Wednesday, February 29, 2012

Pembina Pipelines Corp 2

I own this stock (TSX-PPL). This is a stock I have done very well with. I bought shares a couple of times in December of 2001 and have made a total return of 18% per year. The dividend portion of my return is 7.5% per year. That means that some 41% of my return is in dividends.

When I look at insider trading, I find insider buying of $2.4M and a net of insider buying at $2.3M. There is a bit of insider selling. The insider trading report does not mention any stock options, but the company does issue them. Insiders are also holding convertible debentures. A lot of the insiders do have substantial amounts of shares. Both the CEO and CFO own millions of dollars in shares.

Institutions own some 15% of the shares. They have bought and sold shares over the past 3 months and currently hold 21% more shares than they had 3 months ago.

I get 5 year median low and high Price/Earnings Ratios of 12.6 and 17.0. The current P/E ratio of 25.8 shows a rather high current stock price. And I am using today’s price. The day before the P/E was 26.4 at a price of $28.75. The 10 year median low and high P/E ratios are higher, with ratios of 19.0 and 22.2. Still the current P/E ratio is high for a utility stock.

I get a Graham Price of $8.90. The current stock price of $28.15 is some 223% higher. The 10 year median high difference between the Graham Price and the Stock price is the Stock price being 35% higher. This shows a relatively high stock price.

I get a 10 year Price/Book Value Ratio of 2.38 and a current P/B Ratio of 8.91. The current one is some 373% above the 10 year median ratio and also points to a relatively high stock price. I know that the book value has been going down, but this is a really high P/B Ratio. I get a current Dividend yield 5.63. The 5 year median Dividend yield is 8.81%, which is some 36% lower. I know the dividends have been rather flat, but even the 10 year low dividend yield is higher at 7.7%.

When I look at the analysts’ recommendations, I find that they are all over the place. Recommendations include Strong Buy, Buy, Hold, Underperform (or Reduce) and Sell. The highest number of recommendations is a Buy and the consensus recommendation is a buy.

One analyst with a Reduce recommendation gave a 12 month stock price of $22. A number of analysts giving Reduce and Sell recommendations gave the reason that the stock is overpriced. No one says anything bad about the company. There are more Reduce or Underperform recommendations than sell. (There is only one Sell). All like the recent purchase of Provident.

In fact the Buy recommendations come with comments that the stock should continue to grow with Provident purchase. One analyst says that the most recent dividend increase of 3.8% reflects management's confidence in the significant operational and financial strength of the combined entity going forward.

I think this is a very good company and I am glad to hold this stock. However, I was considering selling some of my shares. The stock is definitely overpriced. However, utility type stocks tend to be high at the moment because they have nice dividends and are relatively safe.

Pembina transports crude oil and natural gas liquids produced in Western Canada. It owns and operates oil sands pipelines and has a growing presence in midstream and natural gas services sectors. Pembina holds a 50% interest in the Fort Saskatchewan Ethylene Storage Facility. Its web site is here Pembina. See my spreadsheet at ppl.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, February 28, 2012

Pembina Pipelines Corp

I own this stock (TSX-PPL). This is a stock I have done very well with. I bought shares a couple of times in December of 2001 and have made a total return of 18% per year. The dividend portion of my return is 7.5% per year. That means that some 41% of my return is in dividends.

If you had invested in the company 5 or 10 years ago, you have probably have earned 24% or 17.6% per year, respectively. The dividend portion of this return would be 8% or 7.5% per year, respectively. The dividend portion of the return would probably have been around 34% or 42.5% per year, respectively.

This stock had some dividend increases prior to 2009, when it decided to change from an income trust to a corporation. In 2009 it stopped any dividend increase and promised that they would maintain the current dividend until 2013. This is because they had a tax pool, so they would probably not have to pay taxes until 2014 to 2015.

Because a lot of income trusts have decreased dividends, or not increased them for a number of years, I would not consider the growth in dividends on this company to be any indication of the future. The growth in dividends by the way for this company is 7.5% per year over the past 5 years and 4% per year over the past 10 years.

They have however, with their recent purchase of Provident Energy; announced that they will increase their current dividend by 3.8%. An article on their 4th quarter report and the purchase of Provident Energy is at the Winnipeg Free Press.

Of course the other problem with dividends from income trusts was that they based it on distributable income. When they changed to a corporation, we really need to start looking at dividend payments with the same perspective we use for other corporations. That is we need to look at Dividend Payout Ratios based on earnings and cash flow.

For this company the Dividend Payout Ratios are high. The 5 year median DPRs for earnings is 137% and for cash flow is 96%. DPRs for 2011 were 158% for earnings and 93% for cash flow. The DPRs for 2012 are expected to be 146% earnings and 86% for cash flow. As you can see, the DPRs for earnings are still much too high. However, the DPRs for cash flow are coming down nicely. One thing is that we do not know what the impact of Pembina buying Provident Energy will have on these ratios.

Some of the growth figures for this company are very good, like Revenues per Share which has grown at the rate of 30% and 16% per year over the past 5 and 10 years. Also, the growth in earnings is not bad, with the growth in EPS being 8.6% and 5.4% per year over the past 5 and 10 years. Growth in Cash Flow is also ok with the 5 and 10 year growth at 9% and 4.4% per year, respectively.

Where this company falls down is the growth in Book Value. It has none. For most income trusts the book values would decline over time. This is because they paid out dividends based on distributable income not earnings. This company was no exception. Book value has declined by 3% and 2.5% per year over the past 5 and 10 years.

Pipelines often have heavy debt loads. The Liquidity Ratio for this company has always been very low. The current ratio is just 0.34. When this ratio is lower 1 it means that the current assets cannot cover the current liability. Even adding back the current portion of the debt (which has been handled) the current ratio is still low at 0.91, but the company has a 5 year median value of 1.12.

The Asset/Liability Ratio is currently lower at 1.40 than usual. The 5 year median ratio is much better at 1.73. The current Leverage and Debt/Equity Ratios are currently higher than normal at 3.47 and 2.47 respectively. The 5 year median ratios are 2.33 and 1.33, respectively. The current ones are a bit high, but the 5 year median ones are pretty typical of such companies. Pembina has been in compliance with all debt covenants during the years ending December 31, 2011 and 2010.

The Return on Equity for the year ending 2011 was 17.2% and the 5 year median ROE is 15.8%. This is a good rate. Also, the ROE based on comprehensive income is fairly close at 16.1% at the end of 2011 and with a 5 year median 16%.

This pipeline company has been a very good investment for me. It has handled the change from an income trust quite well. I have several pipelines and they have all been solid investments.

Pembina transports crude oil and natural gas liquids produced in Western Canada. It owns and operates oil sands pipelines and has a growing presence in midstream and natural gas services sectors. Pembina holds a 50% interest in the Fort Saskatchewan Ethylene Storage Facility. Its web site is here Pembina. See my spreadsheet at ppl.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, February 27, 2012

Shoppers Drug Mart 2

I own this stock (TSX-SC). I had followed this stock for a number of years before I bought it for the TFSA account in January 2009. I bought more in January 2010 and January 2011. By May of 2011 I started to feel that I should be investing differently for my TFSA so I sold some shares in May of 2011. Basically, I have broken even on this stock.

Everyone, including Directors have more options than stocks. This is unusual as under most companies, directors tend to have more shares than options. There has been a bit of insider buying, but nothing like insider selling which is $3.6M and net insider selling at $3.4M. Selling has all been by officers of the company and they seem to be cashing in on options.

There are 162 institutions that own some 41% of the shares of this company. They had bought and sold shares over the past 3 months and during this time they have decreased their shares in this company by 3.1%.

I get 5 year median low and high Price/Earnings ratios of 14.45 and 18.58. The current P/E ratios of 13.64 would appear to be relatively low. However, as I noted yesterday, P/E ratios are declining on this stock. I get a Price/Book Value Ratio of 2.02 which is only 60% of the 10 year median P/B Ratio of 3.31. This shows a good relative price. However, P/B ratios have also generally been declining.

I get a Graham price of $36.63 and the current stock price of $40.50 is some 10% higher. The 10 year median low difference between the Graham Price and the stock price is the stock price being some 48% higher than the Graham Price. However, this difference between the Graham Price and Stock price has also been declining.

The current Dividend yield at 2.62% is almost 40% higher than the 5 year median Dividend yield of 1.88%. Dividend yields have been going up and dividend increases have been going down. Even though the 5 year growth in dividend is 15%, the most recent increase was for 6%. I do not think that the past growth in dividends reflects the future growth.

The tests that I look at are meant to help me determine if the current stock price is relatively reasonable compared to the past. This can give you a good idea about what is a reasonable price for a stock. However, this assumes that, say a growth stock is still a growth stock. The problem with this stock is that it is clearly transitioning from a growth stock to a non-growth or more stable stock.

Personally, I think that the stock price is between a mid and high price. For example, I think that the P/E range for this stock would be between 10 and 15. So a P/E at 13.64 would be between mid and high, because a mid-point would be at 12.5. However, one analyst I read thought that a P/E of 14 was a reasonable one for this stock.

Jean Coutu Group has 5 year median low and high P/E ratio of 10.6 and 13.2. Loblaws has 5 year median low and high of 13.2 to 17.8. The Price/Book Value Ratio of 2.02 is a reasonable one. The Dividend yield is quite good for a consumer stable stock.

When I look at analysts’ recommendations, I find Strong Buy (few), Buy and Hold (lots). The consensus recommendation would be a Hold. One analysts with a Buy recommendation said that you should buy for raising dividends and great cash flow. He goes on to say that it is long-term buy. One hold said that the stock was overpriced and a good current price would be in the low $30’s.

The dividend watchdog blogger recently blogged about this company. The Dividend Ninja also blogged about this company recently. The Blogger Martailer also had an interesting blog on this stock at martailer.com. He talks about how Target and Shoppers will be completing for in Canadian pharmacists for its franchise system.

There has been no end to trouble at Shoppers. See Shoppers Drug Mart shares fall after generic drugs ruling at the G&M. Also, an earlier one titled Shoppers results still hit by drug rules at the G&M. The same sort of story is repeated as Shoppers downgraded as independent pharmacies stay afloat at the Financial Post.

I have not yet decided what I will do about this stock. However, it has been a disappointing buy so far.

Shoppers Drug Mart Corp. is a licensor of Shoppers Drug Mart in Canada and Pharmaprix in Quebec. The company owns and operates Shoppers Home Health Care stores. It also owns MediSystem Technologies Inc. and the new Murale Stores. This is a widely held company. Its web site is here Shoppers. See my spreadsheet at sc.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, February 24, 2012

Shoppers Drug Mart

I own this stock (TSX-SC). I had followed this stock for a number of years before I bought it for the TFSA account in January 2009. I bought more in January 2010 and January 2011. By May of 2011 I started to feel that I should be investing differently for my TFSA so I sold some shares in May of 2011. Basically, I have broken even on this stock.

I must admit I have done worse on stocks, like losing money. However, you expect something better than just breaking even. I think I need to reconsider what I want to invest in for the TFSA account and get out of this stock. The problems are not really the fault of Shoppers, problems have occurred because of action taken by Ontario and other governments to reduce health costs.

Ontario, B. C. and Alberta have all big debts. We have health care costs that need to be brought under control. These provinces will have to (eventually anyway) bring health care costs under control. What has been hammering this company is Ontario changing the rules on generic drugs. Ontario did this to save money on health care. Alberta and B. C. are doing the same thing. I cannot see any of these governments changing their policies any time soon because of debt problems.

Dividends have been reasonable, with a 5 year median dividend yield of 1.89%. Increases have slowed down lately with the latest increase being just 6% compared to the 5 year growth rate of 15% per year. I certainly do not mind collecting dividends waiting for a stock to improve. Problem is will Shoppers improve?

The thing is they are not as fast growing as the 5 year dividend growth suggest. They had better growth when they started out. We are coming out of a recession and they have done better than a lot of companies over the past 5 years. However, their problems are not all caused by the recession. They are being caused by changing government policies.

So, let’s look at growth. The revenue per share has grown at the rate 6% and 11% per year over the past 5 and 10 years. EPS has grown at the rate of 7.8% and 10% per year over the past 5 and 10 years. Cash Flow has grown at the rate of 9.8% and 15.9% per year over the past 5 and 10 years. Book Value has grown at the rate of 9.7% and 11.4% per year over the past 5 and 10 years.

Now, if you had bought this stock 5 years ago, you would not have made any money. The total return is down about 2% per year. Dividends were about 1.8% per year. That gives a capital loss of 3.8% per year. If you had invested 10 years ago you would have had a total return around 9.7% per year with dividends being around 1.6% per year. This stock peaked in 2007 and has not fully recovered.

However, one does make an investment for what a stock has done in the past. One invests for what one expects a stock to do in the future. Although this company has been making money and it has been increasing their revenue, earnings and cash flow, it also appears that it probably has tough times ahead.

The other things that are good about this stock are the Return on Equity and the Debt Ratios. The ROE at the end of 2011 was very good at 14.4%. The 5 year median ROE is also very good at 15.3%. There is also no big difference between this ROE and the ROE based on comprehensive income. The ROE based on comprehensive income are 13.9% for the end of 2011and has a 5 year median of 14%.

The current Liquidity Ratio is 1.52 and this is better than it has been in the past. The Liquidity Ratios have been ok over the past 5 year, but were quite low before that. The 10 year median Liquidity Ratio is 1.15. The Asset/Liability Ratios has always been very good and it is higher also than in the past. The current one is 2.54. The current Leverage and Debt/Equity Ratios have always been good and they are currently at 1.71 and 0.67.

It is not so much that the market does not recognize that the company has continued to make money and increase its revenues, earnings and cash flow so much as it is assigning a lower price/earnings ratio to the company. When this stock was originally issued it was considered to be a growth company and got P/E ratios for a growth company. However, since the company peaked in 2007, the P/E ratios have been coming down.

The low and high median P/E ratios assigned originally were 20 to 26. The current 5 year median P/E ratios are 15 to 19. Then the P/E range in 2011 was 13 to 15. With every further bit of bad news for this company, the P/E ratios come down. One analyst thought that a good ratio for this company might be 14. But perhaps the P/E ratios will continue to come down. I do not expect the range to come lower than 10 to 15, but it could still go lower than the current range.

Shoppers Drug Mart Corp. is a licensor of Shoppers Drug Mart in Canada and Pharmaprix in Quebec. The company owns and operates Shoppers Home Health Care stores. It also owns MediSystem Technologies Inc. and the new Murale Stores. This is a widely held company. Its web site is here Shoppers. See my spreadsheet at sc.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, February 23, 2012

Husky Energy Inc 2

I own this stock (TSX-HSE). I bought Husky in 2008 and some more in 2010. I have lost 8.8% per year on this stock. In this section I will discuss the current stock price and if it is reasonable or not. It is great to buy at a low price, but most of the time, reasonable will have to do.

First of all, about 75% of this company is owned by Mr. Li Ka-shing, directly or indirectly. There is not much action on Insider Trading except a very tiny amount of insider buying. The CEO, CFO and officers have more stock options than shares.

Also, some 150 institutions own just over 9% of the outstanding shares. They have bought and sold shares over the past 3 months and their investments in these shares have increased marginally (by just under ½ of 1%).

The Price/Earnings ratios have fluctuated quite a bit. The 10 year median low and high P/E Ratios are 9.37 and 13.39. So the current P/E ratio of 14.51 is a little high, relatively. (If we use 5 year median high P/E ratios, it is 20.96. However, I went to 10 years because P/E ratios do fluctuate a lot.)

I get a Graham Price of $27.27. The current stock price at $26.26 is some 3% lower. This is a good sign. The low difference between the Graham Price and Stock price is the Stock price is 22% lower. The median difference between the Graham Price and Stock price is the Stock price is 7% higher. A reasonable stock price is when the difference between the Graham price and Stock price is between the low and median values, which is where this stock falls.

I get a 10 year median Price/Book Value Ratio of 2.18 and the current one of 1.44 is 66% of the 10 year median value. This test shows a current good stock price. (A good stock price is when the current P/B Ratio is at or lower than 80% of the 10 year median P/B Ratio.)

The current Dividend Yield of 4.57% is almost the same as the 5 year median dividend yield of 4.59%. Ideally, you want the current dividend yield higher than the 5 year median dividend yield. (However, the 10 year median Dividend yield is at 4.12% and this is 10% lower than the current one.)

The stock price tests I use generally point to a reasonable stock price. The P/E ratio shows a relatively high stock price, but 14.51 P/E ratios on an absolute basis shows a reasonable stock price.

When I look at analysts’ recommendations, I find Strong Buy, Buy, Hold, Underperform and Sell. While the ones for other than Hold have 1 or 2 analysts, the Hold one has 10. The consensus is a Hold because so many analysts are recommending a Hold.

One analyst with a Hold recommendation gives a 12 month stock price of $28 and another said that there are better other companies to buy. One analyst with a Hold recommendation said he is concerned about the lack of growth. An analyst with a Strong Buy recommendation says that the company has good prospects for the longer-term. One with a Buy says that he feels positive about the stock and likes the good dividend yield.

Husky anticipates a difficult year is the headlines for a news article on this company in the G&M. Another article called Husky Energy Inc. a trade, not a hold in the G&M says that the company stock is not liked because “the company has failed to grow sufficiently to meet expectations. It is not that they have failed to grow, but that they have failed to meet expectations”. He goes on to say that “managing investor expectations is the toughest job in the world”.

The dividend Guy blogger recently bought this stock. See his blog for his analysis on Husky. This was also a pick for Dividend Ninja blogger.

A reason to buy a Canadian Oil and Gas producer is because such companies form a large part of the TSX. Another reason might be that you can get good dividend returns over the longer term. However, you have to be prepared to have a stock where the dividend fluctuates. I do not have much invested in this stock, but I plan to hold on to what I have.

This company is one of Canada's largest energy and energy-related companies. The Company's operations include the exploration, development and production of crude oil and natural gas. Husky has operations in Western Canada, Eastern Canada, US, China, Indonesia and Greenland. This company is mostly foreign owned. Industry: Oil and Gas (Integrated Oils). It is listed under TSX Energy Index. Its web site is here Husky. See my spreadsheet at hse.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, February 22, 2012

Husky Energy Inc

I own this stock (TSX-HSE). I bought Husky in 2008 and some more in 2010. I have lost 8.8% per year on this stock. Dividends on this stock equaled a return of 3.4% per year. I have lost some 12.1% per year in Capital gains.

This is a company in the oil and gas production business and as such the dividends fluctuate. Over the past 10 years, dividends are up 14% per year. However, over the past 5 years, dividends are down by 0.1%. Dividends have been decreasing since 2007. The last decrease occurred in 2010, when dividends were decreased by 40%.

The 5 year median Dividend Payout Ratios are 68% for earnings and 40% for cash flow. The 10 year median DPR ratios are 60% for earnings and 31% for cash flow The DPR for the end of 2011 were 52% for earnings and 23% for cash flow. These ratios are expected to be 66% for earnings and 27% for cash for 2012. From this it would not appear that the dividend will rise soon. DPR ratios for cash flow is better than that for EPS.

If you had held this stock over the past 5 years, you would have probably lost 4% per year. The dividend income would be around 4.8% per year. If you had held this stock over the past 10 years, you would have done much better. The total return over the past 10 years is 22% per year, with dividends contributing 10% per year of this total return.

The best growth for this company is in revenue. Revenue per share has grown at the rate of 11.4% and 12.5% per year over the past 5 and 10 years. The Book Value has grown at the rate of 10% and 13% per year. Both Earnings and Cash Flow tend to fluctuate, and in both the 10 year growth is much better than the 5 year growth. EPS has declined over the past 5 years by 6% per year, but has grown by 12% per year over the past 10 years. For Cash Flow, it has not grown over the past 5 years, but has grown by 8% over the past 10 years.

All the debt ratios are fine. The current Liquidity Ratio is 1.61. This is better than the 5 year median of 1.33. The Asset/Liability Ratio is very good at 2.21 and it is close to the 5 year median of 1.19. The current Leverage and current Debt/Equity Ratios are good at 1.85 and 0.84. These are very close to the 5 year median ratios.

The Return on Equity at 12.7% with a 5 year ROE also of 12.5% are both good, but not as high as it has been in the past. The ROE based on Comprehensive Income is close at 13% with a 5 year median value also of 13%.

I had, of course, wanted better results than what I got. You always want stocks to go up. However, I have very little invested in Oil and Gas production. I have around 3% of my portfolio in Oil and Gas and just less than 1% in Oil and Gas productions. I know that oil and gas are a big part of our Canadian market. However, it is not an area I feel that comfortable in investing in. However, I do like to keep an eye on this area, so I have this stock and follow a couple of other stocks.

I plan to continue to hold this stock for the time being.

This company is one of Canada's largest energy and energy-related companies. The Company's operations include the exploration, development and production of crude oil and natural gas. Husky has operations in Western Canada, Eastern Canada, US, China, Indonesia and Greenland. This company is mostly foreign owned. Industry: Oil and Gas (Integrated Oils). It is listed under TSX Energy Index. Its web site is here Husky. See my spreadsheet at hse.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, February 21, 2012

Canadian Tire Corp 2

I own this stock (TSX-CTC.A). From when I originally bought this stock in 2000 I have made a total return of 10.33% per year with 1.74% of the total return per year attributable to dividends. This is a consumer discretionary stock. It has performed as I had expected it to.

This stock is now on one of the dividend lists that I follow of Dividend Aristocrats (see indices). This stock just recently appeared on this list. For more information on this lists and how it is decided to put stocks on the list, see Passive Income Earner .

When I look at insider trading I find $18.6M of insider selling and $4.8M of insider buying. The insider selling was by officers of the company. The insider buying was by officers and directors. All insider but the directors have more options than shares.

Over all the officers have more shares than options, but that is because of a few with large amount of shares. The majority of the officers have more options than shares. However, the selling does not seem to be of options, but of shares that were owned. There are certainly a number of insiders who own millions in shares.

There are some 8 institutions that own 13% of the outstanding shares. Over the past 3 months they have increased their shares by almost 16%.

I get 5 year median low and high Price/Earnings Ratios of 9.41 and 13.95. The current P/E of 10.64 is below the median ratio and shows a relatively reasonable stock price at $65.10. I get a Graham Price of $86.34 and the current stock price is some 25% lower. The median and low difference between the Graham Price and the stock price is the stock price being 19% and 35% lower. This also shows a reasonable stock price.

The 10 year Price/Book Value Ratio is 1.35. The current P/B Ratio is 1.20. The current one is 11% below the 10 year ratio and shows a reasonable stock price. The 5 year median Dividend Yield is 1.53% and the current dividend yield of 1.84% is some21% higher. This shows a good stock price.

When I look at analysts’ recommendations, I find Strong Buy, Buy and Hold ones. The consensus would be a Buy. One Buy, says that the dual class shares is a negative, but in this case a small negative as he thinks highly of the company. One analyst says he cautious about the retail side of this business and therefore has a hold recommendation. Another with a Hold feels that the company is in a very competitive environment and they have to integrate Forzani Group.

One analyst with a buy recommendation said that Canadian Tire is a good company, with a strong balance sheet and improving margins. CTC is a buy for both income and gains.

There is an interesting article about Canadian Tire money on G&M. This newspaper also had an article on 4th quarterly results and a jump in sales. I realize there is an Canadian Tire sucks site. However, I have shopped at my local Canadian Tire store for almost 40 years and I have never had a problem. I have also taken my car there for servicing and never had a problem. I would imagine that any retail store would have some dissatisfied customers.

I am satisfied with my investment in this stock and I intend to hold on to the shares I have.

Canadian Tire Corp engages in retail sales, financial services and petroleum sales. They own Canadian Tire Store, Gas Outlets, Parts Source Stores and Mark's Work Warehouse. The Canadian Tire stores offer a unique range of automotive, sports and leisure and home products. The company is controlled by the Billes family who own most of the voting shares. Its web site is here Canadian Tire. See my spreadsheet at ctc.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, February 17, 2012

Canadian Tire Corp

I own this stock (TSX-CTC.A). I originally bought this stock in 2000. I also bought more in 2009 and 2010. I have made a total return of 10.33% per year with 1.74% of the total return per year attributable to dividends. I have, of course done better on the stock bought in 2000 that the stock bought later. For the stock bought in 2009 and 2010, I have made a total return of 4.33% per year with 1.6% per year attributable to dividends.

This is a consumer stock and it has not done well since the latest bear market of 2008. This is typical of consumer stocks. However, I expect this stock to do well over the long term. If you had invested in this stock over the last 5 and 10 years, your total return would probably be 0% and 11.7%. The dividends paid would have added 1.3% and 1.7% per year to your return. (The implications for 5 year investment would be that you would get dividends, but would have lost around 1.5% in capital gains.)

What is also typical of consumer stock is the low dividend yield, good dividend increases and low Dividend Payout Ratios. The 5 year dividend yield is 1.53%. The 5 and 10 year growth in dividends is at 10.8% and 10.7% per year, respectively. The 5 year median Dividend Payout Ratios for earnings is 18.3% and for Cash Flow is 16.4%. For the stock I bought in 2000, I am getting a dividend yield of 5.4% on my original investment.

This stock is not on any dividend lists I follow. Since 2004, they have had a good record of increasing their dividends. Before 2004, dividends were flat. They also did not raise their dividends in 2009 and 2010. The 10 year median Dividend Payout Ratios are lower than the 5 year ones and this is because of the years 2007 to 2009. The 10 year median DPRs are 15% and 8.8%. The DPR for 2011 is 19% for earnings and 6.4% for cash flow. The dividend increase for 2011 was quite high at 31%. The most recent dividend increase was more normal at 9.1%.

For this stock, the worse growth is in revenues, and the 5 and 10 year growth in revenue per share is 3.9% and 6.4% per year, respectively. Growth in earnings is not bad with 5 and 10 year growth at 5.8% and 9.9% per year, respectively. Growth in Book Value is good with 5 and 10 year growth at 9.6% and 8.4%. The best is growth in cash flow, with 5 and 10 year growth at 11.2% and 12.2% per year, respectively.

When I look at return on equity, I find that ROE for the end of 2011 to be 10.6% and the 5 year median ROE to be 10.6% also. The ROE based on comprehensive income is similar with the one for the end of 2011 at 10.6% and the 5 year median ROE at 11.3%.

This company has voting and non-voting shares, so that it is really controlled by one person, Martha Gardner Billes. Often such companies have good debt ratios and this company is no different. The Liquidity Ratios have always been good and the current one is 1.68. The Asset/Liability Ratio is a bit lower, but still good at 1.56. The Leverage and Debt/Equity Ratios are also good, with current ratios at 2.80 and 1.80.

The Liquidity Ratio and Asset/Liability Ratio are lower than the 5 year median ratios of 1.99 and 1.85. (With these ratios, higher is better, but good ones are 1.50 and above.) The Leverage and Debt/Equity Ratios are higher than the 5 year median ratios of 2.17 and 1.17. (With these ratios, lower is better.) With the new accounting rules, both the Assets and Liabilities have increased, but debt ratios are not as good. Problem is that we do not know what the long term effect of the new accounting rules will be.

I am pleased with the performance of this stock. It is acting as I expected. I had bought this stock for diversification purposes.

Canadian Tire Corp engages in retail sales, financial services and petroleum sales. They own Canadian Tire Store, Gas Outlets, Parts Source Stores and Mark's Work Warehouse. The Canadian Tire stores offer a unique range of automotive, sports and leisure and home products. The company is controlled by the Billes family who own most of the voting shares. Its web site is here Canadian Tire. See my spreadsheet at ctc.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, February 16, 2012

Canadian National Railway 2

I own this stock (TSX-CNR, TSX-CNI). I first invested in the company in 2005 and then bought more in 2009 and 2011. My purchase in 2011 included selling CP (TSX-CP) to rationalize my portfolio (i.e. have few stocks). I have made a 14.9% per year return on my investment. Of my return some 1.62% is attributable to dividends. That is just under 11% of my return is from dividends.

As is typical of stocks were insiders get options, they sell them. When I look at the insider trading, I find $39.3M of insider selling by CEO, officers and directors. There is some insider buying also, but at $2.3M it is completely dwarfed by the selling. The buying is by officers and directors. There are 472 institutions that hold 56% of the shares of this company.

I get 5 year median low and high Price/Earnings Ratio of 10.73 and 14.80. So the current P/E ratios of 14.64 would appear to be relatively high and would show a high stock price. I get a 10 year median Price/Book Value Ratio of 2.32. The current one of 3.22 is almost 40% higher and therefore shows a relatively high stock price.

I get a Graham price of $53.72 and the stock price of $77.75 is 31% higher. The high difference between the Graham Price and the stock price is the stock price being 35% higher. This would also indicate a relatively high stock price. The only place that shows a relatively low stock price is the dividend yield. The 5 year median dividend yield is 1.78% and the current one is 1.93%, which is some 8% higher. However, the dividend yield has been going up over time.

When I look at analysts’ recommendations, I find Strong Buy, Buy, Hold, Underperform and Sell recommendations. In other words they are all over the place. However, the vast majority is in the Hold category with the other categories only having 1 or 2 analysts. The consensus recommendation would be a Hold. One analysts said it was a short term Hold, but a long term Buy.

A buy recommendation came with a 12 months stock price of $89 and a Hold at 79.68. One buy says that CNR is selling at a discount to Canadian Pacific (TSX-CP) and he is right. I get a P/E of 17.14 for CP. One Strong Buy says that CNR will continue to improving their operating ratio. He also thought it was the best railroad company in North America. (I certainly thought it was better than CP and that is why I rationalized by stock portfolio by selling CP and buying more CNR.)

The Passive Income Earner picked CNR as one of his three stocks for the Dividend Growth Index. See his site.

I am pleased with this stock and will continue to hold on to my shares in this company.

Canadian National Railway Company and its operating railway subsidiaries, spans Canada and mid-America, from the Atlantic and Pacific oceans to the Gulf of Mexico, serving the ports of Vancouver, Prince Rupert, B.C., Montreal, Halifax, New Orleans, and Mobile, Ala., and the key metropolitan areas of Toronto, Buffalo, Chicago, Detroit, Duluth, Minn./Superior, Wis., Green Bay, Wis., Minneapolis/St. Paul, Memphis, St. Louis, and Jackson, Miss., with connections to all points in North America. Its web site is here Metro. See my spreadsheet at cnr.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, February 15, 2012

Canadian National Railway

I own this stock (TSX-CNR). I first invested in the company in 2005 and then bought more in 2009 and 2011. My purchase in 2011 included selling CP (TSX-CP) to rationalize my portfolio (i.e. have few stocks). I have made a 14.9% per year return on my investment. Of my return some 1.62% is attributable to dividends. That is just under 11% of my return is from dividends.

If you had invested in the company over the past 5 or 10 years, you would have made a return of 11.6% and 13.8% per year respectively. Of this return, 1.7% and 1.6% per year would be attributed to dividends and that is 15% and 11.2% of your total return.

This company has a very good record of increasing dividends each year. Over the past 5 and 10 years, dividends have been increased at the rate of 14.9% and 17.5% per year, respectively. For the first dividend payable in March 2012, they have raised the dividend by 15.4%. They have raised their dividends every year over the past 16 years since their Initial Public Offering (IPO).

The dividend yield is rather low with a 5 year median of 1.78% and a current one of 1.93%. The Dividend Payout Ratios are relatively low with 5 year median DPR for earnings at 24% and for CF at 19%. This stock would be considered a dividend growth stock. Both dividend yield and DPRs have been steadily increasing over the years.

The number of shares outstanding has been going down with a 10 year median per year reduction of 3%. They have been giving out stock options, but have been repurchasing more shares than they have given out in stock options. So, when you look at revenue and revenue per share, they are quite different. The revenue has only been increasing at the rate of 3% and 4.8% per year over the past 5 and 10 years. Revenue per share has increased at the rate of 6.3% and 7.6% per year over the past 5 and 10 years.

The 5 and 10 year growth in Earnings per share is 6.7% and 12% per year, respectively. The 5 and 10 year growth in cash flow is 4.7% and 7.9% per year, respectively. The growth in book value is 4.7% and 6.4% per year, respectively.

The Return on Equity for the financial year ending in December 2011 was very good at 23%. Stock has a 5 year median ROE, which is also quite good at 18.7. The ROE based on comprehensive income is good, but lower at 12.4% for both the end of 2011 and for a 5 year median value.

When looking at the debt ratios, I find that the Liquidity Ratio to be usually be quite low. The current one is just 1.08. However, if you take into consideration their cash flow (after dividends); the ratio is much better and in fact quite good at 2.48. It is also fine if you look at cash flow after dividends and investments at 1.74. The current Liquidity ratio is better than normal.

The Asset/Liability Ratio has always been good and the current one at 1.70 is also good. The Leverage and Debt/Equity Ratios are fine, with current ones close to the 10 year median values. The current ratios are 2.44 and 1.41.

See dividend watch dog’s site about dividends from CN.

I am pleased with my investment in this stock and intend to continue to hold it. Tomorrow, I will look to see what the analysts say about it and what my spreadsheet says about the current stock price.

Canadian National Railway Company and its operating railway subsidiaries, spans Canada and mid-America, from the Atlantic and Pacific oceans to the Gulf of Mexico, serving the ports of Vancouver, Prince Rupert, B.C., Montreal, Halifax, New Orleans, and Mobile, Ala., and the key metropolitan areas of Toronto, Buffalo, Chicago, Detroit, Duluth, Minn./Superior, Wis., Green Bay, Wis., Minneapolis/St. Paul, Memphis, St. Louis, and Jackson, Miss., with connections to all points in North America. Its web site is here Metro. See my spreadsheet at cnr.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, February 14, 2012

Valener Inc

I do not own this stock (TSX-VNR). This used to be Gaz Metro (TSX-GZM.UN) a limited partnership. All of the units held by public unitholders of Gaz M├ętro were exchanged, on a one-for-one basis, for common shares of Valener, effective September 30, 2010.

No matter how you look at this stock, it is not a great dividend stock. Dividends have been declining by 5% and 2.4% per year over the past 5 and 10 years. The Dividends were reduced in 2011 after remaining flat since the last reduction in 2007. Also, the Dividend Payout Ratios remain too high. (See my site for information on Dividend Payout Ratios). These ratios were 122% for earnings and 108% for Cash Flow. These high ratios are not expected to change much in 2012 and 2013. Also, when the company converted to Valener, it said it would guarantee the $1.00 dividend for 3 years.

How have investors faired? Well, the total return over the past 5 and 10 years was 3.4% and 7% per year, respectively. Dividend yield was some 7.3% and 8% per year over the past 5 and 10 years. This means that the stock has suffered capital loss.

The only growth is in Book Value and this is only because it was increased to the stock price on September 30, 2010. This action doubled the book value. However, the book value has been declining since then also. Revenue per share is down 2% per year over the past 5 and 10 years. EPS is down 8% and 4.4% per year over the past 5 and 10 years. Cash flow is down 25% and 14% per year over the past 5 and 10 years. Analysts do not see any improvements for 2012 and 2013.

Return on Equity is low in 2011 at 5% with a 5 year median of 14%. One reason for the much lower ROE this year is the big increase in Book Value. Until 2011, book value has been declining so the ROE looked good. Net Income has been growing (24% or 1.5% per year over the past 10 years) but so has number of shares (17% over the past 10 years). This is why the difference between growth in net income and EPS.

When it comes to Debt Ratios, they are quite good for Valener as the new company has little debt. However, the Liquidity Ratio is low at 0.90. This means that current assets cannot cover current liabilities.

When I look at analysts’ recommendations, I find Hold, Underperform and Sell. There are lots of Hold recommendations and the consensus recommendation is a Hold. One Hold recommendation said that investors might want this stock for long term stable cash flow. One analyst said that the company has a very high quality asset base, but a no growth profile.

I get a 5 year median low and high Price/Earnings Ratio of 11.66 and 12.95. The current P/E ratio is therefore high at 19.98. It is also quite high for a utility. I get a Graham Price of $17.09, so the current stock price of $16.18 is 5% lower. The 10 year median low difference between the Graham price and stock price is the stock price 5% higher. However, this has been changing lately and the 5 year median low difference is the stock price 8% lower.

I get a 10 year median Price/Book Value Ratio of 2.18, so the current P/B Ratio at 1.01 is only 46% of the 10 year median ratio and points to a good current stock price. The current dividend yield of 6.18% is a good one, but it is lower than the 5 year median dividend yield of 7.64% by 19%. The lower dividend yield points to a relatively high current stock price.

The stock price tests I have used show rather mixed results. Part of the problem of looking at this stock over the past 5 and 10 years is that I am using Gaz Metro’s financial statements as this new company hold 29% of the Gaz Metro. How valid past Gaz Metro financial statements are to Valener Inc. is yet to be determined.

Another problem this company has and this applies to all old unit trust and partnership companies is that they will have to get Dividend Payout Ratios into line with other corporations that pay dividends. Since DPR ratios are currently too high and no one seems to expect this to change for this company over the next couple of years and Valener only said they guaranteed the current distribution for 3 years, it would appear that another distribution cut is in the future.

Valener owns 29% of Gaz Metro and also has investments (i.e. Vermont Gas Systems & Green Mountain Power). Gaz Metro is Quebec's leading natural gas distributor. Its web site is here Valener. See my spreadsheet at vnr.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, February 13, 2012

Transcontinental Inc

I have only Transcontinental (TSX-TCL.A) and Valener (TSX-VNR) to review to finish my list of stocks that I cover. After I do this today and tomorrow, I will slow the pace and start reviewing the stocks I follow who have published their December 2011 year-end statements. The first of these will be Canadian National Railway (TSX-CNR) on Wednesday.

I do not own Transcontinental Inc. (TSX-TCL.A). They on the dividend lists that I follow of Dividend Achievers (see resources) and Dividend Aristocrats (see indices). They have a good record over the past 10 years of rising dividends. However, prior to 2002, their record was spotty.

The 5 and 10 year growth in dividend is 14.4% and 17% per year. However, increases can vary greatly, with increases from 2009 to 2011 being 3.2%, 9.4% and 40%. Their dividend yield has generally been relatively low (under 2%) so the Dividend Payout Ratios have in the past been quite low with 5 year median DPRs of 19% for EPS and 13% for CF. Relatively speaking DPR for EPS for 2011 was high at 51%. The ones for CF were normal at 13%. The corresponding DPRs for 2012 are expected to be around 27% for EPS and 16% for CF.

The company has had a rough time with the latest recession and their stock price was hit hard. The stock price fell over 40% in 2008. This would affect total returns which are down 6% per year over the past 5 years. The total return was better for the last 10 years, but still was not great with a total return of only 3.5% per year. The dividends contributed to total returns by just over 2% per year.

Growth in Cash Flow was been mediocre over the past 5 and 10 years, with growth at 4.3% and 5% per year respectively. Growth in revenues and revenues per share over the past 5 years is non-existent. Growth in revenues and revenues per share over the past 10 years is at 1.4% and 1.6% per year. Growth in Book Value is at 2.8% and 8.4% per year over the past 5 and 10 years.

As far as debt ratios goes, the Liquidity Ratios have always been low, but was better than usual in 2011 at 1.00. The Asset/Liability has always been very good and the current one is 2.18. The current Leverage and Debt/Equity Ratios are good as expected with as an owner controlled company at 1.99 and 0.91, respectively.

The Return on Equity ratio has been good in the past, but it rather low at 6.3% for 2011. However, the Return on Equity based on comprehensive income is much better at 10.4%.

When I look at insider trading, I find a minimal amount of insider buying and no insider selling. Insiders of CEO, CFO and Officers (with one exception) have more stock options and restricted participation units than shares. About 81% of the shares are owned by 50 institutions. They have bought and sold shares over the past 3 months and they have reduced their outstanding shares marginally (less than 1%) over the past 3 months.

When I look for analysts’ recommendations, I find Strong Buy, Buy, Hold and Underperform recommendations. There are a lot of Buy recommendations and the consensus recommendation would be a buy. One Buy recommendation came with a 12 months stock price of $15.00.

One blogger talks about buying this stock at Walking with God. There is an article in Media Canada where the CEO talks about rebrand the company. Pat McKeough talks about buying this blue chip stock at TSI Network.

I get a 5 year low and high median Price/Earnings Ratios of 10.83 and 16.02. The current P/E at 6.56 is both relatively low and absolutely low as far as P/E Ratios go. I get a current Graham price of $26.07 and the current stock price of $12.98 is some 50% lower. The 10 year median low difference is with the stock price being 13% lower than the Graham price. By this measure the stock price is low.

I get a 10 year median Price/Book Value Ratio of 1.49 and the current Price/Book Ratio is at 0.85 is just 57% of the 10 year median. This shows a relatively low stock price and an absolutely low stock price as the stock price is below the book value. The current dividend yield at 4.16% is some 61% higher than the 5 year median dividend yield of 2.58%. This is also shows a very low stock price. Historically, the dividend yield on this stock has been below 2%.

I wish I had some extra money to buy some of these shares. The company is certainly signaling they expect better times with their recent dividend increases.

Transcontinental, one of Canada's top media groups, is the largest printer in Canada and Mexico and the fourth-largest in North America. In addition to commercial printing, it operates 150 websites and is a leading publisher of consumer magazines, French-language educational resources and community newspapers in Quebec and the Atlantic provinces. Its web site is here Telus. See my spreadsheet at tcl.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, February 10, 2012

Telus Corp

I do not own this stock (TSX-T, NYSE-TU). They on the dividend lists that I follow of Dividend Achievers (see resources) and Dividend Aristocrats (see indices). However, the Canadian lists do not have very high standards. This company has only consistently raised their dividends since 2005.

The 5 and 10 year growth in dividends is 15% and 10% per year. However, there can be a huge difference in increase. In 2009, 2010 and 2011 increases are 6%, 5% and 10%. As recently as 2001 and 2002, they were decreasing their dividends.

If you had held this stock 5 and 10 years to the end of December 2011, you would have earned 4.9% and 12.3% in total returns. The portion of this total return in dividends was 3.4% and 3.3%. That means that dividends made up 69% and 26.7% of the total return over the past 5 and 10 years.

None of the other growth figures are particularly good. Growth in earnings is 3% and 9.5% per year over the past 5 and 10 years. Growth in revenue per share is 4.5% and 3.2% per year for the past 5 and 10 years. Growth in Cash Flow is 0% and 6.2% per year over the past 5 and 10 years. Growth in Book Value is 2.3% and 0% per year over the past 5 and 10 years.

The Return on Equity has been quite good lately, with ROE for the financial year ending December 2011 at 16.2% and the 5 year median at 15.7%. However, we should be a bit cautious about the ROE for 2011 as the ROE based on comprehensive income is only 5%, a much lower figure. The statements for 2011 have just been published and they are unaudited.

The debt ratios are mostly fine, except for the Liquidity Ratio which is current at 0.53. If this figure is not at least at 1.00, then current assets do not cover current liabilities. The Asset/Liability Ratio is good at 1.61. The current Leverage and Debt/Equity Ratios are ok at 2.65 and 1.65, respectively.

When I look at insider trading I find some $3.1M insider selling. Selling is by CEO, CFO, officers and Directors. There is minimal insider buying by CEO and directors for a net insider selling of $2.5M. Everyone but directors have more options than shares. The insiders seem to have been selling off option shares. There are some 153 institutions that hold some 30% of the shares of the company. Over the past 3 months they have bought and sold shares and over the past 3 months decreased their shares by 3.4%.

When I look at analysts’ recommendations, I find Strong Buy, Buy, Hold and Underperform. The consensus would be a Hold. There are an awful lot of Hold recommendations on this stock. One analyst with a Hold recommendation is worried about competitive and regulatory pressures in the wireless industry. A Hold recommendation comes with a 12 months stock price of $58.03.

One analyst thought the only reason to hold this stock is for the yield as there will not be much future capital gains. (Yield is currently at 4%.) One analyst said to buy for some capital gain and for dividend growth.

Globe and Mail has a recent article called Telus profit rises on TV, data growth.

I get 5 year median low and high Price/Earnings Ratios of 10.10 and 14.81. The current P/E of 14.03 on a stock price of $56.83 is towards the relatively high side. I get a Graham Price of $45.90. The current stock price of $56.83 is some 23% higher. The 10 year median and high difference between the Graham Price and stock price is the stock price being from 9% to 34% higher. So, this shows a stock price towards the high side.

I get a 10 year median Price/Book Value Ratio of 1.90 and a current P/B Ratio of 2.46, which is 30% higher. The current dividend yield of 4.08% is some 8% lower than the 5 year median dividend yield of 4.42%. These tests show a relatively high current stock price.

You should not only look at the relative position of the current stock price, but also future expectations. Generally it is not a good idea to buy a stock when it is relatively high. However, when you consider this stock is relatively high and that there are concerns of future competitive and regulatory pressure, I can why so many analysts give a Hold recommendation.

See Dividend Ninja’s take on this stock at Telus and at Telus2. See also the Dividend Guy take on this stock at Telus.

Telus is a national telecommunications company in Canada. Telus provides a wide range of communications products and services including data, Internet protocol (IP), voice, entertainment and video. Its web site is here Telus. See my spreadsheet at tel.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, February 9, 2012

Superior Plus Corp

I do not own this stock (TSX-SPB). When you have a stock that cuts its dividends, you should look at it to determine if you should buy more, sell, or keep what you have. The stock seemed to be paying too much out. If you look at the 5 year median Dividend Payout Ratios they are 210% for earnings and 85% for Cash Flow. There are lots of times when the DPR for either earnings or cash flow was over 100%.

Theoretically, income trusts can pay out more than earnings and cash flow, and this stock used to be an income trust. However, it is no longer an income trust. They at first kept the high distributions mainly because it had a tax pool (that allowed it pay no taxes). When income trust had high distributions, they also had negative growth in book value. Sometimes, a “return of capital” is really a “return of capital”.

Last year the distributions were decreased some 63%. This year, the DPR for earnings is still expected to be high at 109%. The DPR for cash flow is much better at 40%. Also, 2011 is not the only year that dividends have been decreased on this stock, there were decreases in 2000 and 2006. They also had some years of very good increases. So you could characterize this stock’s dividends as being inconsistent.

The only growth is in revenue, and over the past 5 and 10 years revenue per share is up 6.4% and 8.4% per year, respectively. Both cash flow and book value is decreasing rapidly, with cash flow down over the past 5 years by11% per year and book value down over the past 5 years by 14% per year. These values are also down over the past 10 years, but not by quite as much. Earnings are down also by a similar amount. They have no positive earnings for the last 12 months, but are expected to finish 2012 with positive earnings.

Another complaint people have about this stock is the high debt. The only good debt ratio is the current Liquidity Ratio at 1.52. The 5 year median ratio of 1.43 is less good. The current Asset/Liability ratio is low currently at 1.33 with an only slightly better 5 year median ratio of 1.40.

The current Leverage and Debt/Equity Ratios peaked in 2010 at 5.44 and 4.44. They are currently at 4.01 and 3.01. They are still higher than the 5 year median ratios which are more reasonable at 2.72 and 1.72. So these ratios are improving and hopefully this will continue to improve.

When I look at insider trading, I find some $1M of insider buying and a bit of insider selling for a net of buying of $.89M. There are a lot of insiders with common shares. There is a lot also with Convertible Debentures. The options issued are rights of Deferred Share Units or Restricted Share Units. There are lots of these too. There are some 26 institutions that hold 6.7% of the shares of this company. They have bought and sold shares over the past 3 months and their holdings have been reduced by 4.8% over this time period.

When I look for analysts’ recommendations, I find Strong Buy, Buy and Hold. There are lots of Hold recommendations and the consensus recommendation would be a Hold. (Interestingly, there were some sell recommendations a year ago, but none today.) A Buy recommendation comes with a 12 months stock price of $8.00.

This company got a new CEO last year and some analysts believe that Superior Plus will perform reasonable well in 2012 under this new CEO. They believe that the tax pool will last another 5 to 7 years. (This means that the company will not be paying Canadian tax during this period.)

One of the recent criticisms has been the unsustainable distributions. They have now lowered them. However, distributions are still quite high at 10.4%.

As far as stock price goes, I have 5 year median low and high Price/Earnings Ratios of 10.72 and 18.18. The current P/E ratio of 11.04 is therefore relatively very good. I get a Graham Price of 8.39, so the stock price of $6.07 is almost 28% lower. The 10 median low difference between the Graham Price and Stock Price is the Stock Price being some 15% higher. By the measure, the current stock price is good.

Even though the Price/Book Value ratio has been going up and book value has been coming down, the 10 year median P/B Ratio is not unreasonable at 2.32. The current P/B Ratio is 1.07 is only 46% of the 10 year median value. Also, the stock price is just above the book value. No sense in comparing dividend yield as the dividend has just been decreased.

Basically people have only made money on this over the past 5 and 10 years because of the distributions. The stock over both time periods has Total Returns around 6% per year. However, distributions were around 17% per year. If you own this stock, a gutsy move would be to buy more. A lot of analysts believe that the company will be just fine going forward. However, the risk level on this stock would be quite high.

The Divestor site says some interesting things about this company. See the site for some more information on Superior Plus. The Dividend Ninja also brings up debt levels on this stock. See Superior Plus.

Superior Plus Corp. is a group of diversified businesses that operate within three primary divisions. Superior’s Energy Services division provides distribution, wholesale procurement and related services in relation to propane, heating oil and other refined fuels throughout Canada and the North Eastern United States. Superior’s Specialty Chemicals division is a leading supplier of sodium chlorate and related technology to the pulp and paper sector and a regional Midwest supplier of chloralkali and potassium based products. Superior’s Construction Products Distribution division is a leading distributor of walls, ceilings and insulation products to the Canadian and United States construction industry. Its web site is here Superior Plus. See my spreadsheet at spb.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, February 8, 2012

Shaw Communications Inc

I do not own this stock (TSX-SJR.B, NYSE-SJR). I have followed this stock for a while. It was part of Investment Reporter list of stock published by MCL Communications. See their site. They on the dividend lists that I follow of Dividend Achievers (see resources) and Dividend Aristocrats (see indices).

The company has consistently raised their dividends since 2004. There was some dividend increases prior to this, but they were inconsistent. The 5 and 10 year growth in dividends is 30.5% and 43% per year. However, the big increases took place between 2004 and 2008. The most recent increase was for 4.5% and for 2011 was for 4.5% and for 2010 was 4.8%.

The 5 year Dividend Payout Ratios are 66% for earnings and 25.5% for Cash Flow. The ones for 2011 were 87% for earnings and 31.7% for Cash Flow. They are expected to be lower at 56% and 26.7%, respectively, in 2012. I would not expect big dividend increases in the near future.

Total return over the past 5 and 10 year was around 9.9% and 5.4% per year, with dividends contributing 4% and 2% per year to the total return. This means that dividends are contributing just under 40% of the return on this stock. The current dividend yield is quite good at 4.69%. Dividend yields have been increasing lately because the stock price has flattened recently.

The growth rates a generally good. The 5 and 10 year growth in revenues per shares is 13.6% and 12.3% per year, respectively. Earnings growth is not so good with the 5 and 10 year growth at 0% and 13% per year. However, earnings were low in 2011 and are expected to recover nicely in 2012.

Cash flow growth has been very good at 10.8% and 22% per year over the past 5 and 10 years. Book Value is missed with growth at 13.4% and 1% per year over the past 5 and 10 years. The Return on Equity has generally been very good, with 5 year median ROE at 19.5% and ROE for 2011 at 13.7%. The ROE based on comprehensive income is similar.

As far as debt ratios go, the Liquidity and Asset/Liability Ratios are lower than what I would like to see and the Leverage and Debt/Equity Ratios are a higher than what I would like to see. The current ratios are 0.71, 1.43, 3.35 and 2.35 respectively.

When I look at analysts’ recommendations I got ones all over the place from Strong Buy to Sell. The consensus recommendation would be a Hold. One analyst said to buy for long term share gains and rising dividends. Another thought it might be a takeover target. One analyst said buy for short term rise in stock price, but not a long term hold. A buy comes with a 12 months stock price of $24. So this is rather a mixed bag.

The insider trading report looks rather mixed also. There is some $5.7M of insider selling, but $24.9M of insider buying for a net of $19.2M of insider buying. Both the selling and the buying are by officers and directors. It is only the CFO that has more options than stocks. However, even though officers generally have more shares than options, some officers only have options.

There are 245 institutions that own some 57% of the shares. There has been lots of buying and selling over the past 3 months and the institutions have decreased their shares by 2.6%.

I get 5 year low and high median Price/Earnings Ratios of 15.13 and 19.02. The current P/E of 11.98 is a good one and it is relatively quite low. I get a Graham Price of $17.90 and the current stock price of $19.65 is about 10% higher. The 10 year median difference between the Graham Price and stock price is the stock price being some 53% higher. By this measure the current price is very good.

The current dividend yield of 4.93% is almost 24% above the 5 year median dividend yield of 4%. This dividend yield is also quite high by historical standards. I get a 10 year median Price/Book Value of 3.14 and the current one of 2.26 is only some 72% of this 10 year median value and also points to a very good relatively stock price.

The relatively stock price is very good. On an absolute basis the price is reasonable. That is P/E of 11.98 is reasonable as is the P/B Ratio of 2.26.

It would seem that this stock sold at premium prices in the past, but not so much at present. Personally I wonder about Telecommunications stocks in Canada. We have some of the highest cable and wireless prices anywhere. I do not think that this will continue indefinitely. So, I wonder about the future profitability of telecommunications companies.

I am not personally interested in companies in this sector as I feel that risks are too high against possible future rewards. I still have some investments in BCE and Manitoba Telecom that I have had for a while. I have not yet decided what to do about them.

Here is another bloggers’ take on this company at Dividend Heaven. And another Dividend Watchdog.

Shaw Communications Inc. is a diversified communications company whose core business is providing broadband cable television, Internet, digital phone and satellite direct-to-home services. Industry: Communications & Media (Cable). SJR.B shares are non-voting and the SJR.A shares are voting shares. J.R. Shaw owns 79%. Its web site is here Shaw. See my spreadsheet at sjr.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, February 7, 2012

Research In Motion

I do not own this stock (TSX-RIM, Nasdaq-RIMM), but I used to. I must admit I made a lot of money on this stock. But when I made money it was a rising star. Now, people view it as falling off a cliff. This stock has a financial reporting date of the March 1st. However, no one believes that the financials for March 2012 will be as good as for 2011.

Investors were making money on this stock until last year. Since then stock prices are down around 75%. They have a very low Price/Earnings Ratios around 4.04. However, P/E Ratios are set to expected future earnings and investors think that are going down. They are not wrong. Earnings so far in this financial year, over the past 12 months are down around 35%. Past growth does not count if it looks that future growth will not be there.

This stock has always had great debt ratios. The 5 year median Liquidity Ratio is 2.36 and the 5 year median Asset/Liability Ratio is 3.64. The 5 year median Leverage and Debt/Equity Ratio at 1.28 and 0.28 are also very good. However, this will count for nothing if there is going to be no future growth.

I often used past performance to judge a stock. However, this is fine with businesses in stable environments, but does not work with tech stocks. Technology may be fast growing, but it can be very unstable. The one favorable item is that they do have cash. However, even this can change rapidly when growth stops.

The insider trading report is rather interesting. There is $134M of insider selling and $50M of insider buying. However, all insider selling was before last year (prior to mid-year) and all the insider buying is this year. Except for the CFO, insiders have more shares than options. However removed a couple of officers from this tally, and then the rest have more options than shares. There are a lot of insiders with options and Rights Deferred Share units.

So what do the analysts say? When I look at analysts’ recommendations, they are Strong Buy, Buy, Hold, Underperform and Sell. The vast majority of recommendations are Hold, but there are more Underperform and Sell recommendations than Buy recommendations.

One analyst remarked that it is selling at a deep discount to normal valuations, but that growth is decelerating very quickly. An analysts with a Hold recommendation said that he wants to see how the new team works out. Everyone agrees the next few quarters are going to be tough for the company.

My spreadsheet shows that this current price is very low. I get a Price/Earnings Ratio of 4.04. This is very low in itself. The stock has low and high 5 year median P/E ratios of 10.71 and 35.26, a very wide range. I get a Graham price of $42.47 and the current price is 60% below this. Until last year, the stock price never came near to the Graham Price, let alone below it. However, since the Graham Price takes into consideration earnings, you can expect Graham Price to drop.

I get a 10 year Price/Book Value Ratio of 4.45, a rather high ratio, but typical of growth companies. The current P/B Ratio of 0.86 is just 20% of the 10 year ratio. Also, it says the current stock price is below the book value of the shares.

Personally, I am not currently interested in this stock. I think it is too risky. Besides, I already made money on this stock, why risk losing that in these very uncertain times for this stock.

Research In Motion is a leading designer, manufacturer and marketer of innovative wireless solutions for the worldwide mobile communications market. Through the development of integrated hardware, software and services that support multiple wireless network standards, RIM provides platforms and solutions for seamless access to time-sensitive information including email, phone, SMS messaging, internet and intranet-based applications. RIM technology also enables a broad array of third party developers and manufacturers to enhance their products and services with wireless connectivity. Founded in 1984 and based in Waterloo, Ontario, RIM operates offices in North America, Europe and Asia Pacific. Its web site is here RIM. See my spreadsheet at rim.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, February 6, 2012

Reitmans (Canada) Ltd.

First I would like to mention that Leon’s Furniture (TSX-LNF) has not only increased their dividend by some 11%, but also paid in special dividend in January 2012.The is a rather small family owned company that believes in treating shareholders well. This is a Consumer Discretionary stock and the stock prices are back to where they were in 2006/7. The recovery in Canada is taking longer than anyone thought it would and Consumer Discretionary stocks are suffering. However, the company seems more optimistic than some analysts and indeed the market, on this stock. One problem is stock is rather illiquid. I own stock in Leon’s.

I do not own Reitmans (TSX-RET.A). This is another Consumer Discretionary stock. The management of this company also seems more optimistic than the market. They raised their dividend by 11% in 2011 after keeping it the same between 2009 and 2010.

The dividend yield on this stock has been higher than it has been historically, as stock prices have been suppressed. If you held this stock for the past 10 years, you would have made money, probably around 28% to 30% with some 6% of this total return attributable to dividends. However, if you held this stock over the past 5 years, you would probably not have made any money. You would have collected around 4% per year in dividends.

The financial year for this company ends January 31 of each year. No one expects this company to do well for the financial year ending in January 31, 2012. However, analysts do expect that the company will begin to recover in 2013.

Dividend increases have been erratic on this stock, but the overall result is very good increases, with the 5 and 10 year growth in dividends at 14.9% and 22.8% per year, respectively. The Dividend Payout Ratios are good; with the 5 year median DPRs being 60% for earnings and 35% for cash flow.

The 10 year growth rates for this stock are much better than the 5 year growth rates. For example, the growth in revenues per share over the past 5 and 10 years are 3.2% and 7.7% per year, respectively. The growth in cash flow over the past 5 and 10 years is 4.7% and 17.9% per year, respectively.

As with a number of our stocks with a dominant owner, the debt ratios on this stock are very good. The current Liquidity Ratio is 4.72 and the Asset/Liability Ratio is at 4.78. The current Leverage and Debt/Equity Ratios are 1.26 and 0.26 respectively. This stock has a very strong balance sheet.

The Return on Equity for the financial year ending January 31, 2010 was 16.6% with a 5 year median also at 16.6%. The ROE for January 31, 2010 will probably be less, perhaps around 10%, but still a good ROE.

When I look at insider trading, there is some $5.6M insider selling and a minimal amount of insider buying. The selling all seems to be of options. There are lots of insiders with significant holdings in these shares. The only insider with more options than shares is the CFO. Some 35 institutions own 23% of the shares. Over the past 3 months, they are bought and sold shares and hold marginally fewer shares (much lower than 1%).

When I look at the analyst recommendations, I find Strong Buy, Buy and Hold. The consensus recommendation would be a Buy. Analysts mention the clean balance sheet. Others think that the company is in a tough business and it will not improve in the short term. One analyst says that the stock is a long term play. Another analyst thinks that the stock is too expensive with a P/E of 13 or 14.

The 5 year low and high median Price/Earnings Ratios are 9.76 and 15.63. The current P/E at 13.37 is above the median P/E of 12.97. I get a Graham price of $13.73 and the current stock price of $14.97 is some 9% higher. The median and high difference between the Graham Price and stock price is the stock price being the same as the Graham Price to 29% higher. Both these show higher than median relative stock prices.

The 10 year median Price/Book Value Ratio is 2.19 and the current one of 2.00 is some 91% of that. This shows a good, but not great stock price. The only place that shows a good stock price is the Dividend yield, which currently at 5.34% is some 14.6% higher than the 5 year median dividend yield of 4.66%. Also, the 10 year median high dividend yield is also lower at just 3.78%. So on a dividend yield basis, the stock is at a very good price.

The company has a significant amount in cash, current around $2.40 per share. If you took this amount off the share price it would lower the P/E ratio. They also have another $1.09 in marketable securities.

The Consumer Discretionary stock will probably not improve in the near term, but there is no reason to think they will not do so in the longer term. You would buy this stock for long term capital gains and an increasing dividend income.

Reitmans (Canada) Limited operates a network of clothing stores specializing in women's & men's fashions and accessories. The company operates stores under the names Reitmans, Smart Set, Pennington Superstores, RW & Co., Thyme Maternity, Addition-Elle, and Cassis. Sherlex Investments Inc (Reitman family) owns 50% of this company. Its web site is here Reitmans. See my spreadsheet at ret.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, February 3, 2012

Power Corp

I do not own this stock (TSX-POW), but I own a related company in Power Financial (TSX-PWF). This is a big group of companies, of which some are also on the TSX. You would not want to own separately, different companies under this group unknowingly. That is, you should check out whom or what owns companies you invest in.

I invested in Power Financial as it holds only financial companies. Others like Power Corp better as it holds more companies than just financial companies. It a much more diversified company. It all depends on what you are looking for. They are both very good companies.

As with a lot of companies, this company has not raised dividends since 2008. It would appear that they may not increase the dividend soon as the Dividend Payout Ratio for earnings over the 5 years has a median value of 61%. Prior to the recent market problems, the DPR for earnings was under 30%. The projected DPR for 2013 is at 41%. Although I must say that the DPR for Cash Flow over the past 5 years has a median value of 9%, which is much more in line with past DPR for Cash Flow.

Over the past 5 years, investors would not have made any money. The loss in capital would not have been made up in dividends, even though dividend income was at 3.7%. The loss over the past 5 years would have still be around 3.5% per year. However, investors holding this stock over the past 10 year would have made money. Total return would have probably been around 6% per year with the portion attributable to dividends being around 3.7% per year, or 65% of the return.

A large portion of this company is financial, including life insurance companies. Financial companies, especially life insurance companies have really suffered in this latest recession. They are on the mend, but it will take time.

As far as growth values go, the ones for the past 10 years are in all cases better than the ones for the past 5 years. For example, the 5 and 10 year growth in revenue per share is 4% and 6.4% per year, respectively. For cash flow the 5 and 10 year growth is 3% and 29% per year, respectively.

The Asset/Liability Ratio at 1.11 is normal for a company heavily into financial companies, as is the 5 year median Leverage and Debt/Equity Ratios at 15.07 and 12.66 respectively. Under the new IFRS accounting rules, these last two ratios jumped to 26.37 and 23.82 in the 3rd quarterly report. Unfortunately, it may take some time to sort out how the new accounting rules are going to affect how things are valued. Under the new rules some of their assets and liabilities jumped in value. This is what caused the jump in these last two ratios.

The Return on Equity Ratio for the financial year ending in 2010 is very good, as it generally is, at 14.5%. The one for the 9 months ending in September 2011 is still good, but lower, at 10.7%.

When I look at insider trading, I find insider selling at $18.3M. This selling all occurred before June 2011, when the share price was higher (around $28.00) than recent stock price (around $25). All insiders, except directors have more options than shares. There are some 128 institutions that hold some 27.5% of the shares of this company. The have bought and sold these shares over the past 3 months and marginally have fewer shares (not even 1% decrease).

When I look at analysts’ recommendations, I find Strong Buy, Buy, and Hold. The consensus would be a Hold. The Hold comes with a 12 month stock price of $26.92. A buy comes with a 12 months stock price of $28. A couple of analysts with Hold recommendations are worried about their investments in European communication and financial businesses. They feel that European outlook is not great at present.

A Buy comment was that Power Corp is a low-risk larger cap investment that is attractively valued and offer appealing dividends. Another buy says that the current stock price represents good value.

So how good is the stock price according to my spreadsheet? The 5 year median low and high Price/Earnings ratios are 10.94 and 16.41. The current one is on the low end at 10.13. The 10 year median Price/Book Value Ratio was 1.79. The current one of 1.19 is some 67% lower and points to a good price.

I get a Graham Price of $34.11 and the current stock price of $25.02 is some 62% lower. The 10 year median low between the Graham Price and stock price is the stock price lower by 20%. So this points to a good price. The current dividend yield at 4.64% is higher than the 5 year median dividend yield of 4.14% by almost 12%. Also, note that the 10 year median high dividend yield is much lower at 2.69%. Since this latest recession began, the dividend yield on this stock is much higher than the historical ones.

The problem I see with this stock as with others with Life Insurance and European properties is that the recovery of the stock could take a long time. With this stock you could collect dividends with a yield of 4.6% (much better than any current interest rates) while you wait for the stock to come back. I do not think that there is a question of this company recovery, just when it will.

T. E. Wealth picked this stock for RRSP investment in 2012. The dividend ninja review this stock recently on his site.

Power Corporation of Canada is a diversified international management and holding company with interests in companies in the financial services, communications and other business sectors in North America, Europe and Asia. Some of it subsidiary companies include Power Financial, the Pargesa group and Gesca and Square Victoria Digital Properties. Controlling shareholder of Power Corp of Canada is Paul Desmarais. They have 30.1%, but have 64.6% voting control. Its web site is here Power Corp. See my spreadsheet at pow.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, February 2, 2012

Onex Corp

I do not own this stock (TSX-OCX), but I used to. I had mistaken this stock for a dividend paying stock. I bought the company in 2001 and sold it in 2008. I made a return of 5.9% per year, of which only .4% could be attributed to dividends. The portion that is dividends would be 7.4% of the total return. This is a lousy return considering the risk attached to this stock.

If you owned this stock over the past 5 and 10 years, you would have made 3.5% and 4.4% per year, respectively. The portion that could be attributed to dividends would be .4% per year. Why I say I mistook this stock for a dividend paying stock, is that it really is not a dividend paying stock. They have not changed the dividends paid for over 10 years. The current yield is a measly .3%.

The thing is you are not always rewarded for taking more risks. The Newfound Capital Corp (TSX-NCC.A) reviewed yesterday was a solid performer. There is nothing specular about the results, but they are solid. This company, with its high risk has not produced results. That is why I got out of it when I did. I did not see that it would be a good long term investment. In fact, I did not see it producing good results for me anytime in the near future.

Because this company is buying back shares, the per share values look better than the total values. Over the past 10 years, shares are down just over 27% (just over 2% per year). For example, the revenue over the past 5 and 10 years has grown at the rate of 8% and 1% per year. The revenue per share over the past 5 and 10 years has grown at the rate of 11.4% and 4.4%.

I cannot calculate growth in earnings as they had negative earnings in 2011. Earnings have been erratic with some years with high earnings and 3 other years within the past 10 years with negative earnings. If I look at what earnings are expected this year, then growth in earnings is negative over the past 5 and 10 years at -15% and -4% per year, respectively. However, it would appear that the company has money coming into earnings from discontinued operations and that might shove up earnings for 2011 (only) to higher than it has ever been. The thing with such earnings is that they are not reproducible in other years.

The best growth is in cash flow and over the past 5 and 10 years, it is up 20% and 10% per year, respectively. Book value growth is mediocre and is up 8.5% and 3.6% per year over the past 5 and 10 years. However, with the new accounting rules it would appear that book value is going to go up a lot. It also appears that the value attributed to Non-controlling interest will go down.

Return on Equity is also erratic, with the 5 year median ROE at 12.3%, but the ROE at the end of 2010 at -3.4%. There were no earnings in 2010. With this sort of business, the erratic changes in returns or earnings each year might be acceptable if the total return was very good. But it is not.

The debt ratios are mixed. The Liquidity Ratio is the best with a very good current value of 2.05. The Asset/Liability Ratio is a bit low at 1.26. The current Leverage and current Debt/Equity Ratio are high at 13.03 and 10.35, respectively.

When I look at insider trading, I find $6.4M buying and minimal insider selling. They have paid between, approximately, $31.75 and $37.75 for these shares. There are 109 institutions that own some 39% of this company. They have bought and sold this stock over the past 3 months and have increased their shares by a minimal amount (1%).

The analysts’ recommendation on this stock covers Strong Buy, Buy and Hold. The consensus recommendation would be a Buy. (There is nothing surprising here as this is the recommendation I most often see on any stock.) One analyst says that the stock is undervalued. They point out that the company has almost $2.2B in cash.

A number of analysts like this company. They think it is trading at a discount to its NAV (Net Asset Value). A few mention that they would like it to raise the dividend. One suggested it should not be buying back so much stock. Another says that it rebuys shares at $32 to $33 as the company sees value in their shares at that that price.

I get 5 year median low and high Price/Earnings Ratios of 9.18 and 11.49. These are quite low. Problem is the number of negative earnings years which will push down median values. The current P/E ratio of 33.31 is much higher. It is quite high as P/E Ratios go.

I get a Graham price of $20.47 and the current stock price of $35.31 is some 73% higher. The high and median difference between the Graham Price and stock price is the stock price being 83% and 50% higher. So the current difference is near the high difference.

I get a 10 year median Price/Book Value Ratio of 3.61 (which is quite high). The current P/B Ratio is 1.89 which is some 52% of the 10 year value. Even the one for 2011 at 2.42 is some 67% of the 10 year value. This would point to a very good current stock price. Since they do not raise dividends, looking at dividend yield has no value.

I personally would not buy this stock again. I do not think you get rewarded for the risk taken. This stock is really a private equity fund. (Or, something like a Hedge fund.)

Onex is one of North America's oldest investment firm committed to acquiring and building high-quality businesses in partnership with talented management teams. Onex manages investment platforms focused on private equity, real estate and credit securities. Gerald Schwartz is a major owner. Its web site is here Onex. See my spreadsheet at ocx.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.