a Graham Price of $42.08. The 10 year low, median, and high median Price/Graham Price Ratios are 1.22, 1.50 and 1.77. The current P/GP Ratio is 0.97 based on a stock price of $40.67. The current ratio is below the 10 year median low ratio. This stock price testing suggests that the stock price is relatively cheap. It is also cheap on an absolute basis as any P/GP Ratio below 1.00 is signaling a cheap stock price.
I get a 10 year median Price/Book Value per Share Ratio of 2.60. The current P/B Ratio is 1.78 based on a Book Value of $1,471M, Book Value per Share of $22.81 and a stock price of $40.67. The current ratio is below the 10 year median ratio by 32%. 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 21.08. The current P/CF Ratio is 6.16 based on Cash Flow per Share estimate for 2021 of $6.60, Cash Flow of $426M and a stock price of $40.67. The current ratio is 71% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
An estimate for Cash Flow per Share of $6.60 seems to me to be rather high. The Cash Flow per Share estimate for 2022 seems more reasonable at $3.90. This CFPS gives a Cash Flow of $251 and based on a stock price of $40.67, gives a P/CF Ratio of 10.43. However, this ratio is still 51% above 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 1.17%. The current dividend yield is 1.77% based on dividends of $0.72 and a stock price of $40.67. The current dividend yield is 51% 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 1.00%. The current dividend yield is 1.77% based on dividends of $0.72 and a stock price of $40.67. The current dividend yield is 77% above the 10 year median dividend yield. This stock price testing suggests that the stock price is relatively cheap.
The 10 year median Price/Sales (Revenue) Ratio is 1.55. The current P/S Ratio is 0.97 based on Revenue estimate for 2021 of $2,698M, Revenue per Share of $41.84 and a stock price of $40.67. The current ratio is 37% below the 10 year median ratio.
Results of stock price testing is that the stock price is relatively cheap. The Dividend Yield tests shows this and it is confirmed by the P/S Ratio test. All the tests are showing a relatively cheap current price and I see no problems with my testing.
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. You can see from the following chart that the P/E Ratio and P/S Ratio are relatively low and the dividend yield is relatively high currently.
In the following chart the total return for the 10 years to December 31, 2020 is 20.48% per year. The beginning yield was at 1.14%, and the P/E Ratio and the P/S Ratio were at 14.73 and 0.83. Does this chart change my opinion of the stock price? No, it does not as the current ratios are relatively good for a good return.
| # Years | Total Ret | Beg P/E | Beg P/S | Beg Yield |
|---|---|---|---|---|
| 5 | -1.50% | 25.74 | 1.90 | 0.61% |
| 10 | 20.48% | 14.73 | 0.83 | 1.14% |
| 15 | 20.42% | 12.96 | 0.69 | 0.71% |
| 20 | 26.92% | 6.76 | 0.26 | |
| 25 | 21.23% | 9.07 | 0.32 | |
| 26 | 16.65% | 16.40 | 0.64 | |
| current | 11.79 | 1.12 | 1.77% |
Is it a good company at a reasonable price? I think that the stock price is reasonable, if not cheap. I also think this is a good company that has done well for their shareholders. I like that the Debt Ratios are very good also.
When I look at analysts’ recommendations, I find Strong Buy (3), Buy (4) and Hold (1). The consensus would be a Strong Buy. The 12 month stock price consensus is $52.06.
Analysts on Stock Chase think this stock is a good buy at present. Ambrose O'Callaghan on Motley Fool talks why it may not be too late to buy this stock. Jitendra Parashar on Motley Fool say these shares rise after upgrades from Scotiabank and TD. A writer on Simply Wall Street via Yahoo Finance talks about how strong the financials look for this company. The company talks about their third quarterly results via Yahoo Finance.
Stella-Jones Inc produces and sells lumber and wood products. The company sells products in five main customer categories. The firm organizes itself into two segments based on geography: the United States and Canada. The majority of revenue comes from the United States. Its web site is here Stella-Jones Inc.
The last stock I wrote about was about was First Capital Realty (TSX-FCR.UN, OTC- FCXXF) ... learn more. The next stock I will write about will be Wild Brain Ltd (TSX-WILD, OTC-WLDBF) ... learn more on Wednesday, December 01, 2021 around 5 pm. Tomorrow on my other blog I will write about Top Canadian Blogs.... learn more on Tuesday, November 30, 2021 around 5 pm.
Also, on my book blog I have put a review of the book Has the West Lost It by Kishore Mahbubani 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.
typo in the line "I think that the stock price is reasonable, if no cheap. "
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