Sound bite for Twitter and StockTwits is: Dividend Growth Real Estate. The stock price is relatively cheap. Debt Ratios are fine. The Dividend Payout Ratios (DPR) are good. The current dividend yield is good with dividend growth low. See my spreadsheet on Melcor Developments Inc.
Is it a good company at a reasonable price? I intend to hold on to the shares I have. I think this is a reasonable action. I like to have some investment in Alberta, but it is a region of boom and bust. I do not have much invested in this stock. The current stock price is relatively cheap. I do expect to make money on this over the long term. I have done well with dividends. It is a good sign when insiders are buying.
I own this stock of Melcor Developments Inc (TSX-MRD, OTC-MODVF). This was one of the stocks on Mike Higgs' list of good dividend growth stocks. So, I investigated it and bought it. I bought this stock first in 2008 and then some more in 2009. It is a little followed real estate company from Western Canada.
When I was updating my spreadsheet, I noticed I have this in my Pension RIF and in my Trading Account. Overall, I have a total return of 5.07% with 0.73% from capital gains and 4.34% from dividends. For my Trading Account, I have a total return of 7.24% with 2.46% from capital gains and 4.78% from dividends. This is a small cap stock from Western Canada. As far as I can see, Alberta is a boom/bust type of economy.
I follow 6 officers and directors of this company as to what shares they own and what options they have. In the past year, 5 of these 6 increased their shares in this company, with increases in shares ranging from 6% to 43%. This is a good sign.
If you had invested in this company in December 2012, for $1,008.00 you would have bought 64 shares at $15.75 per share. In December 2022, after 10 years you would have received $355.84 in dividends. The stock would be worth $681.60. Your total return would have been $1,037.44. With dividend paying stock, it is harder to end in a loss position.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $15.75 | $1,008.00 | 64 | 10 | $355.84 | $681.60 | $1,037.44 |
According to the following charts the company has been growing except for Revenue over the past 5 years, unlike over the past 10 years where there was no growth except for dividends. I would be happier if Revenue could grow. Analysts do expect growth in Revenue in 2023.
| Year | Item | Tot. Growth | Per Year |
|---|---|---|---|
| 5 | Revenue Growth | -6.70% | -1.29% |
| 5 | FFO Growth | 6.21% | 1.21% |
| 5 | Net Income Growth | 131.94% | 18.32% |
| 5 | Cash Flow Growth | 147.79% | 19.90% |
| 5 | Dividend Growth | 11.54% | 2.21% |
| 5 | Stock Price Growth | -43.66% | -6.99% |
| 10 | Revenue Growth | -13.73% | -1.28% |
| 10 | FFO Growth | -18.09% | -1.65% |
| 10 | Net Income Growth | -17.70% | -1.62% |
| 10 | Cash Flow Growth | -91.21% | -6.28% |
| 10 | Dividend Growth | 28.89% | 10.00% |
| 10 | Stock Price Growth | -47.89% | -3.84% |
The current dividend yield is good with dividend growth low. The current dividend yield is good (5% to 6% ranges) at 5.40%. The 5, 10 and historical dividend yields are moderate (2% to 4% ranges) at 3.70%, 3.66% and 2.92%. The dividends are currently growing at a low rate (below 8%) at 2.2% per year over the past 5 years. Dividends were cut in 2016. Dividends are current 6.7% above the high dividends of 2015. The last dividend increase was in 2023 and it was for 6.7%.
The Dividend Payout Ratios (DPR) are good. The DPR for EPS for 2022 is 21% with 5 year coverage at 30%. The DPR for Funds from Operations (FFO) for 2022 is 31% with 5 year coverage at 27%. The DPR for Cash Flow per Share (CFPS) for 2022 is 31% with 5 year coverage at 26%. The DPR for Free Cash Flow (FCF) for 2022 is 63% with 5 year coverage at 34%.
Debt Ratios are fine. The Long Term Debt/Market Cap Ratio is too high at 2.22. This means that the market is not valuing the debt on this company’s assets at the same price as the balance sheet. The balance sheet shows assets worth $1,874M, Debt at $870.1M and market cap at $332.8M. The Long Term Debt/Covering Assets Ratio is fine at 0.46. The Liquidity Ratio is good at 3.68. The Debt Ratio is good at 2.19. The Leverage and Debt/Equity Ratios are good at 1.84 and 0.84.
The Total Return per year is shown below for years of 5 to 32 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 | 2.21% | -3.39% | -6.99% | 3.60% |
| 2012 | 10 | 10.00% | 0.35% | -3.84% | 4.19% |
| 2007 | 15 | 2.51% | -0.77% | -4.08% | 3.31% |
| 2002 | 20 | 9.19% | 12.07% | 5.43% | 6.65% |
| 1997 | 25 | 7.28% | 15.93% | 7.62% | 8.32% |
| 1992 | 30 | 11.88% | 16.82% | 7.86% | 8.96% |
| 1990 | 32 | 13.53% | 16.56% | 8.03% | 8.54% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 6.35, 7.32 and 8.91. The corresponding 10 year ratios are 6.40, 7.51 and 8.93. The corresponding historical ratios are 6.28, 7.25 and 8.43. The current P/E Ratio is 6.11 based on a stock price of $11.85 and EPS estimate for 2023 of $1.94. 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 also have Funds from Operations (FFO) data. The 5-year low, median, and high median Price/Funds from Operations Ratios are 5.23, 7.33 and 9.44. The corresponding 10 year ratios are 7.42, 8.72 and 9.85. The current ratio is 6.30 based on a stock price of $11.85 and FFO for last 12 months of $1.88. This 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 Graham Price of $40.57. The 10-year low, median, and high median Price/Graham Price Ratios are 0.37, 0.45 and 0.50. The current P/GP Ratio is 0.29 based on a stock price of $11.85. 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 0.48. The current P/B Ratio is 0.31 based on a stock price of $11.85, Book Value of $1,178M and Book Value per Share of $37.71. The current ratio is 34% 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 12.42. The current P/CF Ratio is 20.18 based on Cash Flow for the past 12 months of $18.4M, Cash Flow per Share of $0.59 and a stock price of $11.85. The current P/CF Ratio is 62% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
I also collection Cash Flow excluding Working Capital (WC). This has a 10 year P/CF Ratio of 9.21 based Cash Flow excluding WC of 58.3M, Cash Flow per Share of $1.87 and a stock price of $11.85. The current ratio is 31% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap. (Some analysts like the Cash Flow excluding WC better than just Cash Flow.)
I get an historical median dividend yield of 2.92%. The current dividend yield is 5.40% based on a stock price of $11.85 and dividends of $0.64. The current yield is 85% 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 3.66%. The current dividend yield is 5.40% based on a stock price of $11.85 and dividends of $0.64. The current yield is 48% 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 1.94. The current P/S Ratio is 1.18 based on a stock price of $11.85, Revenue estimate for 2023 of $313M, and Revenue per Share of $10.02. The current ratio is 39% 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 the dividend yield tests are showing the stock price as relatively cheap. This is confirmed by the P/S Ratio testing. Almost all the testing is showing the stock price as relatively cheap. Also, I noticed that the ratios for this stock are very low. For example, a P/E Ratio of 10.00 is generally considered a low ratio, but the median high ratio for this stock for the 10 year median ratios is just 8.93.
When I look at analysts’ recommendations, I find one Hold Rating and a 12 month stock price consensus of $14.00. This implies a total return of 23.54% with 18.14% from capital gains and 5.40% from dividends. There seems to be only one analyst following this stock. A hold recommendation does not seem to go with an 23% total return.
The last remark on this stock on Stock Chase was in 2016. It is not well followed. Stock Chase give this stock 1 star out of 5. It has never been on the Money Sense list. Nikhil Kumar on Motley Fool asked in 2021 if this is Canada’s cheapest Real Estate stock. Aditya Raghunath on Motley Fool did not like this company in 2020. The company put out a Press Release on Newswire about their fourth quarter of 2022.
Simply Wall Street via Yahoo Finance put out a recent report on this stock. Simply Wall Street gives 3 warnings on this stock of debt is not well covered by operating cash flow; dividend of 5.33% is not well covered; and large one-off items impacting financial results. Simply Wall Street gives this stock 3 stars out of 5.
Melcor Developments Ltd is a real estate development company. It develops and manages mixed-use residential communities, business and industrial parks, office buildings, retail commercial centers, and golf courses. Its web site is here Melcor Developments Inc.
The last stock I wrote about was about was BCE Inc (TSX-BCE, NYSE-BCE) ... learn more. The next stock I will write about will be Goodfellow Inc (TSX-GDL, OTC-GFELF) ... learn more on Friday, April 7, 2023 around 5 pm. Tomorrow on my other blog I will write about Something to Buy April 2023 .... learn more on Thursday, April 6, 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.
See my website for stocks followed and investment notes. I have three blogs. The first talks only about specific stocks and is called Investment Talk. The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter or StockTwits. I am on Instagram. Or you can just Google #walktoronto spbrunner8166 to see my pictures.
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