Is it a good company at a reasonable price? The stock price seems reasonable. However, it is not something I think I would like to own. I do not like the debt ratios. They have not done well for shareholders over the longer term. They cut the dividends in 2020 and analysts do not expect any change in dividends over the next 3 years. A cut in dividends is never a good sign. It shows the expectations of management which would be that they will not do well over the short term. However, as with most dividend paying stock, shareholders tend not to lose or lose much. See investment over 10 years chart below. It also has a very high dividend yield. Companies with high dividend tend not to raise the dividend much. It is not surprising they were cut.
I do not own this stock of Chemtrade Logistics Income Fund (TSX-CHE.UN, OTC-CGIFF). I decided to investigate this stock after reading an article in the G&M in February 2012 about investing in small cap stocks that pay dividends. This was one of the stocks mentioned that I had never heard of before.
When I was updating my spreadsheet, I noticed Book Value has decrease over the past few years and had decrease by some 44% in 2021. The decrease in 2021 is mainly due to a sale of assets. They also have a big EPS loss this year and this is mainly due to Cost of Sales being higher and Revenue. Revenue went down but Cost of Sales went up. Cost of Sales is below Revenue in the first two quarters of 2022.
If you had invested in this company in December 2011, $1,009.80 you would have bought 68 shares at $14.85 per share. In December 2021, after 10 years you would have received $744.60 in dividends. The stock would be worth $503.20. Your total return would have been $1,247.80.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $14.85 | $1,009.80 | 68 | 10 | $744.60 | $503.20 | $1,247.80 |
The dividend yields are good with dividend growth non-existent. The current dividend yield is good (5% and 6% ranges) at 6.56%. The 5, 10 and historical dividend yields are high (7% or above) at 8.41%, 7.56% and 8.41%. This company was an income trust and income trusts can have higher dividends that corporations. The company is still called an income fund, but rules are changed in 2006 and were effective as of 2011. Dividends were decreased in 2007 and then were flat until 2020, when they were decreased again. Dividends are now expected to be flat again.
The Dividend Payout Ratios (DPR) are probably too high. The DPR for EPS for 2021 are not calculable because EPS is negative. The same applies to the 5 year coverage. DPR for EPS is expected to be around 92% in 2022. The DPR for Cash Flow per Share for 2021 is 22% with 5 year coverage at 36%. The DPR for Distributable Income (or Cash) for 2021 is 72% with 5 year coverage at 118%. Until the first quarter of 2022, the company was putting out Adjusted Funds from Operations (AFFO). The DPR for AFFO for 2021 was38% with 5 year coverage at 60%. The DPR for Free Cash Flow for 2021 is 39% with 5 year coverage at 75%.
Debt Ratios are awful. The Long Term Debt/Market Cap for 2021 is too high at 1.17. This means that the Long Term Debt is higher than the Market Cap and this is not good. The Liquidity Ratio is very low at 0.53 and even with adding in Cash Flow after dividends it is still low at 0.88. This means that current assets cannot cover current liabilities. The Liquidity Ratio with cash flow after dividends for the second quarter of 2022 is better at 1.30, but still low. I prefer this to be 1.50 or higher. The Debt Ratio is too low at 1.23 and I prefer this to be 1.50 or higher. The Leverage and Debt/Equity Ratio are too high at 5.39 and 4.39. I prefer these to be below 3.00 and below 2.00.
The Total Return per year is shown below for years of 5 to 20 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 | -12.94% | -9.76% | -17.14% | 7.37% |
| 2011 | 10 | -6.70% | 3.10% | -6.73% | 9.83% |
| 2006 | 15 | -5.64% | 14.42% | -0.56% | 14.98% |
| 2001 | 20 | 0.96% | 12.59% | -2.29% | 14.87% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are negative, so useless. The corresponding 10 year ratios are also negative and useless. The corresponding historical ratios are 10.25, 11.00 and 13.04. The current P/E Ratio is 13.09 based on a stock price of $8.51 and EPS estimate for 2022 of $0.65. This ratio is between the low and median historical ratios. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I also have Distributable Cash data. The 5-year low, median, and high median P/DC Ratios are 9.10, 11.65 and 14.56. The corresponding 10 year ratios are 8.86, 10.51 and 12.19. The current P/DC Ratio is 6.60 based on DC for last 12 months of $1.29, and a stock price of $8.51. The current ratio is below the 10 year median low ratio. This stock price testing suggests that the stock price is relatively cheap.
I get a Graham Price of $7.84 . The 10-year low, median, and high median Price/Graham Price Ratios are 0.98, 1.11 and 1.25. The current P/GP Ratio is 1.09 based on a stock price of $8.51. 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 1.51. The current P/B Ratio is 2.02 based on a stock price of $8.51, the Book Value of $438M and the Book Value per Share of $4.20. The current ratio is 34% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
I get a 10-year median Price/Cash Flow per Share Ratio of 6.75. The current ratio is 4.28 based on a stock price of $8.51, Cash Flow per Share estimate for 2022 of $1.99 and Cash Flow of $207M. The current ratio is 37% 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 8.41%. The current dividend yield is 7.05% based on a stock price of $8.51 and dividends of $0.60. The current yield is 16% 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 7.36%. The current dividend yield is 7.05% based on a stock price of $8.51 and dividends of $0.60. The current yield is 4% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable but above the median.
The 10-year median Price/Sales (Revenue) Ratio is 0.87. The current P/S Ratio is 0.53 based on Revenue estimate for 2022 of $1,688M, Revenue per Share of $16.20 and a stock price of $8.51. The current ratio is 40% 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 reasonable. The dividend yield tests say that it is reasonable. The P/S Ratio test says the stock price is cheap. The problem with the dividend yield is the recent cut in dividends. Since they are not expected to go up in the next 3 years, the cut in the dividends is a negative, so I will go with reasonable. Various other test says the stock price is from cheap to reasonable to expensive.
Last year I said that the results of stock price testing were that the stock price was probably cheap. The dividend yield tests say the stock is reasonable and cheap even with a 50% dividend cut. The P/S Ratio test says that the stock is also cheap. The other good tests of P/CF Ratio and P/B Ratio also say that the stock price is relatively cheap.
When I look at analysts’ recommendations, I find Strong Buy (1), Buy (5) and Hold (1). The consensus would be a Buy. The 12 month stock price is $10.89. This implies a total return of 35.02% with 27.97% from capital gains and 7.05% from dividends.
When I look at analysts’ recommendations last year, I found Strong Buy (1), Buy (3), Hold (3) and Underperform (1). The consensus recommendation would be a Buy, but there is a big range of recommendations. The 12 month stock price is $8.28. This implies a total return of 41.40% with 31.85% from capital gains and 9.55% from dividends based on a stock price of $6.28. What happened is a stock move to 8.51 and a total return of 45.06% with 35.51% from capital gains and 9.55% from dividends. So, they were accurate.
One analyst on Stock Chase says that new Management is turning the company around. Stock Chase gives this stock 4 stars out of 5. It is not on the Money Sense list. Christopher Liew on Motley Fool says it is good passive income company. Amy Legate-Wolfe on Motley Fool likes this stock for its high yield. The company announced the results on Business Wire for the fourth quarter of 2021. The company announced its results for the second quarter of 2022 on Business Wire. Simply Wall Street reports on this stock via Yahoo Finance. They have one warning of dividend of 6.56% is not well covered by earnings.
Chemtrade Logistics Income Fund provides industrial chemicals and services to customers in North America and around the world. Its geographical segments are Canada, the United States, and South America. Its web site is here Chemtrade Logistics Income Fund.
The last stock I wrote about was about was Aecon Group Inc (TSX-ARE, OTC-AEGXF) ... learn more. The next stock I will write about will be Alimentation Couche-Tard Inc (TSX-ATD.B, OTC-ANCUF) ... learn more on Wednesday, August 24, 2022 around 5 pm. Tomorrow on my other blog I will write about What Do Investors Believe .... learn more on Tuesday, August 23, 2022 around 5 pm.
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