Is it a good company at a reasonable price? The stock price is probably relatively reasonable. But note the good results from the dividend yield tests are because dividends were raised about 85.7% in 2022. This is a big dividend increase. However, there were no increases in 2021 and only 3 dividends were paid in 2020. The other good thing is that the dividends are above 1%. I still like this stock and will continue to hold my shares.
I own this stock of Richelieu Hardware Ltd (TSX-RCH, OTC-RHUHF). This company is a dividend paying stock on the Investment Reporter stock list.
When I was updating my spreadsheet, I noticed I have done very well on this stock that I have had for almost 13 years. My total return is 20.07% per year with 18.68% from capital gains and 1.39% from dividends. On my original investment, I am earning a dividend yield is 8.49%.
If you had invested in this company on December 31, 2011, $1004.85 you would have bought 105 shares at $9.57 per share. In December 2021, after 10 years you would have received $229.61 in dividends. The stock would be worth $4,581.15. Your total return would have been $8,810.76.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $9.57 | $1,004.85 | 105 | 10 | $229.61 | $4,581.15 | $4,810.76 |
The dividend yields are low with dividend growth low. The current dividend yield is low (below 2%) at 1.04%. The 5, 10 and historical median dividend yields are also low at 0.75%, 0.91% and 1.07%. The current dividend growth is low at 4.59% per year over the past 5 years. There was a decrease in dividends in 2020 because they only paid 3 dividends not 4 dividends. However, they paid a special dividend in 2021 to make up for this. They just increased the dividends by some 85.7%. Next year the 5 year dividend growth will be 18.05% per year.
The Dividend Payout Ratios (DPR) are good. The DPR for EPS for 2021 is 11% with 5 year coverage at 17%. Even with the big dividend increase in 2022 financial year, the DPR for EPS will only increase to 19% with 5 year coverage at 17%. The DPR for Cash Flow per Share for 2021 is 8% with 5 year coverage at 13%. The DPR for Free Cash Flow for 2021 is 22% with 5 year coverage at 19%.
Debt Ratios are good. The Long Term Debt/Market Cap Ratio is 0.00 because this debt is so low. The Liquidity Ratio for 2021 is 3.25. The Debt Ratio is 3.27. The Leverage and Debt/Equity Ratios are 1.44 and 0.44.
The Total Return per year is shown below for years of 5 to 28 to the end of 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 | 4.59% | 12.08% | 11.29% | 0.79% |
| 2011 | 10 | 6.17% | 17.57% | 16.38% | 1.18% |
| 2006 | 15 | 8.36% | 12.89% | 11.90% | 1.00% |
| 2001 | 20 | 11.01% | 14.93% | 13.72% | 1.20% |
| 1996 | 25 | 19.99% | 18.45% | 1.54% | |
| 1993 | 28 | 16.81% | 15.79% | 1.03% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 17.09, 20.19 and 26.39. The corresponding 10 year ratios are 16.53, 19.82 and 23.11. The corresponding historical ratios are 15.09, 15.75 and 19.20. The current P/E Ratio is 18.54 based on a stock price of $50.23 and EPS estimate for 2022 of $2.71. 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 Graham Price of $26.98. The 10 year low, median, and high median Price/Graham Price Ratios are 1.34, 1.64 and 1.97. The current ratio is 1.86 based on a stock price of $50.23. The current ratio is between the median and high ratios 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 3.22. The current P/B Ratio is 4.21 based on a current Book Value of $666M, Book Value per Share of $11.93 and a stock price of $50.23. The current ratio is 31% above the 10 year ratio. This stock price testing suggests that the stock price is relatively expensive.
There is also an estimate of the Book Value per Share for 2022. Here the P/B Ratio is 3.67 based on a stock price of $50.23, Book Value per Share estimate for 2022 of $13.70 and a Book Value of $765. This P/B Ratio is 14% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a 10 year median Price/Cash Flow per Share Ratio of 21.08. The current P/CF Ratio is 26.87 based upon the Cash Flow per Share of the last 12 months of $1.87, Cash Flow of $104M and a stock price of $50.23. This ratio is 27% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
I get an historical median dividend yield of 1.07%. The current dividend yield is 1.04% based a stock price of $50.23 and dividends of $0.52. The current dividend yield is 3% below the historical dividend yield. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get an historical median dividend yield of 0.91%. The current dividend yield is 1.04% based a stock price of $50.23 and dividends of $0.52. The current dividend yield is 14% above the historical 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 1.52. The current P/S Ratio is 1.67 based on Revenue estimate for 2022 of $1,676M, Revenue per Share of $30.01 and a stock price of $50.23. The current ratio is 10% 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 probably relatively reasonable. The dividend yield tests are showing the stock price as relatively reasonable and above or below the median. The P/S Ratio test is showing the stock price as relatively reasonable, but above the median. (The same as last year). Most of the other tests are showing the stock price as relatively reasonable and above or below the median. (Last year most of the tests were pointing to an expensive price.)
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 below you can see that the that P/E Ratios and P/S Ratios have been climbing higher and yields have been going lower. This happens when you have a long bull market.
In the following chart the capital gains for the 10 years to December 31, 2021 is 16.38% per year. The beginning yield was at 1.62%, and the P/E Ratio and the P/S Ratio were at 15.27 and 1.08. Does this chart change my opinion of the stock price? It could be showing that the stock is getting expensive.
| # Years | Cap Gains | Beg P/E | Beg P/S | Beg Yield |
|---|---|---|---|---|
| 5 | 11.29% | 23.89 | 1.86 | 0.79% |
| 10 | 16.38% | 15.27 | 1.08 | 1.62% |
| 15 | 11.90% | 17.69 | 1.42 | 1.01% |
| 20 | 13.72% | 15.63 | 0.97 | |
| 25 | 18.45% | 11.52 | 0.48 | |
| 28 | 15.79% | 12.17 | 0.89 | |
| current | 18.54 | 1.67 | 1.04% |
When I look at analysts’ recommendations, I find Buy (1), and Hold (2). The consensus would be a Hold. The 12 month stock price is $54.50. This implies a total return of 9.54% with 8.50% from capital gains and 1.04% from dividends based on a stock price of $50.23.
When I look at analysts’ recommendations last year, I found only Hold (2) recommendations. The consensus would be a Hold. The 12 month stock price consensus was $38.25. This implies a Total Return loss of 1.15% with a capital loss of 1.87% and dividends of $0.72% based on a stock price of 38.89. What happened was the stock price increased to $50.23 which implies a total return of 29.88% with 29.16% from capital gains and 0.72% from dividends.
Last year I thought the stock price was expensive. I tend not to buy stock when the dividend yield is less than 1%. However, I had not intention of selling this stock just because it was on the expensive side at that time. The P/S Ratio test showed the stock as relatively reasonable, but above the median, but all the other were basically said it was expensive.
Analysts on Stock Chase think this company is a good pick. Ambrose O'Callaghan on Motley Fool thinks this is a good company that is currently cheap. Adam Othman on Motley Fool thinks that even though the company has been on the rise, it is still fairly priced. A Simply Wall Street report on Yahoo Finance talks about the recent analysts upgrades to estimates for this company. A report from Simply Wall Street on Yahoo Finance looks at this company’s performance and says they are pleased with it.
Richelieu Hardware Ltd is a Canada-based company that imports, manufactures, and distributes specialty hardware and complementary products. Headquartered in Montreal, the company operates across Canada and the eastern and midwestern regions of the United States. The majority of the company's sales are derived from its operations in Canada. Its web site is here Richelieu Hardware Ltd.
The last stock I wrote about was about was AGF Management Ltd (TSX-AGF.B, OTC-AGFMF) ... learn more. The next stock I will write about will be Allied Properties Real Estate Investment Trust (TSX-AP.UN, OTC-APYRF) ... learn more on Wednesday, February 16, 2022 around 5 pm. Tomorrow on my other blog I will write about Stock for 2022 .... learn more on Tuesday, February 15, 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.
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.
No comments:
Post a Comment