I do not own this stock of Chartwell Retirement Residences (TSX-CSH.UN, OTC-CWSRF). I saw this stock on a dividend investing blog and looked it up on Stock Chase.
When I was updating my spreadsheet, I noticed that they have a very weak Balance Sheet. The current liabilities are far greater than the current assets. Even adding in cash flow after dividends, the company does not get close to covering current liabilities. It is only when you also add back the current mortgage payable amount that we get a value over 1.00 and it is 1.06. If we use cash flow after working capital it will be 1.31. This company has heavy debt. This could be a problem in economic hard times.
It seems more like a Real Estate company than a Health Care company to me. The use of Funds from Operations (FFO) and Adjusted Funds from Operations (AFFO) shows that it is being valued like a Real Estate Investment Fund (REIT).
The dividend yields are good with dividend growth low. The current dividend yield is good (5% to 6% ranges) at 5.41%. The 5 and 10 year median dividend yields are moderate (2% to 4% ranges) at 3.99% and 4.80%. The historical dividend yield is good at 5.78%. The dividend growth is low (under 8%) with 5 year growth per year at 2.13%. They have been paying dividends for 16 years and in that time, they have raised the dividends 7 times, but have decreased them 4 times.
The Dividend Payout Ratios (DPR) are only fine for FFO and AFFO. The DPR for EPS for 2021 is 876% with 5 year coverage at 1169%. Because this stock has the characteristics of a REIT, I am also looking Funds from Operations (FFO) and Adjusted Funds from Operations (AFFO). The DPR for FFO for 2020 is 80% with 5 year coverage at 66%. The DPR for AFFO for 2020 is 88% with 5 year coverage at 71%. The DPR for CFPS is 51% with 5 year coverage at 48%. I prefer these ratios to be at 40% or less. The DPR for Free Cash Flow for 2020 is 100% with 5 year coverage at 362%. However, there is a difference in what different sites are reporting for FCF.
Debt Ratios need to improve and the company has a lot of debt. The Long Term Debt/Market Cap Ratio is fine but a bit high at 0.92. They have a lot of mortgage debt so I also looked at Debt/Covering Assets and the ratio is fine at 0.71. The Debt Ratio is low at 1.27. I prefer this to be at 1.50 or higher. The Leverage and Debt/Equity Ratios are too high at 4.75 and 3.75. I prefer these to be below 3.00 and 2.00.
The Liquidity Ratio is very low at 0.32. Even if you add in Cash Flow after dividends, it is still very low at 0.63. If this ratio is not 1.00 or higher it means that current assets cannot cover current liabilities. Even if you add back the current portion of the long term debt, you only get to a ratio of 1.06. This ratio should be 1.50 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 | 2.13% | 2.99% | -1.92% | 4.91% |
| 2010 | 10 | 1.21% | 9.63% | 3.49% | 6.14% |
| 2005 | 15 | -3.60% | 2.77% | -2.16% | 4.93% |
| 2003 | 17 | -3.48% | 5.81% | -0.53% | 6.34% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 230.43, 245.40 and 260.37. The corresponding 10 year ratios are 126.04, 161.90 and 189.57. The corresponding historical ratios are all negative and so useless. The current P/E Ratio is negative and so unusable. The P/E Ratios are very high because the stock is not making much in earnings.
Since this stock is more like a REIT, we need to look at Price/ Funds from Operations Ratios. The 5 year low, median, and high median Price/FFO Ratios are 14.94, 16.08 and 17.63. The corresponding 10 year ratios are 12.61, 14.44 and 16.73. The current P/FFO Ratio is 17.95 based on a stock price of $11.31 and FFO estimate for 2021 of $0.57. This is above the high of the 10 year median ratios. This stock price testing suggests that the stock price is relatively expensive.
Since this stock is more like a REIT, we need to look at Price/ Adjusted Funds from Operations Ratios. The 5 year low, median, and high median Price/AFFO Ratios are 15.82, 17.20 and 18.91. The corresponding 10 year ratios are 13.74, 15.75 and 17.98. The current P/FFO is 19.84 based on a stock price of $11.31 and AFFO estimate for 2021 of $0.63. This is above the high of the 10 year median ratios. This stock price testing suggests that the stock price is relatively expensive.
I get a Graham Price of $7.43 using FFO in the equation rather than EPS. In the last 17 year, EPS has been positive 7 times and negative 10 times. This makes the Graham Price using EPS more guess work than anything else. The 10 year low, median, and high median Price/Graham Price Ratios are 1.26, 1.45 and 1.66. The current P/GP Ratio is 1.52 based on a stock price of $11.31. The current ratio is between the median and high of the 10 year 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 3.20. The current P/B Ratio is 2.91 based on a Book Value of $833M, Book Value per Share of $3.89 and a stock price of $11.31. The current ratio is 9% 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 15.25. The current P/CF Ratio is 14.56 based on Cash Flow for the last 12 months of $166M, Cash Flow per Share of $0.78 and a stock price of $11.31. The current ratio is 5% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get an historical median dividend yield of 5.78%. The current dividend yield is 5.41% based on a stock price of $11.31 and dividends of $0.612. The current dividend yield is 6% below the historical median 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 4.80%. The current dividend yield is 5.41% based on a stock price of $11.31 and dividends of $0.612. The current dividend yield is 13% above the 10 year 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 2.78. The current P/S Ratio is 2.66 based on a stock price of $11.31, Revenue estimate for 2021 of $909M and Revenue per Share of $4.25. The current ratio is 4% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
Results of stock price testing is that the stock price seems to be reasonable and probably below the median. The 10 year median dividend yield test shows this as does the P/S Ratio test. The historical median dividend yield test says reasonable but above the median. The P/B Ratio and P/CF Ratios say he stock price is reasonable and below the median. The test involving FFO and AFFO say differently, but this stock is not exactly a REIT, but it is very much like a Real Estate stock.
Is it a good company at a reasonable price? The stock seems to be selling at a reasonable price. I would not personally be interested in this stock as I do not want anymore Real Estate stock. The dividend yields are good, but increases are small to non-existent. I rather have a growth company with lower dividend yields but better dividend growth.
When I look at analysts’ recommendations, I find Strong Buy (2), Buy (4) and Hold (1). The consensus would be a Buy. The 12 month stock price consensus is $14.07. This implies a total return of 29.81% with 24.40% from capital gains and 5.41% from dividends.
When I look at analysts’ recommendations last year, I found Strong Buy (1), Buy (5) and Hold (1). The consensus would be a Buy. The 12 month stock price consensus was $12.46. This implies a total return of 11.92% with 6.68% from capital gains and 5.24% from dividends based on a stock price of $11.68. What happened was a decline in the stock price of 3.17% and so total return was 2.07% with a capital loss of 3.17% and dividends of 5.24%. Last year I said that the stock price was reasonable.
Analysts on Stock Chase mostly think this is a buy. Kay Ng Motley Fool thinks the stock is cheap and now is the time to buy. Christopher Liew on Motley Fool think this stock is an excellent dividend play. A writer on Simply Wall Street via Yahoo Finance says this stock is trading near its fair value of $10.71 but there are four risk warnings of (1) Interest payments are not well covered by earnings, (2) Dividend of 5.43% is not well covered by earnings, (3) Large one-off items impacting financial results and (4) Shareholders have been diluted in the past year. The company reports its third quarter results via Yahoo Finance.
Chartwell Retirement Residences is an unincorporated open-ended trust. The company is engaged in the ownership, operation, and management of retirement and long-term care communities in Canada. Its web site is here Chartwell Retirement Residences.
The last stock I wrote about was about was Richards Packaging Income Fund (TSX-RPI.UN, OTC-RPKIF) ... learn more. The next stock I will write about will be Sienna Senior Living Inc (TSX-SIA, OTC- LWSCF) ... learn more on Monday, December 20, 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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