Is it a good company at a reasonable price? I own this company and I intend to continue to hold it. I think the company is good and has a good possible future. The dividend yield on this company is often below 1.00% and I do not buy companies when the dividend yield is below 1%. I wait for an opportunity when the dividend yield is higher than 1%. It is now. I personally will not be buying anymore because I feel I have enough of this stock.
I own this stock of Richelieu Hardware Ltd (TSX-RCH, OTC-RHUHF). I initially bought this stock in 2007 because it was recommended by the Investment Reporter. It was for my Pension Account. I did sell this in 2015 because of the low dividend when I started to withdrawal money from this account. In 2009, I bought this stock for my trading account and I still have it in this account.
I have made a total return of $16.25% per year with 14.70% from capital gains and 1.55% from dividends. I have had this stock for 14 years in my Trading Account.
When I was updating my spreadsheet, I noticed that because of dividend growth, you could do well with dividends in the longer term. The chart below illustrates this. If dividends keep growing at 18.05%, then in 10 years’ time, your dividends would be $3.15, your yield would be 7.65% on your original purchase price and dividends would have covered 30.97% of your purchase price. This is a reason to buy companies with low dividends, but good growth.
| Div Pd | Div Yld | Years | At IRR | Div Cov |
|---|---|---|---|---|
| $1.38 | 3.34% | 5 | 18.05% | 10.42% |
| $3.15 | 7.65% | 10 | 18.05% | 30.97% |
| $7.23 | 17.54% | 15 | 18.05% | 78.10% |
When you look at growth over the past 5 and 10 years, what I see is that the stock price has not kept up other growth. However, the stock price is up so far this year by 14%.
| Year | Item | Tot. Growth | Per Year |
|---|---|---|---|
| 5 | Revenue Growth | 91.27% | 13.85% |
| 5 | EPS Growth | 160.00% | 21.06% |
| 5 | Net Income Growth | 148.71% | 19.99% |
| 5 | Cash Flow Growth | 0.00% | 11.68% |
| 5 | Dividend Growth | 129.28% | 18.05% |
| 5 | Stock Price Growth | 15.24% | 2.88% |
| 10 | Revenue Growth | 218.63% | 12.29% |
| 10 | EPS Growth | 317.21% | 15.35% |
| 10 | Net Income Growth | 270.87% | 14.00% |
| 10 | Cash Flow Growth | 0.00% | 22.93% |
| 10 | Dividend Growth | 225.00% | 12.51% |
| 10 | Stock Price Growth | 248.93% | 13.31% |
If you had invested in this company in December 2012, for $1,009.97 you would have bought 82 shares at $12.32 per share. In December 2022, after 10 years you would have received $208.84 in dividends. The stock would be worth $2,969.22. Your total return would have been $3,178.06.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $12.32 | $1,009.97 | 82 | 10 | $208.84 | $2,969.22 | $3,178.06 |
The dividend yields are low with dividend growth good. The current dividend yield is low (below 2%) at 1.45%. The 5, 10 and historical dividend yields are also low at 0.80%, 0.91% and 1.10%. The dividend growth is good (15% and higher per year) at 18% per year for the past 5 years. The last dividend increase was in 2023 and it was for 15.4%.
The Dividend Payout Ratios (DPR) are fine. The DPR for 2022 for EPS is 17% with 5 year coverage also at 17%. The DPR for 2022 for Cash Flow per Share is 13% with 5 year coverage also at 13%. The DPR for Free Cash Flow (FCF) fore 2022 non-calculable because the FCF is negative. The 5 year coverage is 29%.
Debt Ratios are good. The Long Term Debt is so low that the Long Term Debt/Market Cap Ratio is 0.00. The Liquidity Ratio is good and high at 2.62. The Debt Ratio is good and high at 2.77. The Leverage and Debt/Equity Ratios are good and low at 1.57 and 0.57 respectively.
The Total Return per year is shown below for years of 5 to 29 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 | 18.05% | 1.97% | 1.10% | 0.88% |
| 2012 | 10 | 12.51% | 12.61% | 11.39% | 1.23% |
| 2007 | 15 | 12.13% | 11.75% | 10.54% | 1.21% |
| 2002 | 20 | 14.18% | 11.76% | 10.56% | 1.20% |
| 1997 | 25 | 17.29% | 15.63% | 1.66% | |
| 1993 | 29 | 15.70% | 14.46% | 1.24% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 13.99, 19.45 and 21.81. The corresponding 10 year ratios are 16.53, 22.17 and 19.82. The corresponding historical ratios are 15.09, 15.71 and 19.21. The current P/E Ratio is 17.18 based on a stock price of $41.24 and EPS estimate for 2023 of $2.40. The current ratio is between the low and median 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 $28.12. The 10-year low, median, and high median Price/Graham Price Ratios are 1.34, 1.64 and 1.97. The current ratio is 1.47 based on a stock price of $41.24. 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 3.22. The current ratio is 2.82 based on a Book Value of $818M, Book Value per Share of $14.65 and a stock price of $41.24. The current ratio is 13% below the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I also have an Book Value per Share (BVPS) estimate for 2023 of $16.20. This implies a P/B Ratio of 2.55 with Book Value of $904M and a stock price of $41.24. This ratio is 21% 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 21.08 but the Cash Flow per Share for the last 12 months is negative, so this cannot be tested.
However, I have a 10 year median P/CF Ratio for Cash Flow excluding Working Capital (WC). That ratio is 15.59. The current P/CF ratio for Cash Flow excluding WC is 10.25 based on Cash Flow excluding WC for the last 12 months of 225M, Cash Flow excluding WC per Share 4.02. This current ratio is 34% 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 1.10%. The current dividend yield is $1.45% based on a stock price of $41.24 and dividends of $0.60. The current dividend yield is 32% 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 0.91%. The current dividend yield is $1.45% based on a stock price of $41.24 and dividends of $0.60. The current dividend yield is 61% 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 1.52. The current P/S Ratio is 1.31 based on Revenue estimate for 2023 of $1,757M, Revenue per Share of $31.50 and a stock price of $41.24. The current ratio is 14% below the 10 year median ratio. 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 reasonable and maybe cheap. The dividend yield tests are saying the stock price is cheap. The P/S Ratio is saying that the stock price is reasonable. Most of the other testing is saying the stock price is reasonable with P/CF Ratio test saying the stock price is cheap.
If you look at the starting values for the ratios I test for, the P/E Ratio is a little high but there were good returns with P/E Ratios around 17.00. The P/S Ratio currently is higher that for other years except 5 years ago. The Dividend yield is higher than for other years. This does not change my conclusion that the stock price is reasonable and maybe cheap.
| # Years | Cap Gains | Tot. Ret. | Beg P/E | Beg P/S | Beg Yield |
|---|---|---|---|---|---|
| 5 | 1.10% | 1.97% | 29.82 | 2.08 | 0.67% |
| 10 | 11.39% | 12.61% | 17.19 | 1.23 | 1.43% |
| 15 | 10.54% | 11.75% | 16.55 | 1.22 | 1.22% |
| 20 | 10.56% | 11.76% | 17.38 | 1.16 | |
| 25 | 15.63% | 17.29% | 11.41 | 0.67 | |
| 29 | 14.46% | 15.70% | 10.52 | 0.89 | |
| current | 17.18 | 1.31 | 1.45% |
When I look at analysts’ recommendations, I find Strong Buy (1), and Buy (1). The consensus would be a Strong Buy. The 12 month stock price consensus is $50.00. This implies a total return of $22.70% with 1.45% from dividends and 21.24% from capital gains based on a stock price of $41.24.
The last two analysts on Stock Chase say it is their Top Pick. Stock Chase gives this stock 4 stars out of 5. It is on the Money Sense list with a C rating. Jitendra Parashar on Motley Fool says that Richelieu registered only a 1.3% year over year increase for EPS, so had only a minor gain. Jitendra Parashar on Motley Fool reviews this stock. The company put out a press release on Newswire about their 2022 results.
Simply Wall Street put out a report via Yahoo Finance and saying this stock maybe a multi-bagger. Simply Wall Street puts out 2 warnings of earnings are forecast to decline by an average of 10.3% per year for the next 3 years; and high level of non-cash earnings
Richelieu Hardware Ltd is a Canada-based company that imports, manufactures, and distributes specialty hardware and complementary products. Headquartered in Montreal, the company operates across Canada and the eastern and midwestern regions of the United States. The majority of the company's sales are derived from its operations in Canada. Its web site is here Richelieu Hardware Ltd.
The last stock I wrote about was about was Allied Properties Real Estate Investment Trust (TSX-AP.UN, OTC-APYRF) ... learn more. The next stock I will write about will be Intact Financial Corp (TSX-IFC, OTC-IFCZF) ... learn more on Friday, February 17, 2023 around 5 pm. Tomorrow on my other blog I will write about Retiring Early .... learn more on Thursday, February 16, 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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