Is it a good company at a reasonable price? This stock has a great track record. It is the sort you can use to build you dividend income portfolio prior to having to use your dividend income. I must admit that I still like this company and even though I live off my dividends, I have no intentions of selling it. Results of stock price testing is that the stock price is probably reasonable, but above the median.
I own this stock of Toromont Industries Ltd (TSX-TIH, OTC-TMTNF). This is one of the stocks I bought after selling Loblaws in 2008. This was a stock on Mike Higgs' Canadian Dividend Growth Stock list. I bought more in 2008 after selling Onex and AGF Management.
When I was updating my spreadsheet, I noticed this has been a great stock. I have had it for 15 years and I have made a total return of 13.50% per year with 11.75% from capital gains and 1.75% from dividends. I like to buy stocks with different yields and growth combinations. Basically, good yields have little growth and low yields have good growth. My earliest purchase, on my original investment, has a yield of 9.8%. Overtime with good growth, low yields, can produced good dividend income.
In the following chart you can see good growth for most categories. The Cash Flow is down over the past 5 years, but if you look at the Cash Flow excluding Working Capital, the 5 year growth is 18.4% (and for 10 years is 14%). This is often the Cash Flow that is important.
| Year | Item | Tot. Growth | Per Year |
|---|---|---|---|
| 5 | Revenue Growth | 80.02% | 12.48% |
| 5 | EPS Growth | 148.64% | 19.98% |
| 5 | Net Income Growth | 158.11% | 20.88% |
| 5 | Cash Flow Growth | -20.54% | -3.67% |
| 5 | Dividend Growth | 102.67% | 15.17% |
| 5 | Stock Price Growth | 77.33% | 12.14% |
| 10 | Revenue Growth | 180.71% | 10.87% |
| 10 | EPS Growth | 250.64% | 13.37% |
| 10 | Net Income Growth | 276.76% | 14.18% |
| 10 | Cash Flow Growth | 480.79% | 19.23% |
| 10 | Dividend Growth | 223.40% | 12.45% |
| 10 | Stock Price Growth | 363.08% | 16.56% |
If you had invested in this company in December 2012, for $1,012.80 you would have bought 48 shares at $21.10 per share. In December 2022, after 10 years you would have received $440.16 in dividends. The stock would be worth $4,690.08. Your total return would have been $5,130.24.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $21.10 | $1,012.80 | 48 | 10 | $440.16 | $4,690.08 | $5,130.24 |
The current dividend yield is low with dividend growth good. The current dividend yield is low (below 2%) at 1.61%. The 5, 10 and historical dividend yields are also low at 1.48%, 1.65% and 1.69%. The dividends have grown at a good rate (14% or higher) at 15.2% per year for the past 5 years. This company has a long history of dividend increases. The last dividend increase was for 10.3% and it was done in 2023.
The Dividend Payout Ratios (DPR) are good. The DPR for EPS for 2022 is 28% with 5 year coverage at 31%. The DPR for Cash Flow per Share (CFPS) for 2022 is 21% with 5 year coverage also at 21%. The DPR for Free Cash Flow (FCF) for 2022 is 85% with 5 year coverage at 33%.
Debt Ratios are good. The Long Term Debt/Market Cap Ratio for 2022 is 0.08 and is good and low. The Liquidity Ratio for 2022 is high and good at 2.43. The Debt Ratio for 2022 is high and good at 2.25. The Leverage and Debt/Equity Ratios for 2022 are low and good at 1.80 and 0.80.
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 | 15.17% | 13.83% | 12.14% | 1.69% |
| 2012 | 10 | 12.45% | 18.64% | 16.56% | 2.07% |
| 2007 | 15 | 11.57% | 13.94% | 12.23% | 1.71% |
| 2002 | 20 | 14.02% | 16.81% | 14.67% | 2.15% |
| 1997 | 25 | 13.71% | 14.26% | 12.58% | 1.68% |
| 1992 | 30 | 13.21% | 22.24% | 18.42% | 3.82% |
| 1990 | 32 | 14.80% | 22.65% | 18.54% | 4.10% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 17.58, 20.09, and 22.59. The corresponding 10 year ratios are 16.12, 18.76 and 22.04. The corresponding 10 year ratios are 13.10, 15.29 and 18.93. The current P/E Ratio is 20.07 based on a stock price of $106.78 and EPS estimate for 2023 of $5.32. The current P/E 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 get a Graham Price of $58.15. The 10-year low, median, and high median Price/Graham Price Ratios are 1.41, 1.70 and 1.98. The current P/GP Ratio is 1.84 based on a stock price of $106.78. This 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 get a 10-year median Price/Book Value per Share Ratio of 3.45. The current ratio is 3.78 based on Book Value of $2,325M, Book Value per Share $28.25 and a stock price of $106.78. The current ratio is 9.5% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a 10-year median Price/Cash Flow per Share Ratio of 15.30. The current P/CF Ratio is 13.69 based on Cash Flow per Share estimate for 2023 of $7.80, Cash Flow of $642M and a stock price of 106.78. The current ratio is 10.5% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get an historical median dividend yield of 1.69%. The current dividend yield is 1.61% based on a dividend of $1.72 and a stock price of $106.78. The current ratio is 4.7% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a 10 year median dividend yield of 1.65%. The current dividend yield is 1.61% based on a dividend of $1.72 and a stock price of $106.78. The current ratio is 2.4% below the 10 year median dividend yield. This stock price testing suggests that the stock price is relatively reasonable but above the median.
The 10-year median Price/Sales (Revenue) Ratio is 1.44. The current P/S Ratio is 1.97 based on Revenue estimate for 2023 of $4,465M, Revenue per Share of $54.24 and a stock price of $106.78. The current ratio is 36% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
Results of stock price testing is that the stock price is probably reasonable, but above the median. The dividend yield tests are saying this. The P/S Ratio test seems to be the only one to say the stock price is expensive. The rest are saying it is reasonable but above the median.
When I look at analysts’ recommendations, I find Strong Buy (2), Buy (5) and Hold (2). The consensus is a Buy. The 12 month stock price consensus is $125.11. This implies a total return of 18.78% with 17.17% from capital gains and 1.61% from dividends based on a current stock price of $106.78.
There are only two remarks for 2023 on Stock Chase. They are positive. This company has four stars out of 5 by Stock Chase. It is 29 on the Money Sense List. It is on the Dividend Aristocrat list. Adam Othman on Motley Fool thinks this is a good stock to build a nest egg with. I agree. Adam Othman on Motley Fool thinks this is a blue chip stock to buy and forget. Vishesh Raisinghani on Motley Fool thinks this stock is a long term winner. Toromont put out a Press Release on their 2022 results.
Simply Wall Street via Yahoo Finance reviews this stock. Simply Wall Street gives this stock 3 stars out of 5. They list one warning of significant insider selling over the past 3 months. Statistics do not differentiate between selling and stock options not being pick up. Over the past year both the CEO and CFO pick up more shares.
Toromont Industries Ltd is a Canadian industrial company. The company operates two business segments: Equipment Group and CIMCO. The company operates mainly in Canada and derives a smaller portion of sales from the United States of America. Its web site is here Toromont Industries Ltd.
The last stock I wrote about was about was Alaris Equity Partners Income Trust (TSX-AD, OTC-ALARF) ... learn more. The next stock I will write about will be Supremex Inc (TSX-SXP, OTC-SUMXF) ... learn more on Monday, April 17, 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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