Is it a good company at a reasonable price? This stock is never going to be great stock, but it probably can produce a return of 8% per year. A bad sign is that dividends have been flat since 2020. But analysts do expect dividends to start to rise again this year so this is a good sign. They have been a dependable dividend producing stock. The price seems to be relatively cheap. There is insider buying and this is a good sign.
I own this stock of Transcontinental Inc (TSX-TCL.A, OTC-TCLAF). This has been a dividend growth stock and will probably be that again. It was on several dividend lists. However, it fell on hard times after 2008, but currently seems to be recovering. It is was on the Canadian Dividend Aristocrats Index when I bought it in 2015.
I plan to hold on to the stock that I have. I have not made much , a total return of 5.12% per year over the past 8 years. However, my purchases were in the $15 range and I think it will go higher.
When I was updating my spreadsheet, I noticed that Revenue came in higher than expected. Analysts expected an 3.2% increase, but Revenue increased 11.8%. However, Adjusted Net Earnings was expected to fall 2%, but fell 7.6%. It was expected at $2.32 and came in at $2.19.
I noticed also that analysts expected this company to restart raising their dividends in 2022, from $0.90 to $0.97 and continue to raise them in the following years. This did not happen. Now analysts are expecting the dividends to go to $0.91 in 2023 and $0.96 in 2024.
There is some insider buying. The CFO increased his shares by 57%, from 16,050 to 25,250 shares. Another officer increased her shares by 11% from 16,000 to 20,000. There is a fair amount of insider ownership by the Marcoux family, with say, Remi Marcoux owning some 12,562,840 Class B shares.
If you had invested in this company in December 2012, for $1,003.50 you would have bought 90 shares at $11.15 per share. In December 2022, after 10 years you would have received $790.20 in dividends. The stock would be worth $1,375.20. Your total return would have been $2,165.40. As the chart below shows, the 10 year total return if 10.32% with 3.20% from capital gains and 7.12% from dividends.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $11.15 | $1,003.50 | 90 | 10 | $790.20 | $1,375.20 | $2,165.40 |
The dividend yields are good with dividend growth low. The current dividend yields are good (5% to 6% ranges) at 5.91%. The 5 and 10 year median dividend yields are moderate (2% to 4% ranges) at 4.86% and 4.22%. The historical dividend yield is low (below 2%) at 1.70%. They have been paying dividends for 29 years and dividends were below 2% prior to 2009. The dividends have increase at a low level over the past 5 years at 2.8% per year. However, the last dividend increase was in 2020. Analysts are expecting dividend increase in the future.
The Dividend Payout Ratios (DPR) are fine. The DPR for 2022 for EPS is 55% with 5 year coverage at 48%. The DPR for Adjusted Earnings per Share (AEPS) for 2022 is 41% with 5 year coverage at 35%. The DPR for Cash Flow per Share (CFPS) for 2022 is 18% with 5 year coverage at 17%. The DPR for Free Cash Flow (FCF) for 100% with 5 year coverage at 34%.
Debt Ratios are fine with a good Liquidity Ratio. The Long Term Debt/Market Cap Ratio for 2022 is 0.73 and this is fine. The Liquidity Ratio for 2022 is good at 2.07. The Debt Ratio for 2022 is good at 1.98. The Leverage and Debt/Equity Ratios for 2022 are fine at 2.02 and 1.02. They would be good if below 2.00 and 1.00, so they are close.
The Total Return per year is shown below for years of 5 to 34 to the end of 2022. 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. |
|---|---|---|---|---|---|
| 2017 | 5 | 2.77% | -4.95% | -9.26% | 4.31% |
| 2012 | 10 | 4.67% | 10.32% | 3.20% | 7.12% |
| 2007 | 15 | 3.02% | 4.24% | -0.20% | 4.43% |
| 2002 | 20 | 10.60% | 2.32% | -0.95% | 3.27% |
| 1997 | 25 | 11.44% | 7.66% | 3.72% | 3.94% |
| 1992 | 30 | 9.21% | 7.84% | 4.29% | 3.54% |
| 1988 | 34 | 9.45% | 5.90% | 3.55% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 8.06, 9.43 and 11.82. The corresponding 10 year ratios are 7.55, 9.08 and 11.00. The corresponding historical ratios are 10.21, 12.74 and 14.74. The current P/E Ratio is 9.58 based on a stock price of $15.23 and EPS estimate for 2023 of $1.59. The current ratio is between the median and high ratios of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I have Adjusted Earnings per Share (AEPS) data. The 5-year low, median, and high median Price/Earnings per Share Ratios are 6.57, 7.51 and 8.91. The corresponding 10 year ratios are 6.29, 7.40 and 8.58. The current P/AEPS Ratio is 7.12 based on a stock price of $15.23 and AEPS estimate for 2023 of $2.14. 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 $32.29. The 10-year low, median, and high median Price/Graham Price Ratios are 0.51, 0.65 and 0.77. The current P/GP Ratio is 0.47 based on a stock price of $15.23. 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 1.35. The current ratio is 0.70 based on a stock price of $15.23, Book Value of $1,876M and Book Value per Share of $21.66. The current ratio is 48% 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 2023. That estimate is $22.30 and would produced a ratio of 0.68 based on a stock price of $15.23 and a Book Value of $1,932M. This ratio is 50% 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 5.03. The current P/CF Ratio is 3.13 based on Cash Flow per Share estimate of $4.87, Cash Flow of $422M and a stock price of $15.23. The current ratio is 38% 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 1.70%. The current dividend yield is 5.91% based on dividends of $0.90 and a stock price of $15.23. The current yield is 248% above the historical dividend yield. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median dividend yield of 4.22%. The current dividend yield is 5.91% based on dividends of $0.90 and a stock price of $15.23. The current yield is 40% above the 10 year dividend yield. This stock price testing suggests that the stock price is relatively cheap.
The 10-year median Price/Sales (Revenue) Ratio is 0.63. The current ratio is 0.44 based on Revenue estimate for 2023 of $3,032M, Revenue per Share of $35.00 and a stock price of $15.23. The current ratio is 31% 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. The 10 year dividend yield test is showing this and it is confirmed by the P/S Ratio test. Most of the other tests are showing the same thing.
When I look at analysts’ recommendations, I find Buy (3) and Hold (3) recommendations. The consensus would be a Buy. The 12 month stock price of $21.50. This implies a total return of $47.08% with 41.17% from capital gains and 5.91% from dividends based on a current stock price of $15.23.
Last year when I look at analysts’ recommendations, I found Strong Buy (1), Buy (3) and Hold (2). The consensus would be a Buy. The 12 month stock price was $26.50. This implied a total return of 37.14% with 32.63% from capital gains and 4.50% from dividends based on a stock price of $19.98. What happened was a drop in price to $15.23 and a loss of 19.27% with a capital loss of 23.77% and dividends of 4.50%. This is the second year in a row that analysts expected a strong price rise. Perhaps this year it will happen.
The last recommendation is a sell on Stock Chase because the analyst think there are better stocks to buy. Some analysts like this stock and some do not. Stock Chase gives this stock 3 stars out of 5. It is on the Money Sense list for 2022 with an A rating. Jitendra Parashar on Motley Fool thinks this stock is a current buy. Christopher Liew on Motley Fool also thinks this stock is a buy. The company put out a press release via Globe Newswire on their results for 2022.
A Simply Wall Street report on Yahoo Finance in January 2023 suggest that this stock is still a buy. Simply Wall Street gives this stock 4 stars out of 5. They also give 3 warnings of has a high level of debt; dividend of 5.91% is not well covered; and significant insider selling over the past 3 months. It looks more to me that insiders are not picking up stock options rather than selling stock.
Transcontinental Inc or TC Transcontinental, is a Canadian printer and flexible packaging provider that operates in three segments: packaging, printing, and other. Its packaging segment features the production of different plastic products geared toward consumer goods. Its web site is here Transcontinental Inc.
The last stock I wrote about was about was Canadian Imperial Bank of Commerce (TSX-CM, NYSE-CM) ... learn more. The next stock I will write about will be Sylogist Ltd (TSX-SYZ, OTC-SYZLF) ... learn more on Wednesday, January 24, 2023 around 5 pm. Tomorrow on my other blog I will write about Quarterhill Inc .... learn more on Tuesday, January 24, 2023 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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