Is it a good company at a reasonable price? The stock price seems reasonable. This company has done well for its shareholders over the longer term. I like to have several different sector companies with different yields and dividend growth. This company has a good yield (usually around 3 to 4%) and low growth in dividends. There is always a trade off between yield and growth. With higher yield comes lower growth.
I do not own this stock of North West Company (TSX-NWC, OTC-NWTUF). I wanted to review all the income trust stocks touted in the Money Show of 2009. There was a lot of talk at this show about some of the Income Trust being currently good buys with very good yields. This stock changed from an income trust to a corporation in 2011.
When I was updating my spreadsheet, I noticed this stock has done well for its shareholders over the longer term. See the chart below. This stock has a financial year ending each year January 31. So, I am reviewing the financial year for January 31, 2022. The second quarter is for 2023.
If you had invested in this company in December 2011, for $1,007.50 you would have bought 50 shares at $20.15 per share. In December 2021, after 10 years you would have received $624 in dividends. The stock would be worth $1,712.00. Your total return would have been $2,336.00.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $20.15 | $1,007.50 | 50 | 10 | $624.00 | $1,712.00 | $2,336.00 |
The dividend yields are moderate with dividend growth low. The current dividend is moderate (2% to 4% ranges) at 4.58%. The 5, 10 and historical median dividend yields are also moderate at 4.35%, 4.42% and 4.78%. The dividend growth is low (below 8%) at 3.32% per year over the past 5 years. The last dividend increase was for 2.7% and it occurred in 2022.
The Dividend Payout Ratios (DPR) are good. The DPR for 2022 is 46% with 5 year coverage at 62%. The DPR for Adjusted Earnings per Share (AEPS) is 47% with 5 year coverage at 67%. The DPR for Cash Flow per Share (CFPS) for 2022 is 24% with 5 year coverage at 28%. The DPR for Free Cash Flow (FCF) is 26% with 5 year coverage at 76%. (However, all the sites I looked at have a different FCF.)
Debt Ratios are fine. The Long Term Debt/Market Cap Ratio is 0.11 and is fine. The Liquidity Ratio is low at 1.37. If you add in Cash Flow after dividends, it is 1.89 and fine. The Debt Ratio is good at 1.91. The Leverage and Debt/Equity Ratios are fine at 2.16 and 1.13.
The Total Return per year is shown below for years of 5 to 31 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 | 3.32% | 8.94% | 4.47% | 4.47% |
| 2011 | 10 | 4.28% | 10.35% | 5.44% | 4.90% |
| 2006 | 15 | 4.09% | 11.37% | 5.41% | 5.95% |
| 2001 | 20 | 5.66% | 19.23% | 9.66% | 9.56% |
| 1996 | 25 | 10.10% | 20.22% | 10.09% | 10.13% |
| 1991 | 30 | 9.11% | 11.13% | 6.37% | 4.76% |
| 1990 | 31 | 8.46% | 17.74% | 9.81% | 7.92% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 15.07, 16.60 and 18.14. The corresponding 10 year ratios are 15.92, 18.09 and 20.12. The corresponding historical ratios are 9.96, 12.67 and 15.03. The current ratio is 13.66 based on a stock price of $33.20 and EPS estimate for 2023 of $2.43. This ratio is below the low of the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I also have Adjusted Earnings per Share (AEPS) data. The 5-year low, median, and high median Price/Earnings per Share Ratios are 16.05, 17.68 and 19.32. The corresponding 10 year ratios are 15.64, 17.59 and 19.47. The current P/AEPS Ratio if 13.23 based on a stock price of $33.20 and AEPS estimate 2023 of $2.51. The current ratio is below the low of the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I get a Graham Price of $26.10. The 10-year low, median, and high median Price/Graham Price Ratios are 1.50, 1.71 and 1.87. The current P/GP Ratio is 1.27 based on a stock price of $33.20. 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 10-year median Price/Book Value per Share Ratio of 3.58. The current P/B Ratio is 2.66 based on a stock price of $33.20, Book Value of $597M, and a Book Value per Share of $12.46. The current ratio is 26% 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 9.94. The current P/CF is 7.20 based on Cash Flow per Share estimate for 2023 of $4.61, Cash Flow of $220.7M and a stock price of $33.20. The current ratio is 28% 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 4.78%. The current dividend yield is 4.58% based on a stock price of $33.20 and dividends of $1.52. The current ratio is 4% 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 4.42%. The current dividend yield is 4.58% based on a stock price of $33.20 and dividends of $1.52. The current ratio is 3.5% above the historical median 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 0.72. The current P/S Ratio is 0.70 based on Revenue for 2023 of $2,255M, Revenue per Share of $47.10 and a stock price of $33.20. The current ratio is 2% below 10 year median. 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 testing gives the stock price as reasonable and above or below the median. The P/S Ratio test says the stock price is reasonable also. The current thinking is that you should compare prices to the last 10 years. However, the last bull market has lasted a lot longer than bear markets in the past was the last bull market started in 2008. Also, the US market has fallen a lot more than the Canadian market.
When I look at analysts’ recommendations, I find Buy (2) and Hold (3). The consensus would be a Buy. The 12 month stock price consensus is $37.60. This implies a total return of $17.83% with 13.25% from capital gains and 4.58% from dividends based on a stock price of $33.20.
Analysts on Stock Chase like this stock, but one feels it is overpriced. Stock Chase gives this stock 3 stars out of 5. It is on the Money Sense List with a B rating. Daniel Da Costa on Motley Fool thinks this stock is a defensive stock that has pulled back from its highs. Christopher Liew on Motley Fool says the company is of a lower risk and it is currently beating the market. The company announces its results for 2021 on Global Newswire. The company announces its second quarter of 2022 results on Global Newswire. Simply Wall Street on Yahoo Finance talk about the company’s upcoming dividend. They have one warning sign of dividend of 4.56% is not well covered. I do not see any problem with the company’s DPRs.
The North West Co Inc is a Canada-based company that is principally engaged in retail business in underserved rural communities and urban neighborhoods. Its geographical segment includes Canada and International. The company generates maximum revenue from Canada. Its web site is here North West Company.
The last stock I wrote about was about was Trigon Metals Inc (TSX-TM, OTC-PNTZF) ... learn more. The next stock I will write about will be Medtronic PLC (NYSE-MDT) ... learn more on Wednesday, October 12, 2022 around 5 pm. Tomorrow on my other blog I will write about Brad DeLong - Substack.... learn more on Tuesday, October 11, 2022 around 5 pm.
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