Is it a good company at a reasonable price? The stock price seems at a relatively reasonable level at present. The dividend yield is not the highest it has been in the past, but it is relatively high. Shareholders have, since around 2009, received a good dividend yield. This company is never going to give you a high return, but the dividend yield is nice. I have made a total return of 8.63% per year with 3.95% from dividends and 4.68% from capital gains over the 7 year period I have held this stock.
I own this stock of Transcontinental Inc (TSX-TCL.A, OTC-TCLAF). This is a dividend growth stock. It was on a number of dividend lists. However, it fell on hard times after 2008, but currently seems to be recovering. It is was on the Canadian Dividend Aristocrats Index when I bought it in 2015.
When I was updating my spreadsheet, I noticed when looking at the above charts on total return to the end of December 2021 and the end of October 2021, you can see that the total return to the end of October 2021 is better, but the pattern of returns is the same. That is the 15 year total return is the low around 3%. For the 5 year total return, the total return to October 2021 is much better. See chart below.
The Total Return per year is shown below for years of 5 to 33 to the end of October 2021. 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. |
|---|---|---|---|---|---|
| 2016 | 5 | 4.42% | 6.38% | 1.79% | 4.59% |
| 2011 | 10 | 6.27% | 10.07% | 4.43% | 5.63% |
| 2006 | 15 | 3.79% | 3.41% | 0.07% | 3.34% |
| 2001 | 20 | 11.61% | 6.15% | 2.87% | 3.29% |
| 1996 | 25 | 11.44% | 9.06% | 5.59% | 3.47% |
| 1991 | 30 | 9.55% | 12.03% | 8.09% | 3.94% |
| 1988 | 33 | 9.90% | 6.89% | 3.01% |
The dividend yields are moderate with dividend growth currently low. The current dividend yield is moderate (2% to 4% range) at 4.50%. The 5 and 10 year median dividend yields are also moderate at 4.34% and 4.22%. The historical dividend yield is low (below 2%) at 1.43%. The dividend growth is low (below 8%) per year. The dividend growth over the past 5 years is 4.42% per year. The last dividend increase was in 2020 and it was for 2.27%
The Dividend Payout Ratios (DPR) are fine, but the DPR for EPS is a bit high. The DPR for EPS for 2021 is 60%, with 5 year coverage age 42%. Analyst expect the DPR for EPS to decline over the next little while even if they raise the dividend rate. The DPR for CFPS for 2021 is 17% with 5 year coverage at 18%. The DPR for Free Cash Flow for 2021 is 44% with 5 year coverage at 27%.
Debt Ratios are fine. The Long Term Debt/Market Cap Ratio for 2021 is fine at 0.46. The Intangibles and Goodwill/Market Cap Ratio is 0.94 and that is a bit higher than I like to see. The Liquidity Ratio is good at 1.93. The Debt Ratio is good at 1.95. The Leverage and Debt/Equity Ratios are fine at 2.05 and 1.05.
The Total Return per year is shown below for years of 5 to 33 to the end of December 2021. 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. |
|---|---|---|---|---|---|
| 2016 | 5 | 4.42% | 2.23% | -1.75% | 3.99% |
| 2011 | 10 | 6.27% | 10.46% | 4.88% | 5.58% |
| 2006 | 15 | 3.79% | 3.00% | -0.17% | 3.17% |
| 2001 | 20 | 11.61% | 5.10% | 2.11% | 2.99% |
| 1996 | 25 | 11.44% | 9.18% | 5.77% | 3.41% |
| 1991 | 30 | 9.55% | 12.09% | 8.22% | 3.87% |
| 1988 | 33 | 9.97% | 7.00% | 2.96% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 7.03, 8.74 and 10.49. The corresponding 10 year ratios are 6.70, 8.59 and 10.02. The corresponding historical ratios are 10.30, 13.12 and 15.38. The current P/E Ratio is 11.75 based on a stock price of $19.98 and EPS estimate for 2022 of $1.70. 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 Graham Price of $32.48. The 10 year low, median, and high median Price/Graham Price Ratios are 0.58, 0.65 and 0.77. The current P/GP Ratio is 0.62 based on a stock price of $19.98. The current ratio is between the low and median ratios of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable and below the median
I get a 10 year median Price/Book Value per Share Ratio of 1.35. The current P/B Ratio is 0.99 based on a Book Value of $1,759M, Book Value per Share of $20.21 and a stock price of $19.98. The current ratio is 27% below the 10 year median ratio. 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 4.20. The current P/CF Ratio 4.18 based on Cash Flow per Share estimate for 2021 of $4.78. The current ratio is 0.4% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and at the median.
I get an historical median dividend yield of 1.43%. The current dividend yield is 4.50% based on dividends of $0.90 and a stock price of $19.98. The current dividend yield is 215% above the historical dividend yield. This stock price testing suggests that the stock price is relatively cheap. The dividend yields on this company were low until 2007.
I get a 10 year median dividend yield of 4.22%. The current dividend yield is 4.50% based on dividends of $0.90 and a stock price of $19.98. The current dividend yield is 7% above the 10 year 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 0.63. The current P/S Ratio is 0.64 based on Revenue estimate for 2022 of $2,728M, Revenue per Share of $31.35 and a stock price of $19.98. The current ratio is 1% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and above the median.
Results of stock price testing is that the stock price is probably reasonable and around the median. The 10 year dividend yield test points to this as does the P/S Ratio test. The other test varies a lot from cheap to expensive and in between.
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 chart you can see that the company has not returned much in Capital gains for some durations. The P/S Ratio and Dividend yields are both higher than in the past. However, the company has changed a lot over the years, so this might not tell us anything useful.
In the following chart the capital gains for the 10 years to December 31, 2021 is 4.88% per year. The beginning yield was at 3.86%, and the P/E Ratio and the P/S Ratio were at 13.14 and 0.50. Does this chart change my opinion of the stock price? Not really. You have to wonder how valid old values are.
| # Years | Cap Gains | Beg P/E | Beg P/S | Beg Yield |
|---|---|---|---|---|
| 5 | -1.75% | 11.80 | 0.68 | 4.04% |
| 10 | 4.88% | 13.14 | 0.50 | 3.86% |
| 15 | -0.17% | 13.44 | 0.73 | 1.29% |
| 20 | 2.11% | 51.46 | 0.52 | 0.90% |
| 25 | 5.77% | 166.67 | 0.34 | 1.19% |
| 30 | 8.22% | 0.19 | ||
| 33 | 7.00% | 0.27 | ||
| current | 11.75 | 0.64 | 4.50% |
When I look at analysts’ recommendations, I find Strong Buy (1), Buy (3) and Hold (2). The consensus would be a Buy. The 12 month stock price is $26.50. This implies a total return of 37.14% with 32.63% from capital gains and 4.50% from dividends.
When I looked at analysts’ recommendations last year, I found Strong Buy (2), Buy (4) and Hold (2). The consensus was a Buy. The 12 month stock price consensus was $24.25. This implies a total return of 20.80% with 16.47% from capital gains and 4.32% from dividends based on a stock price of 20.82. What happened was a price decline to $19.98 and a gain of 0.29% with a capital loss of 4.03% and dividends of $4.32%. Last year I thought it was at a reasonable price and that long term it would earn a total return of 8% a year.
A number of analysts on Stock Chase think this company is a buy. Christopher Liew on Motley Fool thinks this is a good stock for an inflationary period. Ambrose O'Callaghan Motley Fool thinks it is cheap with a great dividend yield. The company talks about its fourth quarterly results on Newswire. A Simply Wall Street report on Yahoo Finance talks about the company’s dividends. Their only warning is a high debt level.
Transcontinental Inc or TC Transcontinental, is a Canadian printer and flexible packaging provider that operates in three segments: packaging, printing, and other. Its web site is here Transcontinental Inc.
The last stock I wrote about was about was Canadian Imperial Bank of Commerce (TSX-CM, NYSE-CM) ... learn more. The next stock I will write about will be Sylogist Ltd (TSX-SYZ, OTC-SYZLF) ... learn more on Wednesday, January 26, 2022 around 5 pm. Tomorrow on my other blog I will write about Four REITs to Buy .... learn more on Tuesday, January 25, 2022 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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