Friday, March 30, 2012

Manulife Financial Corp 2

I own this stock (TSX-MFC). I invested in this company first in 2005 and then again in 2006, 2009 and 2010. I have lost at the rate of 11% per year. My dividends income was at the rate of 3% per year. Without dividends, my loss would be at 14% per year. My stock has a capital loss of 54% excluding dividends at the end of last month. The latest price shows that my capital loss is 42%.

When I look at insider trading, I find none at all. No insider buying and no insider selling. In fact it looks like insiders are retaining their options. This is a hopeful sign. What, of course, I do not like is that everyone, including directors, has more “options” than shares. Options for this company include not only things actually called options, but Rights Performance Share Units (Psu), Rights Restricted Share Units (Rsu), and Deferred Share Units.

The problem with insider trading reports is that they only consider “options” that are called “options”. However, I look at all free stock that is given to insiders as options. As far as I am concerned, such things as Deferred Share Units are options. Some people call these other “options”, restricted stock awards. See article on this subject from 2003 in Benefits and Pension Monitor magazine.

There are 497 institutions that hold 61% of the shares of this company. They have bought and sold stock over the past 3 months with a net of buyers, but they have reduced their overall exposure to this stock by 2%.

I have 5 year median low and high Price/Earnings Ratios of 13.65 and 33.71. However, P/E’s have been quite high over the past couple of years. I have 10 year median low and high P/E Ratios of 12.49 and 16.31. The 5 year median high is probably not representative of this stock. However, the current P/E Ratio is just 10.67 and this is low and shows a low current stock price.

I get a current Graham Price of $19.05. The low difference between the Graham Price and stock price is the stock price 3.3% lower than the Graham Price. The median difference between the Graham price and stock price is the stock price being 13% higher than the Graham Price. With the current stock price being some 28% lower than the Graham price, it would suggest that the current stock price is low.

I get a 10 year median Price/Book Value Ratio of 1.79. The current P/B Ratio of 1.08 is some 60% of the 10 year median ratio. This relatively low P/B Ratio points to a low current stock price.

Even though the dividend was decreased in 2009 and it has not changed since, the current dividend yield of 3.8% is some 12% higher than the 5 year median dividend yield of 3.4%. This also points to a low current stock price.

When I look at analysts’ recommendations, I find Strong Buy, Buy and Hold recommendations. The consensus would be a Buy. A Buy recommendation gives a 12 months stock price of $16. The latest financials presented no surprises and analysts seem to expect insurance company’s environments to improve over the next couple of years.

Analysts feel that the current dividend is safe. No one thinks that this is anything else than a long term buy. Some analysts are still worried about low interest rates. A couple of analysts like Great West Life (TSX-GWO) better.

I am going to hold on to my shares. I think they will recover nicely, but I still have a while to wait. To buy at this point is risky. However, the share price is very good for anyone that can afford the risk. The dividend is nice at 3.8%.

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, March 29, 2012

Manulife Financial Corp

Yes, I am in an article on April’s issue of Money Sense. The article is “Stocks that Pay You Back”. I had not read this magazine before. It is quite good.

I own this stock (TSX-MFC, NYSE-MFC). At one time life insurance companies were considered to be rather safe investments. This last recession and current very low interest rates has been very hard on life insurance companies, and especially this one.

I invested in this company first in 2005 and then again in 2006, 2009 and 2010. I have lost at the rate of 11% per year. My dividends were at the rate of 3% per year. Without dividends, my loss would be at 14% per year. My stock has a capital loss of 54% excluding dividends.

Manulife cut their dividends in half in 2009. There has been debate on whether this was really necessary. The dividend was much higher than the net income or earnings, but it was not that high in connection with cash flow. The 10 year median Dividend Payout Ratio for Cash Flow is 14%. It would have only gone to 15% with the old dividend. With the new dividend, the DPR for Cash Flow was around 8%.

However, there are more considerations than DPR for Cash Flow. One is debt levels. The other is DPR for earnings. The 10 year median DPR for earnings is 28%. The DPR for earnings in 2012 is expected to be 40% and then 35% in 2013. I do not expect an increase in dividends within the next few years.

I bought my shares first 8 years ago. Even people who have had this stock for 10 years have lost. The 10 year return would be a loss of 2.3% per year. You would have had to hold the stock for at least 12 years to show a profit and then it would be a profit mostly because of dividends.

2011 was a marginally better year for Manulife than the last couple of years. They managed to make a small amount of earnings, but cash flow was down. Revenue was up substantially in 2011, but analysts feel that revenue for 2012 will be similar to 2010.

Cash Flow growth is low over the past 5 year, but good over the past 10 years. The 5 and 10 year growth in cash flow is 2.5% per year and 11.4/% per year, respectively.

There is no growth in book value over the past 5 years. Earnings have been very low and book value has been going down. Book Value is down by 4.8% per year over the past 5 years. It is up just 4% over the past 10 years.

The current Liquidity Ratio is good as it generally is. The current Debt Ratio is 1.08 and this is quite normal for a financial institution. The current Leverage and Debt/Equity Ratios are rather high at 20.63 and 19.52. They are higher than the 5 year median ratios of 14.69 and 13.64.

The Return on Equity ratio is low as the company did not make much money in 2011. The ROE at the end of 2011 was just 1.1%. The 5 year median ROE is 1.9%. They made no money last year so the ROE would have been negative. The ROE based on the Comprehensive Income is a bit better at 2.3%.

I will be holding on to my shares in this company. The share price is already up some 25% in 2012. This reflects the improvement in the company’s finances. I believe it will recover.

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.

Wednesday, March 28, 2012

Sun Life Financial Inc 2

I own this stock (TSX-SLF, NYSE-SLF). I first bought this stock in 2000 and some more in 2001, 2003 and 2006. I have made a 1% per year return on this stock. The only reason I have a positive return is because of dividends. I calculate that I have made a return of 4.76% per year in dividends.

When I look at the insider trading report I find very minimal insider buying over the past year and no insider selling. Insiders not only have options they have Units Performance Share Units, Units Restricted Share Units, Units Sun Shares and Deferred Share Units. Everyone, including directors have lots more options than shares (or common stock).

There are some 386 institutions that hold 55% of the shares of this company. Over the last 3 months they have bought and sold these shares and they have very, very marginally reduced their shares outstanding.

I get 5 year median high and low Price/Earnings ratios of 12.40 and 14.47. (10 year median high and low P/E ratios are very close the 5 year ones.) The current P/E ratio of 9.4 therefore shows a very low current stock price.

I get a Graham price of $36.00 and the current stock price of $24.01 is some 33.3% lower. The low and median difference between the Graham Price and the stock price is the stock price being 24.2% lower and 3.9% lower than the Graham Price. By this measure the current stock price is low.

I get a 10 year median Price/Book Value Ratio of 1.25 and a current P/B Ratio of 1.07. The current one is some 85% of the 10 year median and therefore shows the current stock price to be a reasonable one.

The 5 year median dividend yield is 5.02%, which is some 20% lower than the current dividend yield of 6%. This test shows a very low stock price. This is especially so since there have been no dividend increases for a while.

When I look at analysts’ recommendations, they are all over the place with Strong Buy, Buy, Hold, Underperform and Sell recommendations. However, the most recommendations are in the Hold place and the consensus recommendation would be a Hold. Some Hold recommendations come with a 12 months share price at or below the current one. One Buy recommendation gave a 12 months stock price of $27.

No one talks about a dividend increase, at least before 2015. Everyone feels that there are still tough times ahead for Life Insurance companies, especially over the next two years. Some expect improvements as the economy improves and when interest rates are better. One remarks on the fact that the P/B Ratio is close to 1.00. (That is the book value and stock price is almost the same.)
There is an article about Sun Life posting fourth-quarter loss of $525-million at the G&M. The Passive Income Earner talks about Canadian Insurance Companies in December 2011.

I still think that this company will recover and I am holding on to my shares. I realize that it might take them awhile. I expect that recovery is still a couple of years away. To me, I will get a decent return on my money in dividends while I wait for this recovery. I have too much in this company to consider buying any more shares. The purchase of shares in this company would be risky. Any purchase must be considered to be a long term purchase.

Sun Life Financial is a leading international financial services organization providing a diverse range of protection and wealth accumulation products and services to individuals and corporate customers. Chartered in 1865, Sun Life Financial and its partners today have operations in key markets worldwide, including Canada, the United States, the United Kingdom, Ireland, Hong Kong, the Philippines, Japan, Indonesia, India, China and Bermuda. Its web site is here Sun Life. See my spreadsheet at slf.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, March 27, 2012

Sun Life Financial Inc

I have just recently reviewed Emera (TSX-EMA) and Fortis (TSX-FTS). Analysts have given Emera a consensus recommendation of Hold (but it had 3 buy recommendations). Analysts have also given Fortis a consensus recommendation Hold (but it has only 1 buy recommendation). What I found is that people can be very bad on predicting the future. Personally, if I was in the market to buy a utility, I would buy Fortis because it passed my reasonability stock tests, especially the dividend yield one.

Now, I shall talk about Sun Life Financial (TSX-SLF) which is the stock that I want to talk about today. I own this stock. I first bought this stock in 2000 and some more in 2001, 2003 and 2006. I have made a 1% per year return on this stock. This is not what I had in mind when I bought it. The only reason I have a positive return is because of dividends. I calculate that I have made a return of 4.76% per year in dividends.

What can I say about this stock, except it has not been a happy year for Sun Life Financial. For both this company and Manulife I am waited out the bad times. I have to wonder if it was worth it for one of my stocks to have so much down time. Would it have been better for me to have exit these stocks and then come back for better times?

Unfortunately, I really do not know the answer to this. I have gone through good times and bad times on some of my other stocks and have, over the long term, done well. Also, a lot of the problems it is having, such as very low interest rates, are not caused by the management of this company. However, management is not totally blameless.

The dividends on this company have been level since 2008, or for over 4 years. There is no indication when this might change. The Dividend Payout Ratio for cash flow is reasonable with a 5 year median rate of 31.2% and a 2011 DPR of 32%. However, this is above 10 year median DPR of 22%. The DPR for earnings is expected to be lower than it has been for a few years at 56%. However, this is quite a bit above the 10 year median DPR of 32%.

I think the 10 year median rates are important here because the DPRs have been unusual over the past few years. Looking at the 10 year DPRs, I cannot see an increase happening for some time. However, I think the worst is over and so I do not think that the dividends will be cut either.

Growth over the past 5 and 10 years has been low to non-existent. Revenue per share over the past 5 years is down 2% per year and is flat over the past 10 years. I cannot calculate earnings, since this year’s is negative. However, even if they make $2.56 as is forecasted for 2013, earnings would still be down over the past 5 years and would be up only about 2% per year over the past 10 years.

Cash flow has grown very mediocre over the past 5 and 10 years at 3% per year and 1.5% per year respectively. There has been no growth in Book Value over the past 5 years, but this might have more to do with the new accounting rules than anything else. Book Value has only grown at the rate of 2.3% per year over the past 10 years.

The current Liquidity Ratio is 1.58 and is this good. The Debt Ratio is lower at 1.08, but this is rather normal for a financial institution. The current Leverage and Debt/Equity Ratios at 16.48 and 15.29 are quite high, but these tend to be high for financial institutions. They are also much higher than the 5 year median ratios of 11.83 and 10.84, respectively.

There is no happy news where Return on Equity is involved. They did not make any money last year. That gives them a very low 5 year median ROE of just 5.4%. The 5 year median ROE based on comprehensive income is even lower at just 3.2%.

Currently, I still intend to wait out the problems on this stock and hold my current shares. Normally shares of a Life Insurance company would be for conservative investors, but because of recent financial problems, this is not currently the case and buying Life Insurance companies would be risky at this time.

Sun Life Financial is a leading international financial services organization providing a diverse range of protection and wealth accumulation products and services to individuals and corporate customers. Chartered in 1865, Sun Life Financial and its partners today have operations in key markets worldwide, including Canada, the United States, the United Kingdom, Ireland, Hong Kong, the Philippines, Japan, Indonesia, India, China and Bermuda. Its web site is here Sun Life. See my spreadsheet at slf.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, March 26, 2012

Fortis Inc 2

I own this stock (TSX-FTS). I first bought this stock in 1987. I bought more in 1995 and 1998. I sold some in 2005, as I had relatively too much of this stock for my portfolio. This stock is currently at 5.6% of my total portfolio. My total return on this stock is 13.3% per year. The portion of my return attributable to dividends is 4.85% per year. That is some 36.4% of the return is attributable to dividend income.

When I look at insider trading, there was a minor purchase by a Director near the end of last year. Everyone but directors have more options than shares. However, there are other option type vehicles that insiders have, such as Performance Share Units for CEO and Deferred Share Units for Directors. Still, the CEO has some $10.7M in common shares and the CFO has some $3M in common shares. (See my site for information on Insider Trading.)

There are some 153 institutions that hold 32% of the shares of this company. Over that past 3 months 3 more institutions bought shares, and there were more buyers than sellers. However, overall, institutions hold almost 3% few shares at the end of this period than at the beginning.

I get 5 year median low and high Price/Earnings ratios of 15.9 and 20.20. The current P/E of 18.54 is just north of the 5 year median ratio of 18.47. This shows a reasonable stock price. I get a Graham Price of $28.43. The current stock price of $32.44 is higher by 14%. The 10 year median low difference between the Graham Price and the stock price is the stock price being 5.5% lower. The 10 year median high difference between the Graham Price and stock price is the stock price being 20.8% higher. This shows the stock price towards a high price.

I get a 10 year median Price/Book Value Ratio of 1.66. The current P/B Ratio is 1.58 which is 5% lower. This shows the stock at a good price. I get a current Dividend Yield of 3.7% and the 5 year median Dividend Yield is 3.3%, which is some 12% lower. This also shows a good stock price.

There are some mixed results in my tests, but most of the tests show a reasonable stock price. However, the stock passes the most important test on dividend yield and so it would seem to me that the current price is reasonable.

When I look at analysts’ recommendations, I find Strong Buy, Hold, Underperform and Sell. The consensus recommendation would be a Hold. (This is where most recommendations are.) One Hold gives a 12 months stock price of $35 and another at $34.44. Fortis is to purchase CH Energy Group Inc. (NYSE-CHG) and some analysts look on this as a positive.

One Hold reviewer says that the CH Energy acquisition was at a reasonable price, but another says they are paying too much. See a G&M article about this acquisition. See article in Class Action Central which says the price is too low. And a lawsuit has been filed about the too low price. See article in SBWire.

Another Hold says that the price is too high considering that not much growth is expected in earnings in the near future. One Buy recommendation came with comments that it is a great defensive stock with increasing dividends. Another Buy said that the yield of 3.7% is a great one.

The G&M has an article called Can Fortis power its way through recent soft patch? It basically says that Fortis has produced great returns over the past 10 years, but doubts it can continue. They expect dividend increases to be low, like the latest one of 3.4%. This is a highly regulated company and Alberta Utilities commission has just lowered allowed ROE by 0.25%. The company faces reviews also from Newfoundland and British Columbia.

The blogger The Loonie Bin has this stock and wrote about it in December 2011. And the blogger Cash Money 101 has recently written about Utility Stocks, including Fortis.

This is a utility stock and is therefore is a conservative investor’s choice. It provides a good dividend with increases above the inflation rate.

Fortis is a diversified, international distribution utility holding company. Its regulated holdings include electric distribution utilities in five Canadian provinces and three Caribbean countries and a natural gas utility in British Columbia. Fortis owns and operates non-regulated generation assets across Canada and in Belize and Upper New York State. It also owns hotels and commercial office and retail space primarily in Atlantic Canada. Its web site is here Fortis. See my spreadsheet at fts.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, March 23, 2012

Fortis Inc

I own this stock (TSX-FTS). I first bought this stock in 1987. I bought more in 1995 and 1998. I sold some in 2005, as I had relatively too much of this stock for my portfolio. This stock is currently at 5.6% of my total portfolio. My total return on this stock is 13.3% per year. The portion of my return attributable to dividends is 4.85% per year. That is some 36.4% of the return is attributable to dividend income.

For the stock I bought in 1987, but yield on the original purchase price is 25.8%. Over the past 5 and 10 years, dividends have grown at the rate of 11.6% and 9.5% per year. The latest increase was much lower at 3.4%. This last increase is close to the historical norm for this stock. There were very large increases between 2006 and 2008.

The Dividend Payout Rates are good with 5 year median at 67% for earnings and 27% for cash flow. The DPRs for 2011 was close to this at 67% for earnings and 24% for cash flow.

If you had held this stock over the past 5 and 10 years, this stock would probably have had total returns of 5.6% and 15% per year over the past 5 and 10 years. Dividends would probably contribute to this return by 3.3% and 4% per year respectively. The portion of the return attributable to dividends over these periods would have been 59% and 27% per year, respectively. As you can see, return over the past 5 years has not been great. Return on any stock tends to fluctuate. The last 5 years has not been kind to a lot of stocks.

The shares under this company have grown at the rate of just over 12% per year for the past 5 and 10 years. Revenue growth is good for the past 5 and 10 years at 21% and 20% per year. However, the revenue growth per share is lower at 7% and 6.5% per year over the past 5 and 10 years.

Earnings per share have grown moderately at 4.9% and 6.8% per year over the past 5 and 10 years. Cash flow growth has been better at 8.2% and 7.8% per year over the past 5 and 10 years. Growth in book value has been strong at 10.8% and 10.5% per year over the past 5 and 10 years. This company has not yet changed their bookkeeping rules to the new IFRS standard, so we do not know how this change will affect book value yet.

For this stock, Return on Equity is fine, but not great. The ROE for the year ending in 2011 was 9.2%. The 5 year median ROE was a bit lower at 8.2%. The ROE on comprehensive income for 2011 was better than the ROE on net income. It was 9.7% with a 5 year median value of 9.4%.

Utility companies tend to have large debts and this company is not an exception. This shows in the Liquidity, Leverage and Debt/Equity Ratios. The current Liquidity Ratio is just 0.85 and it a bit higher and better than the 5 year median of 0.71. The current Debt Ratio is fine at 1.53 and is a bit higher and better than the 5 year median ratio of 1.52. The current Leverage and Debt/Equity Ratios are ok at 3.50 and 2.29 and are better than the 5 year median ratios of 3.74 and 2.44.

This is a solid utility stock and would be good for conservative investors who want to receive a good dividend return and some capital gain. Expect long term gain to be 8% to 10% per year with dividends contributing around 4% per year. Expect good dividends and moderate increases for the dividend on this stock.

Fortis is a diversified, international distribution utility holding company. Its regulated holdings include electric distribution utilities in five Canadian provinces and three Caribbean countries and a natural gas utility in British Columbia. Fortis owns and operates non-regulated generation assets across Canada and in Belize and Upper New York State. It also owns hotels and commercial office and retail space primarily in Atlantic Canada. Its web site is here Fortis. See my spreadsheet at fts.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, March 22, 2012

Emera Inc 3

I own Emera Inc. (TSX-EMA). I first bought this company in 2005 and then bought more shares in 2011. To date I have made a total return of 16.5% per year. The portion of my return attributable to dividends is 4.45% per year or 27% of my total return. After 7 years investing in this stock, I am making a dividend yield of 7.2% on the original shares that I bought.

When I look at the insider trading report I find lots of insider selling and little insider buying. Insider selling is at $12.6M and net insider selling is just over $12.4M. A large part of insider selling ($10.6M) is by the CEO and it seems to be all options. The company not only has stock options, but Performance Share Units and Deferred Share Units. Everyone, including the directors have more “options” than shares. (I think options are options, no matter what you call them.)

There are 78 institutions that hold 27% of the outstanding shares in this company. They have being buying and selling shares over the past 3 months and have reduced their shares by 2.6% over this time period.

I get 5 year median low and high Price/Earnings Ratios of 13.41 and 17.30. By this measure the current stock price of $34.07 is high as the P/E is 19.69. (The 10 year median high P/E ratio is still lower at 18.00.)

I get a Graham Price of $21.45. The current stock price is some 58.8% higher. The 10 year median low difference between the Graham Price and stock price is the stock price being 7% lower. The 10 year median high difference is the stock price being 20% higher. The median difference between the Graham Price and stock price over the past 2 year is the stock price being some 20% and 34% higher. (This is a utility stocks, so you expect the stock price to be around the Graham Price.) (See my site for information on calculating Graham Price.)

I get a 10 year median Price/Book Value Ratio of 1.79. The current P/B ratio at 2.88 is some 66% higher. What you want is a P/B Ratio is close to or lower than the 10 year median. By this test, the stock price is high.

The 5 year median Dividend Yield is 4.44% and the current dividend yield is 3.96%. The current one is 11% lower than the 5 year median. What you want is one at or higher than the 5 year median dividend yield.

When I look at analysts’ recommendations, they are all over the map. I find Strong Buy, Buy, Hold, Underperform and Sell. It all depends on how you view the company. It probably does not have much upside as far as capital gain goes, but it has a good dividend and it is a rather low risk company. If you are looking for income, the 4% dividend yield is good. If you are looking at total return, there will probably be little capital gain and you might not make much beyond the dividend yield.

By all accounts, the current stock price is rather high, but not excessively so. The problem is that there are a lots of dividend investors going for yield because interest rates are so low. This is a good, low risk company and it has a good dividend of almost 4%. This is basically what the Buy recommendations are saying also.
One analyst with a buy recommendation gave a 12 month stock price of $35 and said that the 4% dividend would be attractive to income-orientated investors.

So, it all depends on why you want to buy this stock. If you want to buy it simply for yield, then it is a buy. If you are looking for dividends and capital gain, then it is probably not a buy. It is overpriced.

Emera Inc. is an energy and services company that has two wholly-owned regulated electric utility subsidiaries, of Nova Scotia Power Inc. and Bangor Hydro-Electric Company. Emera also owns 19% of St. Lucia Electricity Services Limited, and 25% of Grand Bahamas Power Company that serves 19,000 customers on the Caribbean island of Grand Bahamas. Emera also owns the Brunswick Pipeline; Bayside Power, in Saint John, New Brunswick; Emera Energy Services; a joint venture interest in Bear Swamp northern Massachusetts; a 12.9% interest in the Maritimes & Northeast Pipeline; and an 8.2% interest in Open Hydro. Its web site is here Emera. See my spreadsheet at ema.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, March 21, 2012

Emera Inc 2

Yesterday, I may have gotten off topic a bit, but there are many people that do not like utilities to be run by private corporations. Today I will talk about this stock and how well it has done over the past 5 and 10 years. Tomorrow, I will talk about whether or not its price is reasonable and what analysts say.

I own Emera Inc. (TSX-EMA). I first bought this company in 2005 and then bought more shares in 2011. To date I have made a total return of 16.5% per year. The portion of my return attributable to dividends is 4.45% per year or 27% of my total return. After 7 years investing in this stock, I am making a dividend yield of 7.2% on the original shares that I bought.

This stock used to have a good dividend and low growth; however things have changed over the past 5 years. The dividend yield has gone down somewhat and the dividend growth has gone up. The current dividend yield is 3.96 and the 5 year median dividend yield is 4.44%. The 5 and 10 year growth in dividends is 8% and 4.4%. All this good growth in dividends has occurred since 2008.

The last dividend increase in 2011 was for 3.8%. However, there was a couple of dividend increases in 2010, so the total dividends received in 2011 was up 12.9% over the total dividends received in 2010. The 5 year median Dividend Payout Ratios are 68% for earnings and 38% for Cash Flow. The DPR are fine.

The 5 and 10 year total returns are 12% and 11% per year, respectively. The portion of this return attributable to dividends is 4% and 4.3% per year, respectively. That means that the dividend payments make up around 34% and 38% of the total returns.

For both revenue and earnings, the last 5 years were better than the last 10 years. Revenue growth per shares over the past 5 and 10 years is 7.9% and 4.2% per year respectively. The growth in EPS is 12.2% and 5.2% per year over the past 5 and 10 years. Growth in Cash Flow is not quite so good, with 5 and 10 year growth at 4% per year.

For Book Value, there has been no growth over the past 5 and 10 years. The Book Value dropped 17% with the change in Accounting Rules. Emera has decided to go from Canadian GAAP to US GAAP rules (rather than go to the IFRS rules). Going to US CAAP rules is an option for some Canadian companies. By these rules, if they had been in place in 2010, Book Value would have gone up by 10%.

This is a utility and utilities tend to have rather high debt ratios. This stock is no exception and the debt ratios tend to be towards the high end for utilities. The current Liquidity Ratio at 1.24 is ok and it is higher than the 5 year median ratio of just 0.97. The current Debt Ratio at 1.36 is also ok, and it is slightly lower than the 5 year median of 1.40.

The current Leverage and current Debt/Equity Ratios are ok at 4.77 and 3.51, but rather high and are higher than their respectively 5 year median ratios of 3.00 and 2.00. (See my site for further information on Debt Ratios.)

The Return on Equity for 2011 is very good at 16.6%. The ROE 5 year median rate is also good at 11.6%. The ROE based on comprehensive income is quite a bit lower at 9.2% with a 5 year median rate also of 9.2%. Some analysts think we should look to the ROE based on comprehensive income rather than net income. This 9.2% does not quite make it into the good range of 10% to 15%.

The number of shares outstanding has been rising with the growth over the past 5 and 10 years at 2% and 2.3% per year. The growth seems to be mostly employees buying shares under the company’s purchase plan and stock options. Although with the increase in 2011 of 7% in shares, they have been acquiring assets.

I look at growth per share compared to just growth. For example, the Revenue growth over the past 5 years was 10.2%, but the revenue growth per share was 7.9%. As a shareholder, I think that the growth per share is what really counts.

This is a utility stock and as such it is suitable for conservative investors looking for dividends and growth. The dividend growth of 12.9 in both 2010 and 2011 probably will not continue. I would expect lower dividend growth in the future. As I said above the most recent one was 3.8%.

Emera Inc. is an energy and services company that has two wholly-owned regulated electric utility subsidiaries, of Nova Scotia Power Inc. and Bangor Hydro-Electric Company. Emera also owns 19% of St. Lucia Electricity Services Limited, and 25% of Grand Bahamas Power Company that serves 19,000 customers on the Caribbean island of Grand Bahamas. Emera also owns the Brunswick Pipeline; Bayside Power, in Saint John, New Brunswick; Emera Energy Services; a joint venture interest in Bear Swamp northern Massachusetts; a 12.9% interest in the Maritimes & Northeast Pipeline; and an 8.2% interest in Open Hydro. Its web site is here Emera. See my spreadsheet at ema.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, March 20, 2012

Emera Inc

I own this stock (TSX-EMA).

Every time I have a blog about this company I get negative comments from someone in Nova Scotia. The following is the latest, but typical.

Anonymous...Emera is gouging the people of Nova Scotia in order to provide dividends to its stockholders. It actually disgusted me to read your blog entry on this company. Let me spell it out for you. Each time Emera raise power rates (10% increase in the near future), it is with the rationale that they need the money to improve infrastructure, yet the infrastructure has crumbled in their hands as dividends have gone up. Small businesses are being forced under in order for you to make your 14 per cent. The entire populace of Nova Scotia hates this company. Eventually we will kick them out. Something to think about.

So, let’s talk about this subject. First of all, Nova Scotia Power Inc. which Emera owns is a regulated company. They cannot do anything without the approval of the Nova Scotia Government. The other thing is the problem of going green costs money. The Nova Scotia government is proud of going green. I suggest if you want lower electricity costs you talk to the Nova Scotia government who mandates how electricity is to be produced and what it is to cost.

If you think you would be better off with the government running the electrical utility, let me tell you how well the government of Ontario has done. My electricity bill went up 4% in 2008, 18.3% in 2009, and 18.7% in 2010 and then down by 8% in 2010. Why did it go down in 2010? This is because we got a “Clean Energy Benefit” equal to a 10% discount. Also, I am on “time of use” billing, so we are trying to lower our consumption.

Why did we get this Clean Energy Benefit? It was because there was a lot of protest about the increasing electrical bills. The problem is that this “Clean Energy Benefit” is a hoax. It is being paid for out of tax money and Ontario cannot afford it. We will not have our deficit under control (that is the new debt we get into each year because we cannot balance our books) until 2018 at the earliest.

The other wonderful thing about Ontario Electrical billing is the “Debt Retirement Charge”. We had thought in Ontario that Ontario Hydro (what we call the utility that generates electricity for Ontario) was one public utility that was being well run. But we were wrong. We were very wrong. It all blew up in 1998 when Ontario Hydro could no longer lie about its finances.

This occurred when the government split up Ontario Hydro into Hydro One and OPG. The debt from Ontario Hydro was too big to be paid off by the new entities. (It was also too big to be paid off the old entity too.) That is why we got a “stranded debt” which the taxpayers are to pay off via their electrical bill.

There was to be this stranded charge on our electrical bill for 10 years. Now the estimate is until 2015 or 2018. One big problem is the money from this charge is going into the Ontario revenue common pot and until the Auditors report of December 2011 no one knew the status of this debt.

Now the auditor general says that the money has really gone to pay down the old Ontario Hydro stranded debt. He also said that progress on paying the debt has been slow even though ratepayers have kicked in $8 billion of the $7.8 billion they owed in 1999. However, we still do not know what the current debt is and the government does not seem inclined to tell us.

Now why is our electricity getting so expensive? One reason is that the government is pushing green and renewable electricity. This costs lots and lots of money. At least Ontario has spent lots and lots of money on it. Everywhere going green and renewable for electricity production costs lots and lots of money. The other reason our electricity is expensive is that we spent too much going Nuclear. Going Nuclear is mainly the reason for the stranded debt (which is 3.6% of my bill).

Since we have gone green with such things as Wind Turbines there has been unexpected consequences. The thing is the wind blows when the wind blows. Because of this, we can end up exporting electricity at negative cents per kWh. Ontario tax payer foots the bill. See “Ontario power: Why Ontario effectively paid its neighbors $214,584.24 in one weekend hour to take our power” at The Star. And, this is not the first time. See an April 2011 article in at cnews on the same subject. The wind turbines produce electricity when the wind blows, they do not care whether we need the electricity or not.

And Nova Scotia’s government has a renewable energy strategy. I cannot image this would be cheap in Nova Scotia and expensive in the rest of the world. I suggest if the people of Nova Scotia want cheaper electricity that they do not mandate green renewable energy.

It is an old argument about who does a better job of running utilities, the government or private industry. In theory, since the government does not need to make a profit, the government should be able to provide utilities at a cheaper price. The problem is real life. In real life this does not happen.

Perhaps the problem is that the people who regulate a utility and who run a utility are the same people when the government runs a utility. If you have group of people as regulators that is different from the group of people who run the utility maybe you can get a utility that is run properly.

When Ontario Hydro started out we had cheap energy. Electricity was cheap because we had Niagara Falls. We thought in Ontario that Ontario Hydro was different from other government run utilities. We were wrong. First we spend too much on going to nuclear power, now we are spending too much going green.

If you want to know where I stand politically, I am a fiscal conservative and a social liberal. What does this mean? I believe that you do not fund social programs by debt. It never ends well. You must fund social programs as you can afford them. A social liberal means that I believe you cannot tell someone else how to live their lives.

And yes, I do know that there are also problems that Emera has in the Bahamas. However, one thing at a time and also I have had no comments on this.

Tomorrow I will start my review on how the company is doing.

Emera Inc. is an energy and services company that has two wholly-owned regulated electric utility subsidiaries, of Nova Scotia Power Inc. and Bangor Hydro-Electric Company. Emera also owns 19% of St. Lucia Electricity Services Limited, and 25% of Grand Bahamas Power Company that serves 19,000 customers on the Caribbean island of Grand Bahamas. Emera also owns the Brunswick Pipeline; Bayside Power, in Saint John, New Brunswick; Emera Energy Services; a joint venture interest in Bear Swamp northern Massachusetts; a 12.9% interest in the Maritimes & Northeast Pipeline; and an 8.2% interest in Open Hydro. Its web site is here Emera. See my spreadsheet at ema.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, March 19, 2012

TransCanada Corp 2

I own this stock (TSX-TRP). I first bought this stock in 2000 and then bought more in 2006. I have a Total Return of 12.24% per year. Of that total return, some 5.07% per year is attributable to dividends. That is some 41.5% of my return on this stock is attributable to dividends.

When I look at insider trading, I find lots of insider selling to the tune of $34.6M and a bit of insider buying. Net insider selling is $34M. Everyone has more stock options than shares. The selloff seems to be of stock options. Directors do not have stock options per se, but have deferred share units, and from what I can see these are more common that actual shareholdings.

There are 516 institutions holding 61% of the shares of this company. Over the past 3 months they have been quite active in buying and selling shares in this company. Over this period they are marginally (less than1%) decreased their investment in this company.

I get 5 year median low and high Price/Earnings Ratios of 15.40 and 18.07. The current P/E ratio of 18.63 would suggest a high stock price. (Note also, the 10 year median high P/E ratio at 16.62 is lower than the 5 year median high P/E Ratio.

I get a Graham Price of $36.23 and the stock price of $44.16 is some 21.9% higher. The median and high difference between the Graham price and stock price is the stock price being 10.7% and 25.24% higher than the Graham Price. By this measure, the current stock price is towards the high side.

I get a 10 year median Price/Book Value of 2.06 and the current P/B Ratio of 1.79 is some 13% lower. This would point to a reasonable stock price. The 5 year median dividend yield is 4.11% and the current yield of 3.8% is 7.5% lower. This would point to a rather high stock price, considering the 10 year median low dividend yield is at 3.78%.

So the current stock price is not cheap, but the relative stock price has also been higher. All my test suggest a rather high current stock price and it is only the P/B Ratio that suggests anything different and it suggests a reasonable stock price.

When I look at analysts’ recommendations, they are all over the place. I find Strong Buy, Buy, Hold, Underperform and Sell recommendations. Most are in the Hold category and the consensus would be a Hold recommendation.

A few analysts are worried about Keystone and most think it will turn out ok. One analyst with a Hold says to wait until this is resolved because the stock will go nowhere until it is. A couple of Buy analysts say that it is a long term buy. A number of analysts remark that it is a safe stock with a safe dividend.

Dividend Watchdog talks about another dividend increase from TransCanada. Dividend Ninja asks “Why Do Utilities Have Such High Debt and High Payout Ratios?”. My Own Advisor also talks about TransCanada’s dividend increase. Cash Money 101 also talks about owning TransCanada.

For an article in Money Morning by Kerri Shannon on building the Keystone pipeline, click here.

This is considered to be a utility stock. This would be a stock for a conservative investor who wants to hold a steady and reliable stock in their portfolio. If you are living off your dividends like I am, this stock will provide a good dividend yield and moderate dividend growth. Dividend growth should at least be a few 100 basis points above inflation.

TransCanada is a leader in energy infrastructure. Their network of pipeline taps into virtually all major gas supply basins in North America. TransCanada is one of the continent’s largest providers of gas storage and related services. It is a growing independent power producer. Its web site is here TransCanada. See my spreadsheet at trp.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.

Saturday, March 17, 2012

Kathleen Gabriel's Art Show

Kathleen Gabriel's Art Show is running from March 21 to April 10, 2012

Showing is at Women's Art Association of Canada at 23 Prince Arthur Avenue, Toronto. It is close to the St. George Subway station, Bedford Exit.

Gallery is open from Monday to Wednesday, from 9:30 to 3:30.

One of Kathleen's pictures is below, as is the poster for this show.




Friday, March 16, 2012

TransCanada Corp

I own this stock (TSX-TRP). I first bought this stock in 2000 and then bought more in 2006. I have a Total Return of 12.24% per year. Of that total return, some 5.07% per year is attributable to dividends. That is some 41.5% of my return on this stock is attributable to dividends.

Dividend growth over the past 5 and 10 years has been at 5.3% and 6.3% per year, respectively. These are decent increases when you consider inflation has been running at 2% per year over the past 5 and 10 years. The 5 year median Dividend Payout Ratios are 71% for earnings and 31% for Cash Flow. The DPR for the 2011 were 76.5% and 30% for earnings and cash flow. (See my site for information on Dividend Payout Ratios).

This company has been increasing their dividend each year since 2001. They reorganized around 1999 and cut the dividend. I bought this stock just after the second dividend cut in 2000. The company had a plan, but the stock price was hammered by the dividend decreases. Buying a stock when it was out of favor affected my long term return. Without this purchase, my total return would be 9% per year.

Using the current dividend yield of 3.8%, if you purchase this stock you could reasonably expect to be earnings around 5% after 5 years and 6.5% after 10 years on your original purchase price. For my stock purchased in 2006, 6 years ago, I am earnings 5% on the original purchases. For my purchase in 2000, 12 years ago, I am earnings 14% yield on the original purchase price.

The total return on this stock if purchased 5 and 10 years ago would be 5.4% and 13.08% per year, respectively. The portion attributed to dividends would be 3.5% and 5.6% per year, respectively. The portion of the return attributable to dividends would be 76% and 36% per year, respectively. This is, of course, an estimate. What you would actually earn depends on what you paid for the stock and that price can vary a lot within a year.

Shares have increased over the past 5 and 10 years at the rate of 7.6% and 4% per year respectively. Money was raised for capital expenditures and acquisitions. They are also issuing a small number of shares under a DRIP plan and because of stock option. This means that growth and growth per share is different. As a shareholder you are, of course, interested in growth per share.

For example, revenue has grown over the past 5 and 10 years by 4% and 5.7% per year, respectively. However, revenue per share has declined over the past 5 by 3% per year. Revenue per share over the past 10 years has grown at the rate of 1.6% per year. The first figures show moderate growth, the second figures show not much growth at all.

Growth in cash flow has been moderate to good. The 5 and 10 year growth in cash flow per share is 5.4% and 9.9% per year, respectively. Growth in Book Value per share has been fine with 5 and 10 year growth at 7.3% and 8% per year, respectively.

The current Liquidity Ratio is low at 0.62 and it has generally been low. However, if you exclude the current portion of long term debt, the ratio is better at 1.20. The current portion of long term debt has been handled. The current Debt Ratio is good at 1.62 and it generally has been good as the 5 year median ratio is also at 1.62. The first ratio looks at current liabilities and current assets and the second ratio looks at liabilities and assets.

Current Leverage and current Debt/Equity Ratios are fine at 2.83 and 1.75. They are better than the 5 year median ratios at 3.05 and 2.01. These ratios compare book value to liabilities and to assets, respectively.

The Return on Equity is moderate at 9.9% for the end of 2011. The 5 year median ROE is the same at 9.9%. The ROE based on Comprehensive Income is similar with the ROE for end of 2011 at 9.7% and the 5 year median also at 9.7%.

This is a great stock for a conservative portfolio and would also be good for a riskier portfolio to balance the risk level. If you are living off your dividends like I am, this stock will provide a good dividend yield and moderate dividend growth. Dividend growth should at least be a few 100 basis points above inflation.

On Monday, I will look at what the analysts say about this stock and also what my spreadsheet tells me about the current stock price.

TransCanada is a leader in energy infrastructure. Their network of pipeline taps into virtually all major gas supply basins in North America. TransCanada is one of the continent’s largest providers of gas storage and related services. It is a growing independent power producer. Its web site is here TransCanada. See my spreadsheet at trp.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, March 15, 2012

Russel Metals Inc 2

I own this stock (TSX-RUS). I first bought this stock in 2007. I bought more in 2009 and 2011. To date I have a total return of 5.4% per year. Of that return, 4.3% is attributable to dividends. So my dividend payments are 80% of my return. I expected to do better in the future.

The insider trading report does not tell us much. There is a bit of insider buying and a bit of insider selling with a small net of insider buying. All insiders but the directors have more stock options than shares. Lots of insiders own convertible Debentures as well as shares. The CEO probably owns the most shares at 101,739 worth around $2.8M. Some 75 institutions own 36% of the outstanding shares. They have bought and sold shares over the past 3 months and have decreased their shares by 4%. (This is not a good sign, but there is often a herd mentality in institutions.)

I get 5 year median high and low Price/Earnings Ratios of 10.22 and 14.38. (The 10 year median high and low P/E Ratios are substantially lower at 5.77 and 8.93, respectively). The current P/E ratio is 14.15. Although it is not a particularly high P/E ratio, it would be a relatively high one for this stock.

I get a Graham Price of $23.97. The current stock price is $27.45 is 14.5% higher. The high difference between the Graham Price and the stock price is the stock price being 4% lower than the Graham Price. This would also suggest a relatively high stock price. (The low difference between the Graham Price and the stock price is the stock price being some 42% lower than the Graham Price.)

I get a 10 year Price/Book Value Ratio of 1.70. The current P/B Ratio of 2.09 is some 23% higher. This would suggest a relatively high stock price. The last test is the Dividend Yield. The current Dividend Yield of 4.37% is good, but the 5 year median is 28% higher at 6.12%. Even the 10 year median low dividend yield of 4.42% is higher than the current one. So this also suggests a relatively high stock price.

When I look at analysts’ recommendations, I find Buy, Hold and Underperform. The consensus would be a Hold. One hold gives a 12 months stock price as $26.00. Another Hold gives a 12 months stock price of $27.00. Analysts like the good debt ratios of this company. No one says anything bad about the company.

Analysts think it is well run. Buy analysts feel that we are in the growth phase of the current business cycle and this company does well in the growth phase of the business cycle. One analyst said the dividend would be risk if there was an economic dip. Hold analysis do not see any upside as they find the stock fully valued (That is price is high and unlikely to go higher.) My spreadsheet shows that the price is high, and so it agrees with this assessment.

Who would buy this stock? Russel Metal would be a good stock for someone just starting out and can accept the risk. If you are living off your dividends like I am, it could be part of a large portfolio but you have to be able to handle the variation of dividend payments. I have a lot of very stable dividend paying stock to counter act the variable dividends of this one. This stock is very sensitive to the business cycle.

The thing is never buy a stock that will stop you from getting a good night’s sleep. Russell will be more volatile that your stable conservative utility stock. It will be more volatile in things like dividends, earnings, cash flow and revenue. That said you could potentially make a lot more money with it than your stable utility stock. (However, threre is lots of indicators saying now is not the time to buy this as the current price is relatively high.)

Personally, I like to have a mix of low, median and high dividend yield and low, median and high dividend growth stocks. That is I like stocks with different growth and yield patterns. Having such a mix has caused my dividends to grow each year. I have a 5 year median dividend growth of 11.4%. My lowest dividend growth year was at 5.3% (2010) and the highest at 24% (2007). The 5 year median growth is way above inflation and my dividends are growing much faster than my budget.

This company does metal distribution and processing North America. It operates in three segments of metals service centers, energy tubular products and steel distributors under various names including Russel Metals, A. J. Forsyth, Acier Leroux, Acier Loubier, Acier Richler, Arrow Steel Processors, B&T Steel, Baldwin International, Comco Pipe and Supply, Fedmet Tubulars, JMS Russel Metals, Leroux Steel, McCabe Steel, Mégantic Métal, Métaux Russel, Métaux Russel Produits Spécialisés, Milspec, Norton Metals, Pioneer Pipe, Russel Metals Specialty Products, Russel Metals Williams Bahcall, Spartan Steel Products, Sunbelt Group, Triumph Tubular & Supply, Wirth Steel and York-Ennis. Its web site is here Russel Metals. See my spreadsheet at rus.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, March 14, 2012

Russel Metals Inc

I own this stock (TSX-RUS). I originally got into this stock because it was on a list of dividend paying growth stocks. I followed an early Canadian financial blogger of Mike Higgs and this was one of the stocks he followed. Mike was always pushing dividend paying growth stocks as the ones we should buy. He influenced my thinking on stocks.

I first bought this stock in 2007. I bought more in 2009 and 2011. To date I have a total return of 5.4% per year. Of that return, 4.3% is attributable to dividends. So my dividend payments are 80% of my return. I expected to do better in the future.

This stock has an interesting dividend record. I have records back to 1990. They had a decreasing dividend from 1990 to 1992 and no dividends from 1993 to 1999. We had a recession in the early 1990 and the company had problems with earnings from 1991 to 1996. The company had increasing dividends from 1999 to 2008. For this stock, the highest dividends were paid in 2008. In 2009 dividends were decreased some 44%. Since 2011 they have again been increasing dividends.

Over the last 5 years dividends have decreased by 6.4% per year. Over the past 10 years, dividends have increased by 19%. This is because dividend increases before 2007 were very good. The increase for 2011 is very good. There were two increases totally a 15% dividend increase. The 5 year median dividend yield is 6.1%, but current yield is a lot lower at 4.4%. One analyst expects a 10% increase in dividends. This increase would move dividend yield to 4.8%.

The 5 year median Dividend Payout Ratios are 60% for EPS and 74% for CF. The 10 year median DPRs are lower at 47% for EPS and 45% for CF. The same figures for 2012 are currently expected to be 62% and 51%. The DPR for 2012 would be higher if dividends are increased in 2012.

Total return over the past 5 and 10 years has been 2% and 32% per year, respectively. The portion of the total return attributable to dividends is 5.4% and 12% per year, respectively. The return for the last 5 years is, of course, all dividends. There was a capital loss of 3.4% per year. For the last 10 years 37.4% of the return has been in dividends.

Mostly, the 10 year growth figures are better than the 5 year growth figures. The growth in revenue per shares is 0% and 2% per year over the past 5 and 10 years. However, growth in the last two years is much better at 10% and 24%. Earnings over the past 5 years are down 12% per year. However, earnings over the past 10 years are up 27% per year. However, analysts expect growth in revenues to be just under 5% for 2012.

Cash Flow per share over the past 5 years has decreased by 3% per year. However, over the past 10 years, cash flow per share is up 9.4% per year. Cash flow was up 49% in 2011, but analysts seem to expect a slight decline for 2012.

Book Value per share over the past 5 years has decrease by 1.7%. Book Value per share has increased by 7.4% per year over the past 10 years. Book Value was up 33% in 2010, but was down by 4.5% in 2011.

Debt Ratios have generally been very good on this stock. The current Liquidity Ratio at 3.41 is great. The 5 year median is also very good at 3.72. The current Debt Ratio at 2.14 is great as is the 5 year median ratio of 2.25. The current Leverage and Debt/Equity Ratios are also very good at 1.95 and 0.51.

The return on equity for the year ending December 2011 was 15%. The 5 year median ROE is 12.9%. The ROE based on comprehensive income was 12.2% at the end of 2011 and was 10.5% as the median value over the past 5 years. The ROE based on comprehensive income is low than the ROE, but it is still good.

This is a rather risky stock as far as dividend payers go. If you have it you have to be prepared for dividend adjustments depending on well the company is doing in the current business cycle. They decrease as well as increase dividends. The company does act prudently as far as dividend payments go. They have very good debt ratios. You would buy this stock for capital gain as well as dividends.

This company does metal distribution and processing North America. It operates in three segments of metals service centers, energy tubular products and steel distributors under various names including Russel Metals, A. J. Forsyth, Acier Leroux, Acier Loubier, Acier Richler, Arrow Steel Processors, B&T Steel, Baldwin International, Comco Pipe and Supply, Fedmet Tubulars, JMS Russel Metals, Leroux Steel, McCabe Steel, Mégantic Métal, Métaux Russel, Métaux Russel Produits Spécialisés, Milspec, Norton Metals, Pioneer Pipe, Russel Metals Specialty Products, Russel Metals Williams Bahcall, Spartan Steel Products, Sunbelt Group, Triumph Tubular & Supply, Wirth Steel and York-Ennis. Its web site is here Russel Metals. See my spreadsheet at rus.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, March 13, 2012

ChemTrade Logistics Income Fund

I do not own this stock (TSX-CHE.UN). I decided to investigate this sock after reading an article in the G&M about investing in small cap stocks that pay dividends. This was one of the stocks mentioned that I had never heard of before. Site I found this at is G&M article. This stock is also mentioned in Today’s small-cap stocks to watch in the Globe and Mail dated February 24, 2012.

This stock was an Income Trust stock. I have waited to do my review until after the December 2011 year-end report was published. The best thing to say about this stock is the total return has been very good. Total return for the last 5 and 10 year is 25.2% and 15.6% per year, respectively.

The portion of this total return attributable to dividends is 12.1% and 13.2% per year, respectively. So the portion of your total return attributed to dividends would be 48% and 85% per year, respectively. The high percentage of dividend return points to great dividends in the past and that the majority of money earned over the past 10 years came from dividends.

Dividend growth is not so straight forward. Dividend growth over the past 5 year is a negative 3.5% per year. Dividend growth over the past 10 years is quite good at 9.2% per year. This is a small company and as such the management has to be prudent in dividend payments. With small companies it is not uncommon for dividends to be decreased. For this company, dividends were decreased in 2007 and since then they have been flat.

The revenue growth per share over the past 5 and 10 years has been 5.1% and 11.2% per year. The 5 year growth in EPS is quite high because they had a year of bad earnings 5 years ago. The 4 year growth in earnings is probably more reliable at 24% per year. The 10 year growth in EPS is just 4%.

Growth in Cash Flow has not been great with the 5 and 10 years growth at 5.7% and 0% per year, respectively. Book Value growth is 2.2% per year over the past 5 years but there is no growth over the past 10 years. It is quite typical for Income Trust stocks not to grow their book value.

The debt ratios are a bit disappointing. The current Liquidity Ratio is 1.24. The 5 and 10 year median ratios are not much better. The current Debt Ratio is 1.47. For this ratio, the 5 and 10 year median ratios are much better at 1.68 and 1.74. I would be happier with this stock if the current ratios were at least 1.50. The current Leverage and current Debt/Equity Ratio are ok at 3.14 and 2.14, but are higher than what I would like to see.

The Return on Equity Ratio started to get to a decent value in 2007. The one for 2011 is quite good at 17.6% and the 5 year median ROE is also quite good at 18.6%. The ROE based on comprehensive income was good for 2011 at 19%, with a 5 year ROE lower, but still good at 14.2%.

When I look at insider trading, I find that there is some insider buying and no insider selling. The insider buying is across the board with CEO, CFO, officers and directors all buying, but the amount is not that high at $0.5M. A lot of the insider buying seems to be by a company plan. The company does give out options, but they seem to give them out sparingly. A lot of insiders seem to have trust units. The CEO has trust units worth $2.7M. There are 36 institutions holding 36% of the units of this company. There has been some, but not much buying and selling over the past 3 months with institutions increasing their holdings by 2.4%.

I get 5 year median low and high Price/Earnings Ratios of 7.40 and 12.98. The current one of 9.33 is between the median P/E Ratio of 11.72 and the low one of 7.40 and therefore points to a good current stock price. I get a Graham price of $18.29 and the current stock price of $16.88 is some 7.7% lower. The low and median difference between the Graham Price and Stock price is the Stock price being at 17.7% and 1.6% lower than the Graham price. By this measure the stock price is good.

I get a 10 year median Price/Book Value Ratio of 1.55 and the current one at 2.05 is some 32% higher. Part of the problem with this test is the low growth in Book Value. On an absolute basis 2.05 is not a particular high ratio, but it is not low either, but more to a reasonable level.

The last test I usually do is the Dividend Yield test. The current yield of 7.11 is some 31% lower than the 5 year median dividend yield of 10.26%. The 5 year median dividend yield is very high as is the current 7.1% yield. The stock price tests are rather mixed, but overall the price is probably closer to a reasonable one.

When I look at analysts’ recommendations I find Strong Buy, Buy and Hold. The consensus recommendation is a Buy. There is a buy recommendation with a 12 month stock price of $18.25. This would give you an 8.15% capital gain and 7.11% dividend for a total return of 15.23%. I see another buy recommendation with a 12 month stock price of $19.50 and therefore a 21.6% total gain.

This is an industrial stock and therefore it is very sensitive to the business cycle. No one seems to feel that that the dividend is in jeopardy. A number of analysts feel that the company is recovering well from the recession. One analyst said it was not the time to buy as the stock is fairly priced.

There is certainly money to be made in this company over the long term. The dividend yield is very good, but this is an Industrial company and it is affected by the business cycle. We do know that they will reduce dividends when they have too, but it is unknown if they will rise them also. They recently said that they intend to use excess cash to pay down debt and to grow. Debt ratios for this company are not great and it is probably prudent of them to want to pay debt down.

Income Trust companies tended to use cash for distributions rather than growth. However, corporations tend to use excess cash for growth as well as dividends. The company talks about supporting the current dividend, but not about increasing it.

ChemTrade Logistics Income Fund is a global supplier of sulphuric acid, liquid sulphur dioxide and sodium hydrosulphite and a processor of spent acid, particularly in the U.S. Gulf Coast region. Chemtrade is also a regional supplier of sulphur, sodium chlorate and phosphorus pentasulphide, and also produces zinc oxide at three North American locations. Its web site is here ChemTrade. See my spreadsheet at che.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, March 12, 2012

Calloway Real Estate Investment Trust 2

Calloway Real Estate Investment Trust (TSX-CWT.UN) has a current decent dividend of 5.6%, but the last time they raised the dividend was 2008. The 5 year median Distribution Payout Ratios for Cash Flow is 102% and the one for the end of 2011 is 104%. This is high. The 5 year median DPR based on Fund from Operations and Adjusted Fund from Operations are better at 90% and 94%, respectively.

When I look at insider trading, I find a bit of insider selling and a bit of insider buying, with net insider buying of $0.1M. Insiders may not have options, but they do have something similar called Deferred Units. As far as I can see, CFO and officers have more deferred units than trust units. Also, Mitchell Goldhar has a variety of Trust Units and Limited Partnership Units and the annual statement says he has approximately 21.5% of the units.

Some 94 institutions own some 42% of the outstanding units. Over the past 3 months they have bought and sold units and they have increased their units by 1.4% over this period.

I get 5 year median low and high Price/Adjusted Funds from Operations Ratios of 12.51 and 16.38. The current P/AFFO Ratio of 17.14 on a stock price of $27.43 would imply the current price is high. The 5 year median low and high Price/Funds from Operations Ratio are 12.57 and 16.04. The current P/FFO Ratio of $16.11 would also point to a high stock price.

I am not looking at the Price/Earnings Ratios as the expected EPS are not unduly high compared to the EPS of 2011, but are very high compared to past years. I do not think that using the P/E Ratios will give us a true picture of whether or not the current price is relative high or low. Since the Book Values have generally substantially increased because of new account rules I will not be using the Price/Book Value ratios either. I will also not use the Graham Price as this uses both EPS and Book Value per shares in its formula.

One thing I can use is the Price/Cash Flow Ratios. I get 5 year median low and high Price/Cash Flow Ratios of 13.44 and 18.13. The current Price/CF Ratio of 23.25 would suggest a rather high current stock price. I get a 5 year median Dividend Yield of 6.96% and the current one of 5.64% would also suggest a rather high current stock price. The current dividend yield is also lower than the 10 year median low dividend yield of 5.9%.

When I look at analysts’ recommendations, I find Strong Buy, Buy and Hold. The consensus is a Buy. Analysts seem to mention the fact that they have a big client in Wal-Mart. A couple of analysts says it would be a nice core holding. No one says anything bad about this company, however, one analyst said not to buy at this time because of the high valuation (that is the stock price is too high).

CIBC has given this stock a buy (outperform) rating recently. For information on this, see I stock analysts. They have a target price to $30. Elsewhere CIBC has said they expect Calloway to raise their distributions this year.

The Globe and Mail had a recent article on why REITs are worth the money. It also says that prices are up because retail investors will pay for the good yields from REITs. You might also want to look at CIBC’s Canadian REITs monthly for January 2012 where they compare Canadian REITs. There is also some interesting information on this REIT at Canadian Dividend Stock site.

Cash money 101 has a recent blog entry that talks about REITs that have dividend reinvestment plans and optional cash payments. He does not include Calloway, but does talk about others I have mentioned like CDN REIT, RioCan and H& R. See Cash Money 101.

I think that larger portfolios should have some diversification into REITs. I have a 6.5% exposure to Real Estate, as you can get exposure to this section through other companies than just REITs. Personally, I would not have more than 10% exposure to this sector. You can make some good dividends, but increases are generally in line with inflation.

Personally, I would wonder if now is a good time to purchase REITs as they seem to have relatively high stock prices. I have found that paying too much for a stock affects your long term return on such stocks.

Calloway REIT is the largest owner of large-format unenclosed retail properties in Canada. Its web site is here Calloway. See my spreadsheet at cwt.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, March 9, 2012

Calloway Real Estate Investment Trust

I know several people in their 80’s. When you get to a certain age, you worry about getting old. Some in their 80’s that I know have bright minds and have energy. Some I know have dull minds and lack energy. I am talking about both men and women.

The ones that are bright, socialize, have something to do and they keep moving. They do some activity often swimming. One person I know is still working. The ones that are not like than seem to socialize less and less, seem to do nothing much and do not move much.

I am lucky because I have a circle of friends and we keep quite active. My personal favorites are dinner parties and going out for lunch, but I also go to parties and go out for dinners, go to Art shows, have a meetup group and to a local pub for a drink. I am working on this blog presently, but have some other projects also, like looking after my family tree and scanning old pictures to really go picture digital. I exercise and jog during the week. I read a lot and go for a lot of walks. I leave my home every day, even if it is just to go to my local Starbucks for a coffee. Being active is for me is probably easy as I live downtown.

Is anyone else thinking about this?

Now, on to what I want to talk about today. I follow two REITs that I do not own. I follow this one of Calloway Real Estate Investment Trust (TSX-CWT.UN) and H & R Real Estate Trust (TSX-HR.UN). However, H & R has not published the financial statements for 2011, so I see no point in doing another review of this stock at this point. My last review was in December 2011. For this review click >here and here for parts 1 and 2.

Calloway Real Estate Investment Trust (TSX-CWT.UN) has a current decent dividend of 5.6%, but the last time they raised the dividend was 2008. The 5 year median Distribution Payout Ratios for Cash Flow is 102% and the one for the end of 2011 is 104%. This is high. The 5 year median DPR based on Fund from Operations and Adjusted Fund from Operations are better at 90% and 94%, respectively.

I know a lot of analysts look at FFO and AFFO figures, but I think that the DPR re Cash Flow is the most important. I do not see any increase in Distributions occurring until the DPR re Cash Flow is better. I see no analyst that feels this will happen over the next couple of years.

The growth in distributions over the past 5 and 10 years was 1% and 3.8% respectively. With inflation running around 2%, this growth in distributions is not keeping up. Personally, I would expect that REITs distributions should increase around the rate of inflation.

For this REIT also there has been a huge increase in units outstanding. Over the past 5 and 10 years, units have increased at the rate of 6.5% and 75% per year, respectively. Yes, I did mean 75% per year over the past 10 years. It is very important to look at growth per unit rather than growth if you are a unitholder.

Growth in revenue per share is mediocre at just over 5% per year over the past 5 and 10 years. AFFO growth is not so hot at 1% and 3.5% per year over the past 5 and 10 years. For FFO, the 5 and 10 year growth is 0% and 15.5% per year, respectively. However, note that there has been a lot of changed to FFO or Distributable Income calculations over the past 10 years, so it is hard to say how good the 10 year growth figure is.

The EPS jumped this year by 1474%, and yes, I do mean over 1,000%. The 5 year growth is at 46% per year because of this. Analysts seem to think that EPS will continue to grow. Interestingly, the 10 year growth is just 3.4% because this company had better EPS in the past. Cash Flow has grown at 7% and 28.8%. However, Cash Flow was unusually low 10 years ago. If I look at 11 years of growth I get 8% per year, which is probably more realistic.

Book Value jumped in 2011 by 30%, which probably due to the new accounting rules. Even at that, the 5 year growth in Book Value is just 1% per year. The 10 year growth is a lot better at 20% per year.

The current Asset/Liability Ratio or Debt Ratio is 1.75 and therefore good. It is better than the 5 year median ratio of 1.55. The current Debt/Equity Ratio and Shareholders Equity Ratios are 2.75 and 1.58 and are ok. They are close to the 5 year median ratios.

The Return on Equity is ok at 9.6% for the end of 2011, but the 5 year median ROE at 2.7% is very low. There is no difference with the ROE based on comprehensive income.

This stock is mentioned in a market call article by Dennis Mitchell.

For this company, I do not see the distributions going up anytime soon as analysts do not expect much in the way of increasing cash flow in the near future. The company is paying out too much in distributions compared to the cash flow. They are in the 5th year of no increase in distributions. On Monday, I will take about what the analyst say about this stock and what my spreadsheet says about the current stock price.

Calloway REIT is the largest owner of large-format unenclosed retail properties in Canada. Its web site is here Calloway. See my spreadsheet at cwt.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, March 8, 2012

Canadian Real Estate Investment Trust 2

As I mentioned yesterday, I have been interviewed by Money Sense Magazine. In an email my interviewer said that they would not mention my blog because there was not enough space. When I was interviewed by Me and My Money in the Globe, they also did not mention my blog. However, they did mention blogs when they were written by men. Do people have something against female bloggers? Just asking.

Now, back to the stock I want to review. This stock is Canadian Real Estate Investment Trust (TSX-REF.UN). I bought this in September 2006 and since that time I have made a total return of 11.8% per year. The portion of my total return attributable to distributions is 4.7% or 40% of my return.

When I look at insider trading, I find no insider selling and $1M of insider buying. Contrast this with the orgy of insider selling of $53.6M for RioCan. RioCan has always had insider selling, but nothing like the amount over the past year. CDN REIT’s use of options is much more muted than a lot of companies. Also, a lot of insiders hold shares worth in the 100s of thousands of dollars. The CEO shares are worth just over $26M.

Some 91 institutions hold some 61% of the units of this company. Over the past 3 months institutions have bought and sold units and they have marginally increased their investment in this company by 2.6%.

The current P/E is around 44.05 as no one seems to think they will earn much over the next few years. Looking at Funds from Operations, the high and low 5 year median P/FFO ratios are 14.08 and 11.48. The current one is 15.7, which shows a relatively high stock price. Adjusted Funds from Operations show a similar pattern, with the high and low 5 year median P/AFFO ratios being 16.35 and 13.26 and the current one at 17.58.

There was a 98% increase in the Book Value under the new accounting rules, so I see no sense in looking at the Price/Book Value ratios. The Graham Price is affected by Book Value and EPS, so I do not care to use this test either. Looking at Price/Cash Flow, I get low and high 5 year median P/CF Ratios of 12.32 and 15.19. I get a current P/CF of 15.45. This shows a relatively high stock price.

As far as Dividend Yield goes, I get a current one of 3.76% and a 5 year median of 4.64%, which is some 19% higher. This suggests a rather high stock price also. By the way, the 10 year median high dividend yield is 4.52%, which is also above the current dividend yield.

When I look at analysts’ recommendations, I find Strong Buy, Buy and Hold. The consensus is a Hold. There is nothing unusual here.

One analyst said that this company has a long track record of solid and stable performance and a conservative strategy. A third of their operating income comes from Alberta, so this company relies quite heavily on the energy sector of Alberta. Some see this in a positive light and some do not. A number of analysts mention good management and high quality assets. One thinks it is a long term hold. A number liked the 70% payout ratios.

One analyst with a Hold recommendation gave a 12 months stock price of $39 and another with a Buy recommendation gave a 12 month stock price of $40. They are not that far apart.

One blogger talks about the 12 Top Real Estate Stocks in Canada. He mentions CDN Real Estate. A globe and mail article talks about why Canadian REITS are expensive. The dividend ninja recently talked about why he loves REITS.

I have done better with RioCan, but CDN over last 5 and 10 years has really done better than RioCan. For CDN the 5 and 10 year total return is 6.5% and 18%. For RioCan the 5 and 10 year total return is 6.3% and 15.8%. Insiders’ of CDN seem more committed to the company by holding shares. They have not have the massive sell off the RioCan had last year. They do not have the options to do this in the first place.

Maybe I should have increased my shares in CDN rather than RioCan when I wanted to buy more REIT shares in 2010 and 2011. But, on the other hand, most analysts think that RioCan will do much better CDN on a go forward basis. Perhaps neither is a good buy at present because according to by spreadsheets they are both overpriced.

Canadian Real Estate Investment Trust is an equity real estate trust, which acquires and owns a portfolio of income-producing properties. It specializes in the acquisition and ownership of community shopping centers, industrial and office properties across Canada. This company owns office, industrial, retail properties and some miscellaneous items such as apartment buildings. This stock is rated STA-3M by DBRS. Its web site is here CDN Real Estate . See my spreadsheet at ref.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, March 7, 2012

Canadian Real Estate Investment Trust

First I should probably tell you I have been interviewed by Money Sense magazine. I was at a photo shoot today in connection with the interview. It was interesting. They had me looking at apples, weighing two sets of apples and juggling (or the best I could do) apples.

Now, on to the stock I own this stock Canadian Real Estate Investment Trust (TSX-REF.UN) that I want to review today. I bought this in September 2006 and since that time I have made a total return of 11.8% per year. The portion of my total return attributable to distributions is 4.7% or 40% of my return.

The 5 year median dividend yield on this stock is 4.6%. The growth in dividends over the past 5 and 10 years is 2.1% and 2% per year, respectively. Inflation is running at 1.9% and 2.2% per year over the past 5 and 10 years. So, dividend increases have sort of kept up with inflation. After being invested in this stock for 6 years, my yield on my original investment is 5.5%.

The Distribution Payout Ratios for this company are 68% for cash flow, 60% for Funds from Operations (FFO) and 69% for Adjusted Funds from Operations (AFFO). The company has a fairly good record of increasing dividends since 2002.

The growth rates for this company are ok, but nothing to write home about. The growth in Revenue per shares is just 1% and 5% per year, over the past 5 and 10 years, respectively. Growth in FFO is 4% and 69.6% per year over the past 5 and 10 years, respectively.

There is no growth in EPS. The best is growth in Cash Flow which is 4.4% and 8.5% per year, over the past 5 and 10 years. Book Value jumped in 2011 because of the new accounting rules, so it is hard to judge were this is going. They also have been increasing the units outstanding by 3% and 4.7% per year over the past 5 and 10 years.

As for debt ratios, the Liquidity Ratio has jumped all over the place, which is rather typical for this type of company. It is 1.10 for 2011 and this is fine. The Asset/Liability Ratio is 2.06 at the end of 2011. This is a very good ratio and it is higher than the 5 year median ratio of 1.55.

The current Leverage and Debt/Equity Ratios are good at 1.95 and 0.95 at the end of 2011. They are also better than the corresponding 5 year median ratios of 2.60 and 1.60.

The Return on Equity for 2011 was very low at 2.7%. This is due both to increase in Book Value (98%) and decrease in earnings (72%). The 5 year median ROE is much better at 12.9%. The ROE based on comprehensive income is similar to the above ROE. It is 2.1% for the end of 2011. The 5 year ROE based on comprehensive income is a bit lower over the past 5 years at 9.8%.

This stock has performed much as I would have expected and I plan to continue to keep it. I have made more out of my investment in RioCan than CDN Real Estate, but this stock has lower DPRs and will probably continue to increase its distribution on a modest basis.

Canadian Real Estate Investment Trust is an equity real estate trust, which acquires and owns a portfolio of income-producing properties. It specializes in the acquisition and ownership of community shopping centers, industrial and office properties across Canada. This company owns office, industrial, retail properties and some miscellaneous items such as apartment buildings. This stock is rated STA-3M by DBRS. Its web site is here CDN Real Estate. See my spreadsheet at ref.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.