Is it a good company at a reasonable price? The current stock price is reasonable, if not cheap. They had trouble in 2020 and reduced their dividends, but then have started to increase them again. I consider high dividend stock to be risky and this is a rather small company, so I bought it with my fooling around money of the TFSA account.
I own this stock of Alaris Equity Partners Income Trust (TSX-AD, OTC-ALARF). This is a stock that Dividends in Hand Blogger had bought in July 2016. It was also recommended by Acumen Capital report in a report by Brian Pow and Oliver Shao via Investor’s Digest. The Blogger Dividends in Hand sold his position in this company in April 29, 2020.
When I was updating my spreadsheet, I noticed that I have done well with this stock so far. My total return after almost 5 years is 9.92% with 2.74% from capital gains and 7.18% from dividends. I made several purchases after my initial purchase and that is why I did better than the company’s 5 year return.
If you had invested in this company in December 2011, $1,008.00 you would have bought 56 shares at $18 per share. In December 2021, after 10 years you would have received $809.90 in dividends. The stock would be worth $1,052.24. Your total return would have been $1,862.14.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $18.00 | $1,008.00 | 56 | 10 | $809.90 | $1,052.24 | $1,862.14 |
The dividend yields are good with dividend growth restarted at low. The current dividend yield is good (5% to 6%) at 6.85%. The 5 year and historical median dividend yields are high (7% and over) at 7.77% and 7.10%. The 10 year median dividend yield is good at 6.86%. The dividends are down by 4.9% per year over the past 5 years and up by 1.9% over the past 10 years. Dividends were cut in 2020 by 30% and changed to quarterly in 2020. The last dividend increase was in 2021 and it was for 6.5%.
The Dividend Payout Ratios (DPR) are fine. The DPR for EPS for 2021 is 40% with 5 year coverage at 110%. The DPR for 2022 is expected to be at 57% with 5 year coverage at 81%. The DPR for Cash Flow per Share is 41% with 5 year coverage at 58%. This DPR is expected to go up this year to 63% with 5 years at 56%. These are too high and I prefer them to be at 40% or less. However, this company is set up to distribute the cash they receive, and so this different from more normal companies. The DPR for Free Cash Flow (FCF) for 2021 is 58% with 5 year coverage at 76%.
Debt Ratios are all good. The Long Term Debt/Market Cap is good at 0.38 for 2021. The Liquidity Ratio for 2021 is 2.68. The Debt Ratio for 2021 is 2.62. The Leverage and Debt/Equity Ratios are 1.62 and 0.62.
The Total Return per year is shown below for years of 5 to 14 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 | -4.90% | 1.98% | -4.74% | 6.71% |
| 2011 | 10 | 1.94% | 8.30% | 0.43% | 7.87% |
| 2007 | 14 | 2.03% | 13.27% | 4.61% | 8.67% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 11.16, 19.86 and 22.80. The corresponding 10 year ratios are 14.12, 19.53 and 23.01. The corresponding historical ratios are 11.44, 15.66 and 19.54. The current P/E Ratio is 8.31 based on a stock price of $19.27 and EPS estimate for 2022 of $2.32. The current ratio is below the low ratio of the 10 year median ratios. This stock price testing suggests that the stock price is relatively cheap.
I get a Graham Price of $30.20. The 10 year low, median, and high median Price/Graham Price Ratios are 0.85, 1.08 and 1.45. The current P/GP Ratio is 0.64 based on a stock price of $19.27. This ratio is below the low of the 10 year median ratios. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median Price/Book Value per Share Ratio of 1.32. The last 12 months P/B Ratio is 1.10 based on Book Value of the last 12 of $788.9M, Book Value per Share of $17.47 and a stock price of $19.27. This ratio is 17% 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 forward P/B Ratio of 1.04 based on Book Value per Share for 2022 of $18.60, Book Value of $839.8M and a stock price of $19.27. This P/B Ratio is 22% below the 10 year median ratio of 1.32. 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 11.38. The current P/CF Ratio is 9.18 based on Cash Flow per Share estimate for 2022 of $2.10, Cash Flow of $94.8M and a stock price of $19.27. The current ratio is 19.4% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median. It is also close to being cheap.
I get an historical median dividend yield of 7.10%. The current dividend yield is 6.85% based on dividends of $1.32 and a stock price of $19.27. The current yield is 3.5% below the historical median 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 6.86%. The current dividend yield is 6.85% based on dividends of $1.32 and a stock price of $19.27. The current yield is 0.1% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable and at the median.
The 10 year median Price/Sales (Revenue) Ratio is 8.82. The current P/S Ratio is 5.34 based on Revenue estimate for 2022 of $163M, Revenue per Share of $3.61 and a stock price of $19.27. The current ratio is 39% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
Results of stock price testing is that the stock price is probably cheap to reasonable. The P/S Ratio test says it is cheap, but the dividend yield tests say it is reasonable. Most of the rest of the tests are suggesting that the stock price is cheap. The problem with the dividend yield tests is the recent cut in dividends, although they have started to increased dividends again. When a company decreases dividends, it is time for caution, on the other hand covid has affected a lot of companies.
What I said last year around the results of stock price testing is that the stock price was probably cheap. Both the dividend yield tests and the P/S Ratio test is showing the stock price as cheap. All the tests are saying the same thing.
When I look at analysts’ recommendations, I find Strong Buy (2), Buy (5) and Hold (1). The consensus would be a Buy. The 12 month stock price is $23.75. This implies a total return of 30.10% with 23.25% from capital gains and 6.85% from dividends based on a stock price of $19.27.
When I looked at analysts’ recommendations last year, I found Strong Buy (2), Buy (5) and Hold (1). The consensus was Buy. The 12 month stock price consensus would be $20.38. This implies a total return of 33.21% with 25.57% from capital gains and 7.64% from dividends based on a current stock price of $16.23. What happened was a move to $19.27 and so a total return of 26.37% with 18.73% from capital gains and 7.64% from dividends. It looks like a reasonable call.
Most, but not analysts on Stock Chase like this stock. They say it was hit by covid but is recovering. Stock Chase gives this stock 4 stars out of 5. Adam Othman on Motley Fool says this company can be a powerful income resource. Christopher Liew on Motley Fool says to buy as it will provide a steady flow income. The company on Newswire releases fourth quarter results. There is a review of this company by Simply Wall Street on Yahoo Finance.
Simply Wall Street have four warning signs for this company: earnings are forecast to decline by an average of 13.1% per year for the next 3 years; has a high level of debt; unstable dividend track record; and significant insider selling over the past 3 months. Note that earnings have always been volatile. Concerning dividends, the company was affected by covid. Concerning the last point, the CEO, CFO and Chairman all bought shares in the past year. This is what is important. So, I am comfortable in owning this stock.
Alaris Equity Partners Income Trust is an open-ended trust. The Trust, through its subsidiaries, indirectly provides alternative financing to private companies (Partners) in exchange for distributions with the principal objective of generating stable and predictable cash flows for payment of distributions to unitholders of the Trust. Its web site is here Alaris Equity Partners Income Trust.
The last stock I wrote about was about was Sun Life Financial Inc (TSX-SLF, NYSE-SLF) ... learn more. The next stock I will write about will be Toromont Industries Ltd (TSX-TIH, OTC-TMTNF) ... learn more on Wednesday, April 13, 2022 around 5 pm. Tomorrow on my other blog I will write about Canadian Stock Channel.... learn more on Tuesday, April 12, 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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