Before I go on the talk about my dividend changes for the third quarter, I would just like to say that you probably should be careful about investing in dividend paying stock at the moment. I know that I blog continuously about buying dividend paying stock. The thing is it seems that there are an awful lot of people blogging and/or promoting dividend paying stock. When buying stock, make sure you do not overpay. Dividend paying stock seems to be very “in” at the moment. This could push up their stock prices.
However, I do have faith. Once a new bull market begins, people will forget about conservative investing, and have stars in their eyes about how much they can make on more risky stock and/or non-dividend paying stock. At that point, dividend paying stock investing will no longer be “in”, and it will be better for people like me who will still believe in dividend paying stock. This may seem rather cynical, but I have been investing since the 1970’s and I have seen this before.
So, now back to my subject on what dividend changes I got in the third quarter of this year. Yesterday, I updated my spreadsheet for stock I own and dividend changes for the 3rd quarter of 2010, see dividends. For the third quarter of this year, I have had 5 companies that changed their dividends (these dividends are in blue to distinguish them from changes that occurred in the first and second quarter). Since I do dividend calculations based on the applicable company’s financial year, I have also started columns for 2011. There are changes shown 2011 because when a company increases or decreases its dividend part way through their financial year, the total dividends for the following financial year will also be affected.
Yesterday, I talked about 3 of stocks for which I had dividend changes on and today, I will talk about the remaining 2 stocks with dividend changes.
The first stock I would like to talk about is Saputo, which I purchased in 2006 and 2007. To date, I have earned a return 18.6% per year since I have purchased this stock. Just over 2% of this return is in dividends. However, over the past 5 years this company has increased its dividend by just under 14% per year. The current increase is just over 10% as the dividend per share went from $.145 to .16. I record just 7% increase this year as the increase is for September and there is one further dividend payment due in December, so I will receive two dividends at this increase rate.
This has been a very good stock purchase for me. However, please note that this is considered to be a dividend paying growth stock. This is why the dividends are currently a small part of the total return and it is also why the dividends are increasing at so high a rate each year. See my spreadsheet.
The next one to talk about is Canadian Pacific Railway. I bought this stock in 2007 and I have only made a return of 1.2% per year. This is because the stock price has gone down since then 2007. On average, the dividends add some 2% to the total return each year on this stock. The other thing to note about this stock is that this is the first dividend increase since the one in 2008. However, this stock, on average has been rising it dividend by almost 14% per year over the last 5 years.
The dividend for this stock went from $.2475 per share to $.27 a share, a rise of just over 9%. However, since I will only see two dividends at this rate for this stock this year, my dividends are up for this stock by 4.6% this year. Since all my dividends in 2011 could be at the increase rate, my dividends will also go up in 2011 by 4.4%. See my spreadsheet.
One of the stocks I track is EnCana. Since many Canadian Analysts feel we should have resource stocks in our portfolio, I am tracking this one and Cenovus Energy Inc., which just split from EnCana. I must admit that less than 1% of my own portfolio is in resource stocks. This is a very low figure for most analysts.
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. See my website for stocks followed and investment notes. Follow me on twitter.
Thursday, October 14, 2010
Wednesday, October 13, 2010
State of My Dividends Q3 2010
Today, I am updating my spreadsheet on my stocks for stock I own and dividend increases for the 3rd quarter of 2010, see dividends. For all my stocks, I have shown in the “10” (for 2010) column, if a company has actually increased their dividend yet for the current year of 2010. In the “div” column preceding, I show the percentage increase in the dividends for the company’s financial year ending in 2010.
For the third quarter of this year, I have had 5 companies that changed their dividends (these dividends are in blue to distinguish them from changes that occurred in the first and second quarter). Since I do dividend calculations based on the applicable company’s financial year, I have also started columns for 2011. There are changes shown 2011 because when a company increases or decreases its dividend part way through their financial year, the total dividends for the following financial year will also be affected.
The first stock to discuss is AltaGas Ltd. This stock used to be AltaGas Income Trust. Since the new tax rules come in for Income Trust companies, this company has been planning to change to a corporation and decrease its payout. The changed occurred on July 8th 2010. The old payout was at the rate of $.18 a unit per month to the new dividend structure of $.11 a share. I knew about this change when I purchased shares (or units) in this company in May 2009. At that time, I thought that this stock would make a good addition to my portfolio.
This certainly is not the only Income Trust Company that will decrease their dividends when changing to corporation. See my spreadsheet. Even with the dividend decrease, at the current stock price of $21.97, I have a dividend yield on this stock of 7.9%. Prior to the change to a corporation, there were also lots and lots of insider buying, although I must admit that a lot of analysts were not keen on this stock. I do not know why.
The next company to discuss is Canadian Real Estate Investment Trust. This is a REIT and has a habit of increasing their dividends at a rate very close to inflation. Some REITs do a bit better than this, but most REIT increases seem to be at this level. REITs are never good dividend increasers, but I think it is a good idea to have some in your portfolio for diversification. I see not problem when the increases in dividend is at the rate of inflation. See my spreadsheet.
The next stock I have that increased their dividends in the 3rd quarter is Computer Modelling Group Ltd, a (relatively) small Tech company. They increased that dividend by some 5.5%, but because it was done half way through the year, my total dividends from this company in 2010 will only increase by 2.8%. However, this will change the dividends I receive in 2011 also, so my dividends in 2011 will be 2.7% more than in 2010. This is the smallest increase in dividends for this company since they started paying dividends in 2004.
For this company, I will receive, in 2010, 2 dividends at $.18 per share and 2 dividends at $.19 for a total of $.74 per share, an increase of 2.8% over the $.72 of dividends I received in 2009. If I receive four dividends of $.19 per share in 2011 or a total of $.76 per share, my dividends in 2011 will be 2.7% higher than in 2010. This company also has a habit of giving out special dividends payments when they can afford to. I have already received in June of this year, a special dividend of $.17 per share. See my spreadsheet.
Tomorrow, I will talk about my other dividend increases for this 3rd quarter.
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. See my website for stocks followed and investment notes. Follow me on twitter.
For the third quarter of this year, I have had 5 companies that changed their dividends (these dividends are in blue to distinguish them from changes that occurred in the first and second quarter). Since I do dividend calculations based on the applicable company’s financial year, I have also started columns for 2011. There are changes shown 2011 because when a company increases or decreases its dividend part way through their financial year, the total dividends for the following financial year will also be affected.
The first stock to discuss is AltaGas Ltd. This stock used to be AltaGas Income Trust. Since the new tax rules come in for Income Trust companies, this company has been planning to change to a corporation and decrease its payout. The changed occurred on July 8th 2010. The old payout was at the rate of $.18 a unit per month to the new dividend structure of $.11 a share. I knew about this change when I purchased shares (or units) in this company in May 2009. At that time, I thought that this stock would make a good addition to my portfolio.
This certainly is not the only Income Trust Company that will decrease their dividends when changing to corporation. See my spreadsheet. Even with the dividend decrease, at the current stock price of $21.97, I have a dividend yield on this stock of 7.9%. Prior to the change to a corporation, there were also lots and lots of insider buying, although I must admit that a lot of analysts were not keen on this stock. I do not know why.
The next company to discuss is Canadian Real Estate Investment Trust. This is a REIT and has a habit of increasing their dividends at a rate very close to inflation. Some REITs do a bit better than this, but most REIT increases seem to be at this level. REITs are never good dividend increasers, but I think it is a good idea to have some in your portfolio for diversification. I see not problem when the increases in dividend is at the rate of inflation. See my spreadsheet.
The next stock I have that increased their dividends in the 3rd quarter is Computer Modelling Group Ltd, a (relatively) small Tech company. They increased that dividend by some 5.5%, but because it was done half way through the year, my total dividends from this company in 2010 will only increase by 2.8%. However, this will change the dividends I receive in 2011 also, so my dividends in 2011 will be 2.7% more than in 2010. This is the smallest increase in dividends for this company since they started paying dividends in 2004.
For this company, I will receive, in 2010, 2 dividends at $.18 per share and 2 dividends at $.19 for a total of $.74 per share, an increase of 2.8% over the $.72 of dividends I received in 2009. If I receive four dividends of $.19 per share in 2011 or a total of $.76 per share, my dividends in 2011 will be 2.7% higher than in 2010. This company also has a habit of giving out special dividends payments when they can afford to. I have already received in June of this year, a special dividend of $.17 per share. See my spreadsheet.
Tomorrow, I will talk about my other dividend increases for this 3rd quarter.
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. See my website for stocks followed and investment notes. Follow me on twitter.
Tuesday, October 12, 2010
Finning International Inc. 2
As I said on Thursday, I do not own this stock (TSX-FTT). When I was in the market to buy an industrial stock in this area, at the time I liked Toromont Industries (TSX-TIH) better, so that is what I bought. See my latest reports on Toromont at report 1 and report 2. See my spreadsheet on Toromont at tih.htm.
When looking at Insider Trading, I find about $.5M of Insider Buying and about 1.5M of Insider Selling. This nets to about $1M in net Insider Selling. This is not much action on a $2B company. However, the CEO, CFO and officers have more stock options than shares in this company. This I not what I like to see, however, there are an awful lot of companies giving out an awful amount of stock options. So, we do not learn much here.
When I look at the 5 year P/E low median ratio, I get a low P/E ratio of 16 and a 5 year P/E high median ratio of 19. I get a current P/E of 25 based on earning estimate for 2010. Except for 2008 where the P/E high was 39.5 and for 2004 when it was 22.5, the high P/E ratios have been below 20, the current one of 25 does seem a bit high. However, the forward P/E is 17. Forward P/E ratio is based on earnings expected in 2011. The earnings for this company are not expected to recover from this recession until 2011.
When I look at the Graham Price, I get one of $13.07. The current stock price of $23.85 is some 45% above this. Although the stock price has seldom been below the Graham Price, the median low difference is 12% and the high median difference is 56%. This makes the current price relatively closer to the high median difference. When I look at the Price/Book Value Ratio, I get a current one of 2.98 and a 10 year average of 2.13. The current one is 40% higher than the 10 year average. So this also does not point to a good current stock price.
The one comparison that points to a good stock price is the dividend yield. The current yield of 2% is higher than the 5 year average of 1.8%. However, the yield has been better over the past 2 years and the 10 year high yield is 2% with the 5 year average high at 2.5%. So, while none of this shows the current price is be excessively high, they also do show the current price is be any sort of bargain either. The thing is that this stock price is up over 40% since the end of 2009.
So, what do the analysts say about this stock? When I look at the recommendations, there are lots of Strong Buy and Buy recommendations and a number of Hold recommendations. The consensus is close, but it is probably a Buy rather than a Strong Buy consensus. (See my site for information on analyst ratings.) The curious thing is that no one expects the stock price on this stock to raise much over the next 12 months, although a number of people have said that this stock is a good long term investment. Analysts also point to the company’s strong 2nd quarter and that it has long term growth potential.
There is a Wikipedia entry for this company at Finning. This company is on the dividend lists that I follow of Dividend Achievers and Dividend Aristocrats (see indices).
I will continue to track this company, but will probably not be interested in buying it while I hold Toromont Industries.
This company sells, rents and provides customer support services for Caterpillar equipment and engines. They cover Canada, UK, Argentina, Bolivia, Chile and Uruguay. Its web site is here Finning. See my spreadsheet at ftt.htm.
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. See my website for stocks followed and investment notes. Follow me on twitter.
When looking at Insider Trading, I find about $.5M of Insider Buying and about 1.5M of Insider Selling. This nets to about $1M in net Insider Selling. This is not much action on a $2B company. However, the CEO, CFO and officers have more stock options than shares in this company. This I not what I like to see, however, there are an awful lot of companies giving out an awful amount of stock options. So, we do not learn much here.
When I look at the 5 year P/E low median ratio, I get a low P/E ratio of 16 and a 5 year P/E high median ratio of 19. I get a current P/E of 25 based on earning estimate for 2010. Except for 2008 where the P/E high was 39.5 and for 2004 when it was 22.5, the high P/E ratios have been below 20, the current one of 25 does seem a bit high. However, the forward P/E is 17. Forward P/E ratio is based on earnings expected in 2011. The earnings for this company are not expected to recover from this recession until 2011.
When I look at the Graham Price, I get one of $13.07. The current stock price of $23.85 is some 45% above this. Although the stock price has seldom been below the Graham Price, the median low difference is 12% and the high median difference is 56%. This makes the current price relatively closer to the high median difference. When I look at the Price/Book Value Ratio, I get a current one of 2.98 and a 10 year average of 2.13. The current one is 40% higher than the 10 year average. So this also does not point to a good current stock price.
The one comparison that points to a good stock price is the dividend yield. The current yield of 2% is higher than the 5 year average of 1.8%. However, the yield has been better over the past 2 years and the 10 year high yield is 2% with the 5 year average high at 2.5%. So, while none of this shows the current price is be excessively high, they also do show the current price is be any sort of bargain either. The thing is that this stock price is up over 40% since the end of 2009.
So, what do the analysts say about this stock? When I look at the recommendations, there are lots of Strong Buy and Buy recommendations and a number of Hold recommendations. The consensus is close, but it is probably a Buy rather than a Strong Buy consensus. (See my site for information on analyst ratings.) The curious thing is that no one expects the stock price on this stock to raise much over the next 12 months, although a number of people have said that this stock is a good long term investment. Analysts also point to the company’s strong 2nd quarter and that it has long term growth potential.
There is a Wikipedia entry for this company at Finning. This company is on the dividend lists that I follow of Dividend Achievers and Dividend Aristocrats (see indices).
I will continue to track this company, but will probably not be interested in buying it while I hold Toromont Industries.
This company sells, rents and provides customer support services for Caterpillar equipment and engines. They cover Canada, UK, Argentina, Bolivia, Chile and Uruguay. Its web site is here Finning. See my spreadsheet at ftt.htm.
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. See my website for stocks followed and investment notes. Follow me on twitter.
Friday, October 8, 2010
Manulife Financial Corp
Today’s blog is very different from what I usually do. I own this stock (TSX-MFC). This stock has been plummeting lately. This is because investors in this stock seem very scared. The last few months have seen this stock go down over 40%. I first bought this stock in 2005 and made more purchases in 2006 and 2009. To date I have lost some 14% per year or just over 50% of my investment.
There is no doubt that this stock faces head winds in the near future. The 2nd quarterly results were particularly bad. No one thinks that Manulife will solve their problems soon. At the present, no one feels that this company is going to having any earnings this year either. Everyone expects the company to have a very tough year. However, no one thinks the company is going to bankrupt either.
So, have investors over reacted? Is this is stock sale? I think so. That is why I went into the market this morning and bought a few hundred more shares of this stock. Not a big investment, but I could not resist buying these shares at a price of $12.51. This stock has a forward P/E (that is based on next year earnings) of just over 7. The current stock price is also just 80% of the book value. (A stock selling below book value is a great buy signal.) The dividend yield is also about the highest it has ever been and this is in spite of the fact they recently lowered their dividends.
Now, I also must point out that this sort of investment is not for everybody. You should never invest in something that will disturb your sleep. No investment is worth sleep loss. This sort of investment is also is a bit of a gamble.
The analysts’ recommendations are interesting. This consensus recommendation would be a Hold. This is because there are a lot of analysts following this stock and an awful lot of them give this stock a Hold recommendation. However, there are also Strong Buy and Buy recommendations on this stock. There is no Sell recommendation nor is there even an Underperform recommendation. I know that Sell recommendations are hard to come by, but they do occur. (See my site for information on analyst ratings.)
I will return to discussing Finning International next week after the holiday. However, I just thought I would blog about what I was doing today.
This is a life insurance company in the financial services business. It offers financial protection products (e.g. Life Insurance) and wealth management services (i.e. segregated funds, mutual funds and pension products). They sell products to individuals and business. They are an international company, selling in Canada, US and Asia. This company is listed on Canadian, US, Hong Kong and Philippines Stock Exchanges. Its web site is here Manulife. See my spreadsheet at mfc.htm.
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. See my website for stocks followed and investment notes. Follow me on twitter.
There is no doubt that this stock faces head winds in the near future. The 2nd quarterly results were particularly bad. No one thinks that Manulife will solve their problems soon. At the present, no one feels that this company is going to having any earnings this year either. Everyone expects the company to have a very tough year. However, no one thinks the company is going to bankrupt either.
So, have investors over reacted? Is this is stock sale? I think so. That is why I went into the market this morning and bought a few hundred more shares of this stock. Not a big investment, but I could not resist buying these shares at a price of $12.51. This stock has a forward P/E (that is based on next year earnings) of just over 7. The current stock price is also just 80% of the book value. (A stock selling below book value is a great buy signal.) The dividend yield is also about the highest it has ever been and this is in spite of the fact they recently lowered their dividends.
Now, I also must point out that this sort of investment is not for everybody. You should never invest in something that will disturb your sleep. No investment is worth sleep loss. This sort of investment is also is a bit of a gamble.
The analysts’ recommendations are interesting. This consensus recommendation would be a Hold. This is because there are a lot of analysts following this stock and an awful lot of them give this stock a Hold recommendation. However, there are also Strong Buy and Buy recommendations on this stock. There is no Sell recommendation nor is there even an Underperform recommendation. I know that Sell recommendations are hard to come by, but they do occur. (See my site for information on analyst ratings.)
I will return to discussing Finning International next week after the holiday. However, I just thought I would blog about what I was doing today.
This is a life insurance company in the financial services business. It offers financial protection products (e.g. Life Insurance) and wealth management services (i.e. segregated funds, mutual funds and pension products). They sell products to individuals and business. They are an international company, selling in Canada, US and Asia. This company is listed on Canadian, US, Hong Kong and Philippines Stock Exchanges. Its web site is here Manulife. See my spreadsheet at mfc.htm.
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. See my website for stocks followed and investment notes. Follow me on twitter.
Thursday, October 7, 2010
Finning International Inc
I do not own this stock (TSX-FTT). When I was in the market to buy an industrial stock in this area, at the time I liked Toromont Industries (TSX-TIH) better, so that is what I bought. See my latest reports on Toromont at report 1 and report 2. See my spreadsheet on Toromont at tih.htm.
When I look at the dividend information on Finning, I find that the dividend yield is often between 1% and 2%. It is currently at 2%. The dividends have been higher than usual for 2008 and 2009 because the stock’s price has been depressed. The 5 year average dividend yield is at 1.8%, but historically, the 5 year average has been closer to 1.3%. On a current investment, you could have a 5.8% return on your money in 5 years time and a 12.8% return in 10 years time. That is on a current purchase of the stock at the current stock price of $23.85.
For this stock, the 5 year growth in dividends averages 17% per year. However, you should probably take inflation into account when looking a future returns on your current investment. Long term background inflation runs at about 3%, but current inflation is low, so if you reduce these returns by an inflation rate of 2%, you could be earning 5.3% and 10.7% return in 5 or 10 years on a current investment. This is how you can end up living off your dividends. I want stock’s where the dividends grow faster than inflation. Usually, the lower the dividend yield, the higher the dividend yield growth. However, this is also a growth company and that is why the dividend is increasing at such a high rate.
When looking at growth, the 10 year figures are generally better than the 5 year figures. This is because this stock has been hit hard by the current recession. The only area where growth was better for the 5 year figures was in connection with cash flow. The company reduced administrative expenses, account receivables and inventory for 2009. Cash Flow growth over the past 5 years grew at the rate of 24% per year mainly because of growth in 2009. Revenue growth was not great for the last 5 and 10 years coming in at 3.3% and 7% per year, respectively, for the last 5 and 10 years. Mainly this is because revenues fell about 21% in 2009.
Also, book value growth has not been good coming in at 3.4% and 7.4% per year over the last 5 and 10 years, respectively. This is because there was a 10% drop in book value in 2009. The company took a loss on the sale of Hewden Stuart Limited (UK) business in 2009. This was strategic move on the part of the company.
In the last few years, the company has really strengthened its balance sheet and currently has a very good liquidity ratio of 2.26. The Asset/Liability Ratio is also very good at 1.67. It is important to have a strong balance sheet in a recession. The Return on Equity has a 5 year average of 11.3% to the calendar year ending in 2009. The ROE for 2009 is a decent 8.6% and the one for the first 2 quarters of 2010 is also decent at 8.7%. The current accrual ratio is also very good at -12.7% where anything below -5% is very good indeed.
Even though I do not regret the decision I made to buy Toromont instead of this company, this is still a very good company. Tomorrow I will talk about what the analysts say.
This company sells, rents and provides customer support services for Caterpillar equipment and engines. They cover Canada, UK, Argentina, Bolivia, Chile and Uruguay. Its web site is here Finning. See my spreadsheet at ftt.htm.
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. See my website for stocks followed and investment notes. Follow me on twitter.
When I look at the dividend information on Finning, I find that the dividend yield is often between 1% and 2%. It is currently at 2%. The dividends have been higher than usual for 2008 and 2009 because the stock’s price has been depressed. The 5 year average dividend yield is at 1.8%, but historically, the 5 year average has been closer to 1.3%. On a current investment, you could have a 5.8% return on your money in 5 years time and a 12.8% return in 10 years time. That is on a current purchase of the stock at the current stock price of $23.85.
For this stock, the 5 year growth in dividends averages 17% per year. However, you should probably take inflation into account when looking a future returns on your current investment. Long term background inflation runs at about 3%, but current inflation is low, so if you reduce these returns by an inflation rate of 2%, you could be earning 5.3% and 10.7% return in 5 or 10 years on a current investment. This is how you can end up living off your dividends. I want stock’s where the dividends grow faster than inflation. Usually, the lower the dividend yield, the higher the dividend yield growth. However, this is also a growth company and that is why the dividend is increasing at such a high rate.
When looking at growth, the 10 year figures are generally better than the 5 year figures. This is because this stock has been hit hard by the current recession. The only area where growth was better for the 5 year figures was in connection with cash flow. The company reduced administrative expenses, account receivables and inventory for 2009. Cash Flow growth over the past 5 years grew at the rate of 24% per year mainly because of growth in 2009. Revenue growth was not great for the last 5 and 10 years coming in at 3.3% and 7% per year, respectively, for the last 5 and 10 years. Mainly this is because revenues fell about 21% in 2009.
Also, book value growth has not been good coming in at 3.4% and 7.4% per year over the last 5 and 10 years, respectively. This is because there was a 10% drop in book value in 2009. The company took a loss on the sale of Hewden Stuart Limited (UK) business in 2009. This was strategic move on the part of the company.
In the last few years, the company has really strengthened its balance sheet and currently has a very good liquidity ratio of 2.26. The Asset/Liability Ratio is also very good at 1.67. It is important to have a strong balance sheet in a recession. The Return on Equity has a 5 year average of 11.3% to the calendar year ending in 2009. The ROE for 2009 is a decent 8.6% and the one for the first 2 quarters of 2010 is also decent at 8.7%. The current accrual ratio is also very good at -12.7% where anything below -5% is very good indeed.
Even though I do not regret the decision I made to buy Toromont instead of this company, this is still a very good company. Tomorrow I will talk about what the analysts say.
This company sells, rents and provides customer support services for Caterpillar equipment and engines. They cover Canada, UK, Argentina, Bolivia, Chile and Uruguay. Its web site is here Finning. See my spreadsheet at ftt.htm.
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. See my website for stocks followed and investment notes. Follow me on twitter.
Wednesday, October 6, 2010
Lassonde Industries 2
I do not own any shares in this consumer stock. However, I have started to follow it as it has been recommended for dividend growth and long term capital gain. I just read a report to say this stock (TSX-LAS.A) was undervalued and was currently a good one to buy for long term gains and future dividends.
Well, first off, I find that there is very little activity on the Insider Selling and Insider Buying activity. There was less than $150,000 of insider selling last year and no activity this year. Some of the insiders own shares in this company, but there is not much in the way of any stock options. The thing to note is that Lassonde is buying up their shares. This repurchasing of their shares over the past year seems to be less than 1% of the shares outstanding.
The 5 year low median P/E ratio is 10 and the 5 year high median P/E Ratio is 12.3. The current P/E ratio is 12.7 and the forward P/E is 12. The forward P/E uses the current stock price and the expected earnings for 2011. These P/E ratios are in a narrow range and none of them is high. The next thing to look at is the Graham Price and I get one of $55 for this stock. The current price is $57.10 is close and is only4% above this. This stock tends to spend a lot of time at or lower than the Graham Price.
The first thing I can find pointing to a good current price is the dividend yield. The current yield is 2% and the 5 year average is 1.7%. However, the Price/Book Value ratio at 1.91 is about 17% above the 10 year average of 1.64. What you want to see is the current P/B below the long term average. So from my spreadsheet ratios, the price is high or fair, except when looking at yield. Of course, all analysts have their own way of calculating what a good stock price should be.
On the report I read, they consider a stock to be undervalued if the earnings growth rate is higher than the P/E ratio. I get a 5 and 10 year average earnings growth of 21.3% and 15.6% respectively. They divide the recent average earnings growth rate by the P/E ratio and if the value is over 1.0, then a stock is undervalued. If the value is under 1.0, then a stock is overvalued. By this measure, 21.3/12.7 (recent earnings growth/current P/E) gives a value of 1.7, and therefore they think the stock is undervalued. The report gives a value of 1.8, but the report is dated in September, and since the P/E ratio changes when the stock price changes, my figures are quite close to theirs.
There are few analysts that follow this stock, but I find one Buy and one Hold recommendation. So, together with the recent report I read, we will give this stock a consensus recommendation of Buy. This stock was listed in an article called 10 Gems For the Value Investor in October 2010. See blog and Globe and Mail article. There is an interesting article on Probiotics Viability in Fruit Juice and this company at Taste Magazine Cincinnati.
Lassonde Industries Inc. is a leading manufacturer of pure fruit juices and fruit drinks in Canada, and the largest manufacturer and distributor of apple juice in Eastern Canada. Through its subsidiaries, Lassonde is active in the processing, packaging and marketing of food products such as pure fruit juices, fruit and citrus drinks, the canning of corn on the cob for foreign markets as well as dipping sauces, fondue bouillon, meat marinades, barbecue sauces and baked beans. The Company also markets its know-how in Canada and abroad. Its web site is here Lassonde. See my spreadsheet at las.htm.
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. See my website for stocks followed and investment notes. Follow me on twitter.
Well, first off, I find that there is very little activity on the Insider Selling and Insider Buying activity. There was less than $150,000 of insider selling last year and no activity this year. Some of the insiders own shares in this company, but there is not much in the way of any stock options. The thing to note is that Lassonde is buying up their shares. This repurchasing of their shares over the past year seems to be less than 1% of the shares outstanding.
The 5 year low median P/E ratio is 10 and the 5 year high median P/E Ratio is 12.3. The current P/E ratio is 12.7 and the forward P/E is 12. The forward P/E uses the current stock price and the expected earnings for 2011. These P/E ratios are in a narrow range and none of them is high. The next thing to look at is the Graham Price and I get one of $55 for this stock. The current price is $57.10 is close and is only4% above this. This stock tends to spend a lot of time at or lower than the Graham Price.
The first thing I can find pointing to a good current price is the dividend yield. The current yield is 2% and the 5 year average is 1.7%. However, the Price/Book Value ratio at 1.91 is about 17% above the 10 year average of 1.64. What you want to see is the current P/B below the long term average. So from my spreadsheet ratios, the price is high or fair, except when looking at yield. Of course, all analysts have their own way of calculating what a good stock price should be.
On the report I read, they consider a stock to be undervalued if the earnings growth rate is higher than the P/E ratio. I get a 5 and 10 year average earnings growth of 21.3% and 15.6% respectively. They divide the recent average earnings growth rate by the P/E ratio and if the value is over 1.0, then a stock is undervalued. If the value is under 1.0, then a stock is overvalued. By this measure, 21.3/12.7 (recent earnings growth/current P/E) gives a value of 1.7, and therefore they think the stock is undervalued. The report gives a value of 1.8, but the report is dated in September, and since the P/E ratio changes when the stock price changes, my figures are quite close to theirs.
There are few analysts that follow this stock, but I find one Buy and one Hold recommendation. So, together with the recent report I read, we will give this stock a consensus recommendation of Buy. This stock was listed in an article called 10 Gems For the Value Investor in October 2010. See blog and Globe and Mail article. There is an interesting article on Probiotics Viability in Fruit Juice and this company at Taste Magazine Cincinnati.
Lassonde Industries Inc. is a leading manufacturer of pure fruit juices and fruit drinks in Canada, and the largest manufacturer and distributor of apple juice in Eastern Canada. Through its subsidiaries, Lassonde is active in the processing, packaging and marketing of food products such as pure fruit juices, fruit and citrus drinks, the canning of corn on the cob for foreign markets as well as dipping sauces, fondue bouillon, meat marinades, barbecue sauces and baked beans. The Company also markets its know-how in Canada and abroad. Its web site is here Lassonde. See my spreadsheet at las.htm.
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. See my website for stocks followed and investment notes. Follow me on twitter.
Tuesday, October 5, 2010
Lassonde Industries
I do not own any shares in this consumer stock. However, I have started to follow it as it has been recommended for dividend growth and long term capital gain. I just read a report to say this stock (TSX-LAS.A) was undervalued and was currently a good one to buy for long term gains and future dividends.
What I like to see in a consumer stock is good dividend growth and this stock certain has that. The 5 and 10 year growth in dividends is at 15% and 14% per year respectively. This is very good dividend growth. Also, the current dividend at 2% is also quite good for a consumer stock, as a lot of consumer stock dividends are under 2%. If the growth in dividends continue, you are looking at receiving a 4% dividend yield in 5 years time and a 8% dividend yield in 10 years time, based on the current stock price (so on any current investment).
However, this is a consumer stock, and this company acts conservatively. They do not have a record of always increasing their dividends. In 2007, the dividends were decreased by10% when they made a big acquisition. However, by 2008, dividends were higher than they were in 2006. They have increased their dividend by 11% this year, and this is a good increase.
When you look at the growth figures on this stock, they are all good. For example, there has been a very good growth in revenues over the past years. The growth in revenue for the past 5 and 10 years is 15.7% and 10% per year respectively. The growth in cash value for the past 5 and 10 years is 17.5% and 8.5% per year, respectively. And, dear to every investors heart, is the total returns over the past 5 and 10 years, which at average prices, gives returns of 15% and 13% per year, respectively.
I can see why this stock might be recommended as both the Liquidity and the Asset/Liability Ratios are very good indeed at 2.90 and 2.21 respectively. What is good for both these ratios are ones of 1.50 and above. Also, the Return on Equity is very good with a 5 year average of 15% and one of 13% for the first two quarters of 2010.
All in all, this seems like a very good company and tomorrow, I will look at what other analysts say.
Lassonde Industries Inc. is a leading manufacturer of pure fruit juices and fruit drinks in Canada, and the largest manufacturer and distributor of apple juice in Eastern Canada. Through its subsidiaries, Lassonde is active in the processing, packaging and marketing of food products such as pure fruit juices, fruit and citrus drinks, the canning of corn on the cob for foreign markets as well as dipping sauces, fondue bouillon, meat marinades, barbecue sauces and baked beans. The Company also markets its know-how in Canada and abroad. Its web site is here Lassonde. See my spreadsheet at las.htm.
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. See my website for stocks followed and investment notes. Follow me on twitter.
What I like to see in a consumer stock is good dividend growth and this stock certain has that. The 5 and 10 year growth in dividends is at 15% and 14% per year respectively. This is very good dividend growth. Also, the current dividend at 2% is also quite good for a consumer stock, as a lot of consumer stock dividends are under 2%. If the growth in dividends continue, you are looking at receiving a 4% dividend yield in 5 years time and a 8% dividend yield in 10 years time, based on the current stock price (so on any current investment).
However, this is a consumer stock, and this company acts conservatively. They do not have a record of always increasing their dividends. In 2007, the dividends were decreased by10% when they made a big acquisition. However, by 2008, dividends were higher than they were in 2006. They have increased their dividend by 11% this year, and this is a good increase.
When you look at the growth figures on this stock, they are all good. For example, there has been a very good growth in revenues over the past years. The growth in revenue for the past 5 and 10 years is 15.7% and 10% per year respectively. The growth in cash value for the past 5 and 10 years is 17.5% and 8.5% per year, respectively. And, dear to every investors heart, is the total returns over the past 5 and 10 years, which at average prices, gives returns of 15% and 13% per year, respectively.
I can see why this stock might be recommended as both the Liquidity and the Asset/Liability Ratios are very good indeed at 2.90 and 2.21 respectively. What is good for both these ratios are ones of 1.50 and above. Also, the Return on Equity is very good with a 5 year average of 15% and one of 13% for the first two quarters of 2010.
All in all, this seems like a very good company and tomorrow, I will look at what other analysts say.
Lassonde Industries Inc. is a leading manufacturer of pure fruit juices and fruit drinks in Canada, and the largest manufacturer and distributor of apple juice in Eastern Canada. Through its subsidiaries, Lassonde is active in the processing, packaging and marketing of food products such as pure fruit juices, fruit and citrus drinks, the canning of corn on the cob for foreign markets as well as dipping sauces, fondue bouillon, meat marinades, barbecue sauces and baked beans. The Company also markets its know-how in Canada and abroad. Its web site is here Lassonde. See my spreadsheet at las.htm.
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. See my website for stocks followed and investment notes. Follow me on twitter.
Monday, October 4, 2010
Dorel Industries Inc 2
I do not current own this stock (TSX-DII.B). I held it at one time from May 1999 to July 2006. I did not make any money from it as it sold it at about what I paid for it. This stock was not given dividends at that time. I sold it because I had had it more than 5 years, and it had not gone anywhere. I also did not expect it to do anything anytime soon.
First of all, on the Insider Trading what I see is some $3.6M of insider selling and almost no insider buying. Not what you like to see, but we are in a recession, and it is hard to know why people are selling. The selling is also way less than 1% of the market capital of this stock. This is a stock with two classes of shares, one is a class A stock that has 10 votes per share and one is class B that has 1 vote per share. The Schwartz and Segel families between them have 83% of the votes of this company. Both Class A and Class B shares are traded on the TSX.
The 5 year median P/E low is 7.6 and the 5 year median high is 10.7. The current P/E ratio at 8.7 is between these figures. The average P/E is 9.2, so the current P/E is better than average. I get a Graham Price of $54.57 and the current stock price $33.60 is almost 40% below this. The stock price of this stock is often below the Graham Price, but this current difference is better than average.
When I look at the Price/Book Value ratio, I get a current one of 0.98 and a 10 year average of 1.53. First, this P/B ratio is about 64% of the long term average and the stock price is trading below the book value. Both of these items point to a very good current stock price. When looking at the dividend yield, we do not have much to work with as dividends just started in 2007. However, the average yield is 1.8% and the current yield 1.8%. The reason the average yield is at 1.8% is because the stock price in 2009 was quite low and this significantly boosted the dividend yield.
When I look at analysts’ recommendations, I find Strong Buy, Buy and Hold recommendations. The consensus would appear to be Buy. (See my site for information on analyst ratings.) All the analysts I looked at feel that this company should return a decent profit over the next 12 months. The analysts with the Hold recommendations seem to feel that the 3rd and 4th quarters for this company will not be a good as the first two quarters.
Now that this company is paying a dividend and if I were looked for another consumer stock, I would certainly consider this one. At the moment, I have enough consumer stocks in my portfolio. I will continue to track this company.
Dorel Industries Inc. is a world class juvenile products and bicycle company. Dorel’s branded products include Safety 1st, Quinny, Cosco, Maxi-Cosi and Bébé Confort in Juvenile, as well as Cannondale, Schwinn, GT, Mongoose and SUGOI in Recreational/Leisure. Dorel’s Home Furnishings segment markets a wide assortment of furniture products, both domestically produced and imported. Dorel has facilities in seventeen countries, and sales worldwide. There concentrated ownership of this company by the Schwartz family (66%) and Segel family (17%). There are two classes of shares, Class A with multiple voting (10) and Class B, with subordinate voting rates (1). Its web site is here Dorel. See my spreadsheet at dii.htm.
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. See my website for stocks followed and investment notes. Follow me on twitter.
First of all, on the Insider Trading what I see is some $3.6M of insider selling and almost no insider buying. Not what you like to see, but we are in a recession, and it is hard to know why people are selling. The selling is also way less than 1% of the market capital of this stock. This is a stock with two classes of shares, one is a class A stock that has 10 votes per share and one is class B that has 1 vote per share. The Schwartz and Segel families between them have 83% of the votes of this company. Both Class A and Class B shares are traded on the TSX.
The 5 year median P/E low is 7.6 and the 5 year median high is 10.7. The current P/E ratio at 8.7 is between these figures. The average P/E is 9.2, so the current P/E is better than average. I get a Graham Price of $54.57 and the current stock price $33.60 is almost 40% below this. The stock price of this stock is often below the Graham Price, but this current difference is better than average.
When I look at the Price/Book Value ratio, I get a current one of 0.98 and a 10 year average of 1.53. First, this P/B ratio is about 64% of the long term average and the stock price is trading below the book value. Both of these items point to a very good current stock price. When looking at the dividend yield, we do not have much to work with as dividends just started in 2007. However, the average yield is 1.8% and the current yield 1.8%. The reason the average yield is at 1.8% is because the stock price in 2009 was quite low and this significantly boosted the dividend yield.
When I look at analysts’ recommendations, I find Strong Buy, Buy and Hold recommendations. The consensus would appear to be Buy. (See my site for information on analyst ratings.) All the analysts I looked at feel that this company should return a decent profit over the next 12 months. The analysts with the Hold recommendations seem to feel that the 3rd and 4th quarters for this company will not be a good as the first two quarters.
Now that this company is paying a dividend and if I were looked for another consumer stock, I would certainly consider this one. At the moment, I have enough consumer stocks in my portfolio. I will continue to track this company.
Dorel Industries Inc. is a world class juvenile products and bicycle company. Dorel’s branded products include Safety 1st, Quinny, Cosco, Maxi-Cosi and Bébé Confort in Juvenile, as well as Cannondale, Schwinn, GT, Mongoose and SUGOI in Recreational/Leisure. Dorel’s Home Furnishings segment markets a wide assortment of furniture products, both domestically produced and imported. Dorel has facilities in seventeen countries, and sales worldwide. There concentrated ownership of this company by the Schwartz family (66%) and Segel family (17%). There are two classes of shares, Class A with multiple voting (10) and Class B, with subordinate voting rates (1). Its web site is here Dorel. See my spreadsheet at dii.htm.
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. See my website for stocks followed and investment notes. Follow me on twitter.
Friday, October 1, 2010
Dorel Industries Inc
I do not current own this stock (TSX-DII.B). I held it at one time from May 1999 to July 2006. I did not make any money from it as it sold it at about what I paid for it. This stock was not given dividends at that time. I had bought it because it was a favorite stock of a newsletter I like. It is still a favorite, I must say. I sold it because I had had it more than 5 years, and it had not gone anywhere. I also did not expect it to do anything anytime soon. I liked Manulife better and sold this to buy Manulife.
This stock has been reporting in US$ since 2000 and has done better in US currency, than in CDN currency. The company does business world wide (in about 17 countries). The other thing to note about this company is that there are two classes of shares. Most of the voting rights belong to two families (Schwartz and Segel). This company just started to pay dividends in 2007. They also pay dividends in US$, so dividends will fluctuate with the currency exchange rates.
As with a lot of industrial stocks, the dividend yield is quite low. It has a 3 year average of 1.7% and a current yield of 1.8%. I must say that the payment of dividend adds an interesting aspect to this stock. The dividends have increased on average at 15% per year. However, there was no increase between 2008 and 2009. It will be interesting to see if the average good increase in dividends will be permanent or not.
The company has not done a bad job in increasing Revenues and Cash Flows over the last 10 years. The 5 years figures are not so good. The best growth is probably for the Book Value that has had growth in the last 5 and 10 years of 7.5% and 14% per year, respectively. However, investors in this stock would probably not have made much money on it over the past 10 years and not any money at all over the past 5 years. The stock hit a peak in price in 2004, 2005 and then started to fall. It fall sharply in March of 2009 and has since gain some 80% over those 2009 lows.
Analysts seem to expect this stock to have good increases in earnings for 2010 and 2011. Net income is certainly up in the 2nd quarter of 2010. Compared to the 2nd quarter of 2009 net income is up some 40%. Getting on to what is currently good, this stock has a strong balance sheet. The current Liquidity Ratio is 2.04 and it has a 5 year average of 1.86. The Asset/Liability Ratio is 2.16 and it has a 5 year average of 2.11. For both these ratios, anything over 1.50 is good. Also, the Return on Equity is good with a 5 year average of 10.9% and with a second quarter of 2010 at 13%.
I will continue to track this stock as it might, in the future make an interesting investment, considering that it is now paying a dividend. I can see why people might like this stock. It has a strong balance sheet and it has been able to growth both revenue and cash flow. I am not surprised that it has not made much money for investors over the past 5 and 10 years because Industrial stocks tend to get hit harder in recession than say utility stocks. On Monday, I will look at what the analysts say about this stock.
Dorel Industries Inc. is a world class juvenile products and bicycle company. Dorel’s branded products include Safety 1st, Quinny, Cosco, Maxi-Cosi and Bébé Confort in Juvenile, as well as Cannondale, Schwinn, GT, Mongoose and SUGOI in Recreational/Leisure. Dorel’s Home Furnishings segment markets a wide assortment of furniture products, both domestically produced and imported. Dorel has facilities in seventeen countries, and sales worldwide. There concentrated ownership of this company by the Schwartz family (66%) and Segel family (17%). There are two classes of shares, Class A with multiple voting (10) and Class B, with subordinate voting rates (1). Its web site is here Dorel. See my spreadsheet at dii.htm.
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. See my website for stocks followed and investment notes. Follow me on twitter.
This stock has been reporting in US$ since 2000 and has done better in US currency, than in CDN currency. The company does business world wide (in about 17 countries). The other thing to note about this company is that there are two classes of shares. Most of the voting rights belong to two families (Schwartz and Segel). This company just started to pay dividends in 2007. They also pay dividends in US$, so dividends will fluctuate with the currency exchange rates.
As with a lot of industrial stocks, the dividend yield is quite low. It has a 3 year average of 1.7% and a current yield of 1.8%. I must say that the payment of dividend adds an interesting aspect to this stock. The dividends have increased on average at 15% per year. However, there was no increase between 2008 and 2009. It will be interesting to see if the average good increase in dividends will be permanent or not.
The company has not done a bad job in increasing Revenues and Cash Flows over the last 10 years. The 5 years figures are not so good. The best growth is probably for the Book Value that has had growth in the last 5 and 10 years of 7.5% and 14% per year, respectively. However, investors in this stock would probably not have made much money on it over the past 10 years and not any money at all over the past 5 years. The stock hit a peak in price in 2004, 2005 and then started to fall. It fall sharply in March of 2009 and has since gain some 80% over those 2009 lows.
Analysts seem to expect this stock to have good increases in earnings for 2010 and 2011. Net income is certainly up in the 2nd quarter of 2010. Compared to the 2nd quarter of 2009 net income is up some 40%. Getting on to what is currently good, this stock has a strong balance sheet. The current Liquidity Ratio is 2.04 and it has a 5 year average of 1.86. The Asset/Liability Ratio is 2.16 and it has a 5 year average of 2.11. For both these ratios, anything over 1.50 is good. Also, the Return on Equity is good with a 5 year average of 10.9% and with a second quarter of 2010 at 13%.
I will continue to track this stock as it might, in the future make an interesting investment, considering that it is now paying a dividend. I can see why people might like this stock. It has a strong balance sheet and it has been able to growth both revenue and cash flow. I am not surprised that it has not made much money for investors over the past 5 and 10 years because Industrial stocks tend to get hit harder in recession than say utility stocks. On Monday, I will look at what the analysts say about this stock.
Dorel Industries Inc. is a world class juvenile products and bicycle company. Dorel’s branded products include Safety 1st, Quinny, Cosco, Maxi-Cosi and Bébé Confort in Juvenile, as well as Cannondale, Schwinn, GT, Mongoose and SUGOI in Recreational/Leisure. Dorel’s Home Furnishings segment markets a wide assortment of furniture products, both domestically produced and imported. Dorel has facilities in seventeen countries, and sales worldwide. There concentrated ownership of this company by the Schwartz family (66%) and Segel family (17%). There are two classes of shares, Class A with multiple voting (10) and Class B, with subordinate voting rates (1). Its web site is here Dorel. See my spreadsheet at dii.htm.
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. See my website for stocks followed and investment notes. Follow me on twitter.
Thursday, September 30, 2010
Graham Number
I thought today I would talk about the Graham Price or Graham Number as there has been questions about this item. This is based on the principles of Benjamin Graham and it is meant to be used to calculate the maximum price you should pay for a stock. The Dividends Matters website has a tutorial on this subject.
Benjamin Graham wrote a book called The Intelligent Investor and this book is considered to be a classic investment book. On my website, you can find out how to order this book on Amazon if you care to purchase it. See Graham. Also, this book review and other books I have reviewed are on my website at Book Reviews. Benjamin Graham has an entry on Wikipedia. There is also a good review of this book at Motley Fool website.
Why do I look at this number? I want to be able to figure out what a decent price is to pay for a stock. To this end, I not only look at the Graham Number, but also P/E (price/earnings) ratios, P/B (Price/Book Value) ratios and dividend yield. That is why I look at the current ratios, the dividend yield and the Graham Price and compare them to 5 and 10 year averages.
Having invested for many years, I doubt if you can do better than pay a rather average price for a stock. What I am trying to prevent is over paying for a stock. What I have found is that if you over pay for a stock, the dividend yield that you get over the long term can be affected. If you do this too much, I am sure your portfolio will also suffer.
The formula I use is the square root of (22.5 X EPS X BVPS), where EPS is earnings per share and BVPS is Book Value per share. When I am calculating the current Graham Price, I simply use in my formula, the estimate earnings for the current year and the current book value (all from my spreadsheet).
For other years, in the Graham Prices on my spreadsheet I use the diluted reported earnings per share. There is some controversy about what you should use. Some think that you should use net earnings divided by the outstanding shares. I find mostly that there is not much difference and I want a quick and easy way to get a value to match against the current price.
Some site talks about the NCAV (or net current asset value) and have a formula for that, but I do not use this figure. For a discussion on this aspect of Graham’s way of investing, see Daniel Libeskind’s site.
I am not the only blogger who talks about Graham’s methods for valuing stocks. See Stingy Investor’s blog. See Dividend Matters site again for how a company such as Saputo (TSX-SAP) is valued. Also, see the Div-Net site on how they use the Graham Price in valuing Lowes Company (NYSE-LOW). There is also the Tipblog.in site that explains how they use Benjamin Graham Number to determine a fair price to pay for a stock.
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. See my website for stocks followed and investment notes. Follow me on twitter.
Benjamin Graham wrote a book called The Intelligent Investor and this book is considered to be a classic investment book. On my website, you can find out how to order this book on Amazon if you care to purchase it. See Graham. Also, this book review and other books I have reviewed are on my website at Book Reviews. Benjamin Graham has an entry on Wikipedia. There is also a good review of this book at Motley Fool website.
Why do I look at this number? I want to be able to figure out what a decent price is to pay for a stock. To this end, I not only look at the Graham Number, but also P/E (price/earnings) ratios, P/B (Price/Book Value) ratios and dividend yield. That is why I look at the current ratios, the dividend yield and the Graham Price and compare them to 5 and 10 year averages.
Having invested for many years, I doubt if you can do better than pay a rather average price for a stock. What I am trying to prevent is over paying for a stock. What I have found is that if you over pay for a stock, the dividend yield that you get over the long term can be affected. If you do this too much, I am sure your portfolio will also suffer.
The formula I use is the square root of (22.5 X EPS X BVPS), where EPS is earnings per share and BVPS is Book Value per share. When I am calculating the current Graham Price, I simply use in my formula, the estimate earnings for the current year and the current book value (all from my spreadsheet).
For other years, in the Graham Prices on my spreadsheet I use the diluted reported earnings per share. There is some controversy about what you should use. Some think that you should use net earnings divided by the outstanding shares. I find mostly that there is not much difference and I want a quick and easy way to get a value to match against the current price.
Some site talks about the NCAV (or net current asset value) and have a formula for that, but I do not use this figure. For a discussion on this aspect of Graham’s way of investing, see Daniel Libeskind’s site.
I am not the only blogger who talks about Graham’s methods for valuing stocks. See Stingy Investor’s blog. See Dividend Matters site again for how a company such as Saputo (TSX-SAP) is valued. Also, see the Div-Net site on how they use the Graham Price in valuing Lowes Company (NYSE-LOW). There is also the Tipblog.in site that explains how they use Benjamin Graham Number to determine a fair price to pay for a stock.
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. See my website for stocks followed and investment notes. Follow me on twitter.
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