Is it a good company at a reasonable price? I do think that this is a good company. I have had it for many years and it has done well over time. I think that the current price is reasonable. The current moderate dividend yield with a moderate increases is a very good combination.
I own this stock of Canadian Tire Corp (TSX-CTC.A, OTC-CDNAF). In 2000 when I first bought this stock, it was on the Investment Reporter's list of conservative Canadian stocks. I bought stock for my trading account in 2009 because I have done well with it in my Pension Account and it was a consumer stock.
When I was updating my spreadsheet, I noticed that the company did much better than analysts had expected for 2021. For example, analysts expected the Revenue only to increase by 0.5% to 14,946M, but it increased to $16,292 an 9.6% increase. Analysts expected the Normalized EPS to increase by 5% to $13.58, but Normalized EPS increased by 45% to 18.91. Also, EPS was expected to increase 5.6% to $13.00 but EPS increased by 49% to $18.38.
I have done well with this stock. I have had it for 22 years and have a total return of 12.76% per year with 10.80% from capital gains and 1.96% from dividends.
If you had invested in this company in December 2011, $1054.40 you would have bought 16 shares at $65.90 per share. In December 2021, after 10 years you would have received $455.60 in dividends. The stock would be worth $2,903.04. Your total return would have been $3,358.64.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $65.90 | $1,054.40 | 16 | 10 | $455.60 | $2,903.04 | $3,358.64 |
The dividend yields are moderate with dividend growth good. The current dividend yield is moderate (2% to 4% ranges) at 2.78%. The 5 year median dividend yield is also moderate at 2.50%. The 10 year and historical median dividend yields are low (below 2%) at 1.84% and 1.69%. The dividend growth is good (15% and over) for the last 5 years at 15.36% per year. The last dividend increase was in 2022 and it was for 10.64% (a moderate increase). The one in 2021 was only at 3.30%. A lot of companies had lower dividend increases in 2021 due to uncertainty about the pandemic.
The Dividend Payout Ratios (DPR) are good. The DPR for EPS for 2021 is 26% with 5 year coverage at 30%. The DPR for Cash Flow per Share for 2021 is 11% and 5 year coverage at 12%. This company puts out also an Adjusted EPS (basically without special charges). The DPR for Adj EPS for 2021 is 22% with 5 year coverage at 27%. The DPR for Free Cash Flow for 2021 is 25% with 5 year coverage at 28%.
Debt Ratios are fine, but Leverage and Debt/Equity Ratios are a bit too high. The Long Term Debt/Market Cap for 2021 is 0.35 and is low and good. The Liquidity Ratio for 2021 is 1.72 and is high and good. The Debt Ratio for 2021 is 1.43 and is fine, but I prefer it to be at 1.50 or higher. The Leverage and Debt/Equity Ratios for 2021 are 3.35 and 2.35 and are too high. I prefer them to be under 3.00 and under 2.00.
The Total Return per year is shown below for years of 5 to 33 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 | 15.36% | 7.93% | 5.43% | 2.49% |
| 2011 | 10 | 15.63% | 13.15% | 10.66% | 2.49% |
| 2006 | 15 | 13.98% | 8.17% | 6.47% | 1.70% |
| 2001 | 20 | 13.11% | 12.35% | 10.33% | 2.02% |
| 1996 | 25 | 10.36% | 10.41% | 8.71% | 1.71% |
| 1991 | 30 | 8.56% | 8.78% | 7.29% | 1.49% |
| 1988 | 33 | 9.43% | 9.04% | 7.46% | 1.58% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 10.45, 11.45, and 12.44. The corresponding 10 year ratios are 10.85, 12.59 and 14.70. The corresponding historical ratios are 10.27, 13.06 and 14.56. The current P/E Ratio is 10.45 based on a stock price if $187.06 and EPS estimate for 2022 of $17.90. 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 $185.23. The 10 year low, median, and high median Price/Graham Price Ratios are 0.89, 1.00 and 1.14. The current P/GP Ratio is 1.01 based on a stock price of $187.06. This ratio is just 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/Book Value per Share Ratio of 1.80. The current P/B Ratio is 2.20 based on a stock price of $187.06, Book Value of $5,124M and Book Value per Share of $85.19. The current ratio is 22% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
There is also an estimate for the Book Value per Share for 2022. The Book Value per Share estimate is $92.20. This gives a Book Value of $5,546M and a P/B Ratio of 2.03 with a stock price of $187.06. This ratio of 2.03 is 13% above the 10 year median ratio of 1.80. 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 8.38. The current P/CF Ratio is 6.63 based on a stock price of $187.06, Cash Flow per Share estimate for 2022 of $28.20 and a Cash Flow of $1,696M. The current ratio is 21% 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 1.69%. The current dividend yield is 2.78% based on dividends of $5.20 and a stock price of $187.06. The current dividend yield is 64% 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 1.84%. The current dividend yield is 2.78% based on dividends of $5.20 and a stock price of $187.06. The current dividend yield is 51% 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 0.68. The current P/S Ratio is 0.67 based on Revenue estimate for 2022 of $16,773M, Revenue per Share of $278.87 and a stock price of $187.06. The current ratio is 1.6% 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 is probably reasonable. The dividend yield tests say that the stock price is cheap, but the P/S Ratio tests say it is reasonable and below the median. Most of the other tests say it is reasonable and above and below the median.
Last year I said that the results of stock price testing were that the stock price was probably reasonable. The Dividend yield tests were showing the stock price as cheap, but this is not confirmed by the P/S Ratio test which says the stock price is reasonable but above the median. With the revenue, there is a great deal of uncertainty because of the C19. The rest of the tests were a mixed bag, but it is not good that the P/B Ratio testing says it is expensive.
When I look at analysts’ recommendations, I find Strong Buy (2), Buy (5) and Hold (3). The consensus would be a Buy. The 12 month stock price consensus is $231.18. This implies a total return of 26.37% with 23.59% from capital gains and 2.78% from dividends based on a stock price of $187.06.
When I looked at analysts’ recommendations last year, I found Strong Buy (2), Buy (5), Hold (4) and Sell (1). The consensus was a Buy. The 12 month stock price consensus was $190.58. This implies a total return of 7.98% with 5.39% from capital gains and 2.60% from dividends based on a stock price of $180.85. What happened was a stock price of $187.06 and a total return of 6.03% with 3.43% from capital gains and 2.60% from dividends.
The last analyst recommendation on Stock Chase is a buy but last year there were some Do not Buys. Daniel Da Costa on Motley Fool says to buy this stock before the next big rally. Joey Frenette on Motley Fool says this company is dirt cheap and will outperform the TSX this year. The company announces on newswire their fourth quarterly results. Simply Wall Street on Yahoo Finance looks at this stock. They give one warning risk of a high level of debt.
Canadian Tire sells home goods, sporting equipment, apparel, footwear, automotive parts and accessories, and vehicle fuel through a network of company, dealer, and franchisee-operated locations across Canada. Aside from the namesake banner, stores operate primarily under the Mark's, SportChek, Party City, Atmosphere, and PartSource monikers. The firm also operates and holds majority ownership of a financing arm (Canadian Tire Financial Services; 20% owned by Scotiabank) and a REIT (CT REIT; Canadian Tire owns about 70%). Its web site is here Canadian Tire Corp.
The last stock I wrote about was about was H & R Real Estate Trust (TSX-HR.UN, OTC-HRUFF) ... learn more. The next stock I will write about will be Enbridge Inc (TSX-ENB, NYSE-ENB) ... learn more on Wednesday, March 23, 2022 around 5 pm. Tomorrow on my other blog I will write about Rights of Shareholders.... learn more on Tuesday, March 22, 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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