Is it a good company at a reasonable price? The stock price seems cheap. This stock has produced good results for its shareholders over a long period of time. This is a low dividend yield stock and it is one that is good to buy when you are building a portfolio of stocks to be used as income in the future.
I do not own this stock of Stella-Jones Inc (TSX-SJ, OTC-STLJF). I started a spreadsheet on this stock in mid-2009 because of a favorable report I read on this stock. It was a dividend growth stock and I am always on the lookout for dividend growth stocks.
When I was updating my spreadsheet, I noticed that the Liquidity Ratio and Debt Ratios are very good. A good ratio is 1.50 (or above). The ratios for this company are a Liquidity Ratio of 5.74 and a Debt Ratio of 2.19. Having such good ratios can see a company through difficult times.
This company has had great growth over the past 5 and 10 years. See the chart below. (Note: I orginally had the wrong formula for 10 year growth.)
| Year | Item | Growth |
|---|---|---|
| 5 | Revenue Growth | 49.59% |
| 5 | EPS Growth | 57.21% |
| 5 | Net Income Growth | 47.50% |
| 5 | Cash Flow Growth | 113.39% |
| 5 | Dividend Growth | 80.00% |
| 5 | Stock Price Growth | -8.92% |
| 10 | Revenue Growth | 329.59% |
| 10 | EPS Growth | 301.15% |
| 10 | Net Income Growth | 307.47% |
| 10 | Cash Flow Growth | 1083.14% |
| 10 | Dividend Growth | 476.00% |
| 10 | Stock Price Growth | 295.16% |
If you had invested in this company in December 2011, for $1,002.38 you would have bought 99 shares at $10.13 per share. In December 2021, after 10 years you would have received $411.35 in dividends. The stock would be worth $3,690.99. Your total return would have been $4,372.34.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $10.13 | $1,002.38 | 99 | 10 | $411.35 | $3,960.99 | $4,372.34 |
The dividend yields are low with dividend growth moderate. The current dividend yield is low (below 2%) at 1.69%. The 5, 10 and historical dividend yields are also low at 1.33%, 1.00% and 1.26%. The dividend growth is moderate (8% to 14% ranges) at 12.5% per year over the past 5 years.
If the company increases the dividend at the same rate as they used per year over the past 5 years of 12.47%, starting from a dividend yield is 1.69%, then in 20 years’ time, the dividend yield on your original investment would be at 17.77%.
| Div Yd | Years | At IRR | Div Inc |
|---|---|---|---|
| 3.05% | 5 | 12.47% | 80.00% |
| 5.48% | 10 | 12.47% | 224.00% |
| 9.87% | 15 | 12.47% | 483.20% |
| 17.77% | 20 | 12.47% | 949.76% |
| 31.99% | 25 | 12.47% | 1789.57% |
The Dividend Payout Ratios (DPR) are good. The DPR for Earnings per Share (EPS) for 2021 is 21% with 5 year coverage also at 21%. The DPR for Cash Flow per Share (CFPS) is 9% with 5 year coverage at 11%. The DPR for Free Cash Flow (FCF) is probably 22% with 5 year coverage at 28%. (There is some disagreement on FCF, but not a lot.)
Debt Ratios are good. The Long Term Debt/Market Cap Ratio for 2021 is 0.27 and is good. The Liquidity Ratio for 2021 is great at 5.74. The Debt Ratio for 2021 is good at 2.19. Leverage and Debt/Equity Ratios for 2021 are good at 1.84 and 0.84
The Total Return per year is shown below for years of 5 to 27 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 | 12.47% | -0.36% | -1.69% | 1.33% |
| 2011 | 10 | 19.14% | 16.74% | 14.73% | 2.01% |
| 2006 | 15 | 22.34% | 12.17% | 10.79% | 1.38% |
| 2001 | 20 | 20.42% | 27.82% | 24.50% | 3.32% |
| 1996 | 25 | 23.03% | 21.05% | 1.98% | |
| 1994 | 27 | 15.61% | 14.54% | 1.07% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 15.31, 17.80, 20.29. The corresponding 10 year ratios are 15.54, 18.17 and 21.44. The corresponding historical ratios are 9.14, 12.43 and 15.15. The current P/E Ratio is 12.12 based on a stock price of $47.26, and EPS estimate for 2022 of 3.90. The current 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 Graham Price of $46.71. The 10-year low, median, and high median Price/Graham Price Ratios are 1.22, 1.50 and 1.77. The current P/GP Ratio is 1.01 based on a stock price of $47.26. The current 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 2.60. The current P/B Ratio is 1.90 based on a stock price of $47.26, Book Value of $1,586M and Book Value per Share of $24.87. The current ratio is 27% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I also have a Book Value per Share estimate for 2022 of $26.40. This produces a P/B Ratio of 1.79 based on a stock price of $47.26 and Book Value of $1,684M. This ratio is 31% 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 20.67. The current ratio 7.62 based on Cash Flow per Share (CFPS) estimate for 2022 of $6.20, Cash Flow of $395M and a stock price of $47.26. The current P/CF Ratio is 56% 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 1.26%. The current dividend yield is 1.69% based on dividends of $0.80 and a stock price of $47.26. The current dividend yield is 34% 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 1.00%. The current dividend yield is 1.69% based on dividends of $0.80 and a stock price of $47.26. The current dividend yield is 69% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively cheap.
The 10-year median Price/Sales (Revenue) Ratio is 1.55. The current P/S Ratio is 1.00 based on Revenue estimate for 2022 of $3,020M, Revenue per Share of $47.36 and a stock price of $47.26. The current ratio is 36% 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 cheap. The Dividend yield tests are showing the stock price as cheap and this is confirmed by P/S Ratio test. All the testing shows the stock price as relatively cheap.
When I look at analysts’ recommendations, I find Strong Buy (2) and Buy (5). The consensus would be a Strong Buy. The 12 month consensus stock price is $54.00. This implies a total return of 15.95% with 14.26% from capital gains and 1.69% from dividends based on a stock price $47.26.
Analysts on Stock Chase really like this stock. Stock Chase gives this stock 5 stars out of 5. It is on Money Sense list with a rating of B. Adam Othman on Motley Fool in July 2022 thought it might be down for a while. Kay Ng on Motley Fool says if you not need income now, this is a good stock to buy. I agree. The company put out a press release on Global Newswire about their 2021 results. The company put out a press release on Global Newswire about their third quarter of 2022. .
Simply Wall Street reviews this stock via Yahoo Finance. Simply Wall Street gives out one warning of has a high level of debt.
Stella-Jones Inc produces and sells lumber and wood products. The company operates in two segments: Pressure-treated wood, and Logs & Lumber segment. It also includes the sale of excess lumber to local home-building markets. Most of its revenue comes from the Pressure-treated wood segment. Its geographical segments are the United States and Canada, of which most of its revenue is derived from the United States. Its web site is here Stella-Jones Inc.
The last stock I wrote about was about was First Capital REIT (TSX-FCR.UN, OTC-FCXXF) ... learn more. The next stock I will write about will be Wild Brain Ltd (TSX-WILD, OTC-WLDBF) ... learn more on Monday, November 28, 2022 around 5 pm.
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