Thursday, January 31, 2013

Valener Inc

I do not own this stock of Valener Inc. (TSX-VNR, OTC- VNRCF). I had originally been following this stock as Gaz Metro. Gas Metro LP (TSX-GZM.UN) had floated some 29% of its shares on the TSX. Now, it has made a company out of the 29% that was floated on the TSX. This makes for some confusing accounting. I worry that the accounting for Valener may not reflect the true state of what it owns. My spreadsheet follows the company from Gas Metro to Valener Inc.

First of all let me say that I do not believe that they can afford their dividends. There was a decrease in 2011. This is not the first decrease in dividends for this company. The last increase in dividends was in 2004 and it was for 1.5%. They cannot afford the dividend in 2012 with DPR rates at 122% for earnings and 97% for cash flow. This is not expected to get better this year or next.

Dividends hit a high in 2004 and been tracking down ever since. The 5 and 10 year dividends have declined by 4.2% and 2.4% per year. (Do not forget that I use compounding in my growth calculations. Compounding can do wonderful things when we are talking about growth. It is just as powerful when we are talking about decline.)

Looking at total return, to the end of 2012, the company does not seem to be doing that badly, until you take a closer look. The total return over the past 5 and 10 years is 6.75% and 5.39%. However, the portion attributable to dividends is at 7.11% and 7.4% per year over these periods. There was a capital loss of 0.36% and 1.65% per year over these periods. This means that while shareholders got income, they lost capital. (Also, they cannot afford the dividends.)

When I look at growth, there is none in revenue, EPS or cash flow. There seems to be some good growth in book value per share. Outstanding shares have grown at the rate of 1.5% and 1.6% per year over the past 5 and 10 years. They have issued stock and preferred shares and this seems to be to pay down debt.

This company depends on how well Gaz Metro is doing because it owns part of Gaz Metro. If you look at the Debt Ratio for Valener they look wonderful at 8.52 for the financial year ending in September 30, 2012. However, if you look at the books on Gaz Metro, their Debt Ratio is 1.35 for the financial year ending in September 2012. A Debt Ratio of 1.35 is a low ratio.

The Return on Equity for this company is low at 5.1% and the ROE on comprehensive income is even lower (60% lower) at 2%. The ROE on Gaz Metro is still good. However, Gaz Metro has the same problem with the comprehensive income ROE as it is significantly lower.

So far we got a warning message with the DPRs, we got a warning message with the Debt Ratios (for Gaz) and we got a warning message with variance of ROE on net income and comprehensive income. (This last warning says that earnings may not be of good quality.)

Wait there is more. We get a warning via the Accrual Ratio. The Accrual Ratio has always been high. If the Accrual is positive and high, it might mean that the company is hiding some problem. It also might mean that the Cash Flow is not as good as it appears. It could also indicate that the company is bulking up its earnings with non-cash items. None of this is good.

So what do the analysts say? The analysts' recommendations are a Buy and some Holds. The consensus recommendation would be a Hold. The 12 month consensus stock price is $16.80. This implies a total return of 11.32% with 6.25% from dividends and 5.07% from capital gains.

As far as stock price goes, the Price/Earnings Ratio and the dividend yield tests say the stock price is high. (The 5 year high median P/E Ratio is 12.95 and the current P/E Ratio is 19.50 based on $15.99 stock price and $0.82 EPS for 2013.) The Price/Graham Price Ratio test and the Price/Book Value per Share price say the stock is cheap.

Who do you believe on price? Frankly, I do not care. This stock has much in the way of warnings. I do not think that risk and reward is in balance. I see high risk, low reward. There are a lot of great stocks in our market, so why bother with this one.

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 or StockTwits.

Wednesday, January 30, 2013

Shaw Communications Inc 2

On my other blog I am today writing about my Canadian Bank picks...continue...

I do not own this stock of Shaw Communications Inc. (TSX-SJR.B, NYSE-SJR). They on the dividend lists that I follow of Dividend Achievers (see resources) and Dividend Aristocrats (see indices). I have followed this company for some time.

This is interesting and something I have not seen for a while, there is insider buying at $23.5M. Insider selling is $4.9M and net insider buying is $19.6M. CEO insider's buying is at $9.2M and officers' insider buying is at $14M and there is a small amount of directors' insider buying.

Insider buying is mostly, but not completely was in the early part of 2012 at stock prices of $19 to $20. There also a bunch of insider buying just recently at $23 to $24. Insider selling is by officers at $4.4M and a small amount of directors' insider selling for total insider selling at $4.9M. The insider selling seems to be because of stock options.

I get 5 year low, median and high median Price/Earnings Ratios of 14.06, 16.52 and 17.90. The current P/E ratio is 14.60, towards the low end of this range. The P/E of 14.60 is based on a stock price $23.50 and a 2013 EPS of $1.62. This low P/GP Ratios suggests that the stock price is reasonable.

I get a Graham price of $17.22. The 10 year low, median and high median Price/Graham Price Ratios are 1.47, 1.66 and 1.92. The current P/GP Ratio is 1.36. This ratio is also towards the low end of these ratios. This low P/GP Ratios suggests that the stock price is reasonable.

I get a 10 year median Price/Book Value per share Ratio of 3.39 and a current P/B Ratio of 2.89. The current ratio is some 85% of the 10 year ratio and suggests that the stock price is reasonable. (The current P/B Ratio would have to be just 80% or below of the 10 year ratio for the stock price to be cheap.

The current dividend yield is 4.34% and the 5 year median dividend yield is 4.22%. The current yield is 2.8% higher than the 5 year dividend yield. This suggests that the stock price is reasonable.

When I look at analysts' recommendations I find Strong Buy, Buy, Hold, Underperform and Sell recommendations. However, most are in the Hold category and the consensus recommendation would be a Hold recommendation. The 12 months consensus stock price is $22.60. This would be zero gains, with dividends covering the capital loss.

There is a financial post article about the chairman and founder J. R. Shaw recently buying shares in this company. There was speculation that he was doing this because some large institutional client may have been selling shares. Zacks says why they think this stock is a buy.

One analyst said he only expects modest growth going forward with the company. One analyst thought Shaw was losing market share to Telus (TSX-T). This is discussed in this Financial Post article and also in this article.

My analysis shows that the stock price is reasonable. Analysts do not expect this company to do well this year. However, the first financial report for November 2012 was good. The 12 months EPS was $1.67 compared to a 2013 consensus EPS from analysts of $1.62. No one can tell the future, but I doubt there is much downside risk for this stock.

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 shares are voting shares. Its web site is here Shaw Communications. 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 or StockTwits.

Tuesday, January 29, 2013

Shaw Communications Inc

On my other blog I have uploaded the applicable spreadsheets. See my first spreadsheet on my site at planning.htm, my second spreadsheet at planning2.htm, and my third spreadsheet at planning3.htm.

I do not own this stock of Shaw Communications Inc. (TSX-SJR.B, NYSE-SJR). They on the dividend lists that I follow of Dividend Achievers (see resources) and Dividend Aristocrats (see indices). I have followed this company for some time.

The dividend growth for the past 5 and 10 years looks very good at 15% and 44% per year. However, the dividend yield were extremely low (under 0.5%) until 2003. After that there were some very big increases (like 220% in 2004) until the dividend yield was in the 4% range.

The current dividend is 4.34% and the last increase was for 5.2%. The last few dividend increases were in the 4 to 5% range and this is probably what you should expect going forward. This would mean that on shares purchased today, you might expect to receive a dividend yield of 7% and 9% after 10 and 15 years on the cost of share purchased today.

The Dividend Payout Ratios are good with the 5 year median DPR for earnings at 66% and the DPR for cash flow at 27%. The DPR for the last financial year ending August 2012 was 59% for earnings and 32% for cash flow.

The total return over the past 10 years is very good, but quite lousy over the past 5 years. The 5 and 10 year total returns to the end of 2012 were 2.93% and 14.14%. The portion of the total return attributable to dividends was 3.62% and 3.25% respectively. Over the past 5 years there was a capital loss of 0.69% and over the past 10 years there was a capital gain of 10.90%. Dividends comprised of all of the gain over the past 5 years and were 22.97% of the total return over the past 10 years.

The number of outstanding shares has increased due to stock options, DRIPs, and share issues for acquisitions. They have also done share buy backs. Over the past 5 years outstanding shares have increased by 0.6% per year and over the past 10 years they have decreased by 0.4% per year.

Revenues have grown nicely over the past 5 and 10 years, with revenue going at 12.5% and 10% per year over the past 5 and 10 years. Revenue per share has increased by 11.9% and 10.6% per year over the past 5 and 10 years.

The 5 year growth rate in earnings is quite good at 12.6% per year. Because this company had negative earnings from 2001 to 2003, there are no 10 year growth figures. However, over the past 12 years earnings have grown at the rate of 16% per year.

Over the past 5 and 10 years, cash flow per share has grown at the rate of 4% and 15% per year. Book Value per Share has grown at the rate of 11% over the past 5 years. However, the BV growth over the past 10 years is the worse growth for this company and that growth is 2.7% per year.

The Return on Equity for the financial year ending August 2012 was at 22%. The 5 year median ROE is 21.4%. These are very good rates. The ROE on comprehensive income is close with the ROE for 2012 at 20.1% and the 5 year ROE at 20.9%. The ROE on net income in the last 12 months to the end of November 2012 was at 22%. This is also very good.

The weak area for this company is for the Liquidity Ratio. This ratio is often under 1.00 which means that current assets cannot cover current liabilities. The cash flow after dividends can move this value over 1.00, but not as high as I would like (which would be at 1.50). However, if you exclude the current portion of long term debt rates are better.

The Liquidity Ratio for the financial period ending in November 2012 is 0.49. With cash flow less dividends it becomes 1.26. If you take out the current portion of the long term debt the Liquidity Ratio is 0.64. If you exclude the current portion of the long term debt and take in cash flow less dividends, then the liquidity ratio gets to a more desirable 1.65. The company expects to have sufficient cash flow and borrowing capacity to finance their debt.

The Debt Ratio is fine at 1.51. The current Leverage and Debt/Equity Ratios are a little high, but fine at 3.43 and 2.27. They are basically in line with their industry.

The company is in a competitive business, but has managed to make money for their shareholders over the long term. The good dividend that they can afford would tend to limit the downside risk. This is normal for dividend paying companies which, while they may not rise as quickly as the market, they also do not fall as quickly as the market. Dividends tend to moderate stock price declines and limit downside risks.

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 shares are voting shares. Its web site is here Shaw Communications. 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 or StockTwits.

Monday, January 28, 2013

Metro Inc 2

On my other blog I am today writing about the planning in retirement with stock funds...continue...

I own this stock of Metro Inc. (TSX-MRU, OTC-MTRAF). I bought this stock in 2004 for my Trading account. I have made a return of 18.36% on the stock I bought in 2004. Only 1.95% is attributable to dividends and 16.41% is attributable to capital gains.

When I look at insider trading I find some $6.3M of insider selling and not insider buying. Some 1.7M of this insider selling was by the CEO. It would seem insiders are selling off options. Under this company insiders not only have options but also Performance Share Unit (PSU) and Deferred Stock Units.

The CEO has shares worth $9M and options worth $36.7M. The CFO has no shares worth and options worth $1.7M. An officer has shares worth $0.5M and options worth $2.3M. A director has shares worth $0.2M and has options worth 0.6M. This is just to give you an idea on insider share ownership and option values.

The 5 year low, median and high median Price/Earnings Ratios are 9.08, 10.93 and 12.78. The current P/E is 12.81 based on a stock price of $64.96 and 2013 earnings of $5.07. I get a Graham Price of $54.65. The 10 year low, median and high Price/Graham Price Ratios are 0.88, 1.03 and 1.14. The current P/GP Ratio is 1.19.

I have a 10 year median Price/Book Value per Share Ratio of 2.09 and a current P/B Ratio of 2.48. The current one is some 18% higher than the 10 year median ratio. The 5 year median dividend yield is 1.6% and the current dividend yield is 1.32% a value some 17% lower than the 5 year median.

All my stock price check shows that the current stock price is higher than the historical high median price. It is not a lot higher, but these tests do show that the stock price is relatively high.

When I look at analysts' recommendations I find Strong Buy, Buy, Hold and Underperform recommendations. The consensus recommendation would be a Buy. (But the rating is getting close to a Hold.) (See my site for information on analyst ratings.)

The 12 months consensus stock price is $61.50 and this implies a loss of 4% with capital loss at 5.33% and dividend income at 1.32%. Although one analyst with a Hold rating expected a 12 month stock return of 1.2%.

There is a concern with the partial sale of Alimentation Couche-Tard Inc. (TSX-ATD) stock that Metro will no longer be able to grow their EPS like they have in the past little while. This company is admired, but a couple of analysts with a Hold recommendation thought the stock price was a bit too high.

People are wondering what the company will do with the cash they got from Couche-Tard. See Financial Post article.

I notice that the Accrual Ratio is rather high at 5.83% and this is a negative. It suggests that stock should be sold.

I will hold on to the shares I currently own. I do not sell shares because they are a bit overpriced. The market tends to under and over price stocks all the time and I feel that it would be foolish to sell a stock simply because it is currently overprice. I would end up doing a lot of trades if I did this.

For me this has been a good investment. I feel that it is currently price too high for buying.

Metro is a leader in the food and pharmaceutical sectors. It operates a network of close to 600 food stores under the banners Metro, Metro Plus, Super C, A & P, Dominion, Loeb and Food Basics. It has 250 pharmacies under the banners Brunet, Clini Plus, The Pharmacy and Drug Basics. Metro's operations are concentrated in Quebec and Ontario. Its web site is here Metro. See my spreadsheet at mru.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 or StockTwits.

Friday, January 25, 2013

Metro Inc

I own this stock of Metro Inc. (TSX-MRU, OTC-MTRAF). I first bought this stock in 2001 for the RRSP account and later bought it in 2004 for my Trading account. I sold the stock in my RRSP account, as the stock had grown a lot and there is no capital gain in for RRSP accounts.

I have made a return of 18.36% on the stock I bought in 2004. Only 1.95% is attributable to dividends and 16.41% is attributable to capital gains. I investigated and bought this stock because it was on Mike Higgs list of dividend growth stocks. They on the dividend lists that I follow of Dividend Achievers (see resources) and Dividend Aristocrats (see indices).

The dividend is low on this stock. It was a 5 year median dividend yield of 1.6%. The current dividend yield is just 1.32%. On my stock which I have had for 9 years, I am earning a dividend yield of 4.9% on my original purchase price.

The dividend growth is good with the 5 and 10 year growth at 12.6% and 14.5% per year. The last dividend increase for this stock in the 2012 financial year was for 11.7%. The Dividend Payout Ratios are low. The 5 year DPR for earnings is at 19% and the DPR for cash flow is at 12%.

To the end of 2012 the 5 and 10 year total return has been 20.86% and 15.09%. The portion of this total return attributable to dividends is 1.69% and 1.57%. The dividends make up 12% and 11% of the total return over these periods. The portion of the return attributable to capital gain is 19.17% and 13.56%.

The outstanding shares have decreased over the past 5 and 10 years at 3.2% and 0.2%. The shares have increase for stock options and shares issued and have been reduced through share buy backs.

The revenue has grown by 2.4% and 8.8% per year over the past 5 and 10 years. The Revenue per Share has grown at the rate of 5.9% and 9.1% per year over these periods. Earnings per Share have grown at the rate of 15.4% and 13.1% per year over the past 5 and 10 years.

Cash Flow per Share has grown at 9.8% and 11.1% per year over the past 5 and 10 years. The Book Value per Share has grown at the rate of 9.2% and 15% per year over the past 5 and 10 years. Growth rates are good except for revenue and here the 5 year growth rate is low.

The Return on Equity is good with the one for the financial year ending in September 2012 at 19.2% and the 5 year median ROE at 15.7%. The ROE on comprehensive income at 17.3% is has a 2% difference from the ROE on net income. However, the 5 year median ROE is closer at 15.6%.

The Liquidity Ratio is low at just 1.04. Generally cash flow after dividends makes up for this, but even with cash flow after dividends included the Liquidity Ratio is low at 1.43. (You would like to see this at 1.50.) The Debt Ratio is very good at 1.98. Leverage and Debt/Equity Ratios are fine at 2.02 and 1.02.

It has been a good investment and I plan to hold on to the shares I have at present. It has had a good run recently and I would not be surprise if there is a pause in growth. The high accrual ratio of 5.8% is a negative. Revenue growth for last 5 year has been low.

Metro just sold off half their investment in Alimentation Couche-Tard Inc. (TSX-ATD) mru.htm.

Metro is a leader in the food and pharmaceutical sectors. It operates a network of close to 600 food stores under the banners Metro, Metro Plus, Super C, A & P, Dominion, Loeb and Food Basics. It has 250 pharmacies under the banners Brunet, Clini Plus, The Pharmacy and Drug Basics. Metro's operations are concentrated in Quebec and Ontario. Its web site is here Metro. See my spreadsheet at mru.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 or StockTwits.

Thursday, January 24, 2013

Rogers Sugar Inc

I do not own this stock of Rogers Sugar Inc. (TSX-RSI, OTC-RSGUF). I started to follow this stock in June 2011. It was brought to my attention by Dividend Ninja. This company used to be a Unit Trust (TSX-RSI.UN) but it has converted to corporation. On change to a corporation, it lowered its dividend.

I do not have enough time in a year to do two day reports on all my stocks, so for this stock, I am only doing a one day report.

The lower dividend after 5 and 10 years does not reflect the true position of this company. After lowering the dividends in 2011 the dividends were increased in 2012 by 5.9%. However, sugar is a commodity and I would expect that the dividends on this stock might vary in the future. That is dividends could go down as well as up.

The return to the end of 2012 is good for the shareholders with 5 and 10 year total return at 13.02% and 11.72% per year. The portion of this return attributable to dividends would be 8.05% and 8.54% per year, respectively. The portion of the return attributable to capital gains would be 4.97% and 3.18% per year, respectively. This means that 62% and 73% of the total return over the past 5 and 10 years is in dividends.

They had in the past rather high Dividend Payout Ratios. The 5 year DPRs are 96% and 64% for earnings and cash flows. However, if there is no dividend increase in 2012 the DPR for earnings will be around 86%.

There has been some outstanding share increases over the past 5 years at 1.4% and 2% per year. This is low. The growth in revenues per share is the best at 3.4% and 5% per year. The growth or lack thereof in cash flow is the worst with cash flow per share down 13% and 1% per year over the past 5 and 10 years.

The Liquidity Ratio is low at 1.34, but the Debt Ratio is fine at 1.88 as are the Leverage and Debt/Equity Ratios at 2.14 and 1.14 for the financial year ending in September 2012.

The Return on Equity for net income is good with a 5 year median at 15.9% and it is confirmed by the ROE on comprehensive income at 15.9% also.

Not much is happening in insider trading with insider selling at $0.6M and insider buying at $0.5M. There is not much in the way of stock options outstanding. There are some 11 institutions that hold 26% of the outstanding stock. However, they have decreased their shares by just over 3% in the last 3 months and this does not look good.

The 5 year low, median and high median Price/Earnings Ratios are 8.44, 9.61 and 11.16. The current one is at 14.40 with 2013 earnings of $0.42 and a stock price of $6.05. The 10 year low, median and high median Price/Graham Price Ratios are 0.70, 0.81 and 0.94. The current P/GP Ratio is 1.15.

The 10 year Price/Book Value per Share Ratio is 1.47 and the current ratio is 2.05, a value some 40% higher. Since dividend yield has been declining checking the current stock price using dividend yield will not produce much information. All my stock price tests say that the stock price is relatively high.

When I look at analysts' recommendations all I find are Hold recommendations. The 12 month target stock price is $6.06 and this is only marginally higher than today's price. So there is not much in the way of capital gains, but dividends are good at 6%.

One analyst with a Hold recommendation thought that the stock price was expensive. It said that the company is in a low growth business, but that the company paid good dividends.

I think that this company is in a risky, low growth business. It is risky because sugar is a commodity and like all commodities its price can fluctuate. At present the stock price is relatively expensive.

Rogers Sugar Inc. was established to hold all of the common shares and notes of Lantic Inc. Lantic Inc. is a refiner, processor, distributor and marketer of sugar products in Canada. Its web site is here Rogers Sugar. See my spreadsheet at rsi.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 or StockTwits.

Wednesday, January 23, 2013

National Bank of Canada 2

On my other blog I am today writing about the market systems...continue...

I do not own this stock of National Bank of Canada (TSX-NA, OTC-NTIOF). I have never covered this bank before, but I have heard good things about it. Some analysts are referring to Canada's big 6 banks and include this bank.

When I look at insider trading I find $23M in insider selling and a minimal amount of insider buying with net insider selling at $22.5M. Bank insiders tend to get a lot in options and sell them off when they can because it is part of their salary. Some 20M of this was selling by officers and some $2.8M by the CEO.

Under this bank there are not only options but Restricted Stock Units, Stock units subject to Criterion and Deferred Share units (UAD) / (DSU). (I am translating stock unit language from French.)

The CEO has $5M in shares and $103M in options. The CFO has $0.4M in shares and $5M in options. An officer has $0.04M in shares and $0.9M in options. A director has $0.6M in shares and $0.7M in options. This is just to give you an idea of what the options and insider ownership is like. In this bank an awful lot of people have stock options; the list goes on for about 15 pages.

It would seem 186 institutions own some 25% of the outstanding shares and have increased their shares by almost 2% over the past 3 months.

The 5 year low, median and high median Price/Earnings Ratios for this bank are 9.05, 10.28 and 11.57. The current P/E Ratio is 9.75 based on a stock price of $79.38 and 2013 earnings of $8.14. (Analysts expect the earnings in 2013 to be less than in 2012.) This low P/E ratio suggests a reasonable price.

I get a Graham Price of $76.59. The 10 year low, median and high median Price/Graham Price Ratios are 0.83, 0.93 and 1.07. The current ratio is 1.04. This ratios suggests that the price is a bit high, but still reasonable.

The 10 year median Price/Book Value per Share Ratio is 1.92 and the current P/B Ratio is 1.98, a ratio some 3% above the 10 year median ratio. This suggests that the stock price is reasonable.

The dividend yield is 4.18% and the 5 year median dividend yield is 4.27% a value some 2% higher than the current dividend yield. The close proximately of the dividend yield suggests a reasonable stock price.

My stock testing produced results that say the stock price is reasonable.

When I look at the analysts' recommendations, I find Buy, Hold and Underperform. The vast majority of the recommendations are a Hold and the consensus recommendation is a Hold. The 12 month consensus stock price is $82.50. This implies an 8.11% total return with 4.18% from dividends and 3.93% from capital gains.

Analysts seem to have low expectations from this bank. They do not expect with revenue nor earnings growth for 2013. That is probably why there are so many Hold recommendations for this stock. One analyst liked this bank because of high ROEs (25.3 for 2012) and low P/E (9.75 currently). Another analyst liked the stock because it was dominate in Quebec where it has a protected market and it is the least international of all Canadian banks.

Another analyst said that the bank will give you a good dividend going forward but not much capital gain. (Note that total return consensus for 2013 was just 3.9% capital gain.) There is a write up on Seeking Alpha about this bank. He likes the high yield and low payout ratios, but would wait for a minor pull-back before buying.

I expressed some concerns yesterday about the high EPS/CF Ratio, the difference in ROE between net income and comprehensive income and the high Leverage and Debt/Equity Ratios. I will continue to follow this stock for now, but I would not buy it.

Also, this bank as a lot of cash on hand and it has had lots of cash on hand for more than 5 years. If you reduce the stock price by the $20.14 cash per share the P/E is reduced to a quite low level of 6.85.

National Bank of Canada provides financial services to consumers, small and medium-sized enterprises, and large corporations & has branches in every province in Canada. It is also represented in the U.S. and Europe through its subsidiaries and alliances. It is also represented in the U.S. and Europe through its subsidiaries and alliances. Its web site is here National Bank. See my spreadsheet at na.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 or StockTwits.

Tuesday, January 22, 2013

National Bank of Canada

I do not own this stock of National Bank of Canada (TSX-NA, OTC-NTIOF). I have never covered this bank before, but I have heard good things about it. Some analysts are referring to Canada's big 6 banks and include this bank.

The first thing you have to ask yourself is, has this bank made any money for its shareholders. If you look at the past 5 and 10 years to the end of 2012, I find that it has make money for its shareholders and it has done better than the other banks.

The 5 and 10 year total return is 12.44% and 13.46% per year, respectively. The portion of this total return attributable to dividends is 4.32% and 4.35% per year, respectively. Dividends made ups 35% and 32% of the total return over these respective periods. The portion of this total return attributable to capital gain is 8.11 and 9.11% per year, respectively.

Has this bank done well in dividend growth? Dividends have grown at the rate of 6.2% and 12.72% per year over the past 5 and 10 years. This bank also stopped dividend increases from 2008 to 2010. The last dividend increase was for 5.1%. However, in both 2011 and 2012 dividends were increased twice during the year and the total increases were for 10.5% and 12.4%, respectively.

What about the Dividend Payout Ratios? The 5 year median DPR for earnings is 42% and for cash Flow is 38%. These are good DPRs for a bank. (See my site for information on Dividend Payout Ratios). Also, because these DPRs were so close, I decided to take a look at the Accrual Ratio and EPS/CF Ratio.

A caution is that the Accrual Ratio has been over 5% in the past and the EPS/CF Ratio has been over 1.00. Companies with continuously high Accrual Ratios and high EPS/CF Ratios tend not to do as well as companies that do not have these characteristics. This is from work done by Richard Sloan. If you are interested a couple of sites talk about this subject. See Smart Money site and Richard Sloan at Michigan Ross School of Business.

Both the Accrual Ratio and EPS/CF Ratio have been coming down in 2011 and 2012. The Accrual Ratio was good in 2012 at 0.47% and the EPS/CF had improved in 2012 to 0.91. The 5 year median Accrual Ratio is not bad at 3.8%. For this ratio you worry about values over 5%. The 5 year median EPS/CF is still a bit high at 0.91, but it is under 1.00.

If the Accrual ratio is positive and high, it might mean that the company is hiding some problem. It also might mean that the Cash Flow is not as good as it appears. It could also indicate that the company is bulking up its earnings with non-cash items. These ratios being high, just means to be cautious. It really does not tell you anything positively. They are coming down to better levels recently.

The outstanding shares have increased marginally (0.4%) over the past 5 years and decreased a bit (1.2%) over the past 10 years. The shares have increased due to stock options and acquisitions and have decreased due to share buy backs.

Over the past 5 and 10 years revenue has increased by 9.2% and 5.8% per year. Over the past 5 and 10 years revenue per share has increased by 8.7% and 7.1% per year. Earnings per Share have increased by 9% and 10.8% per year. Cash Flow per Share has increased by 8.6% and 7.1% per year.

I had originally reported that the Book Value per Share has not done as well, increasing by 3.6% and 5% per year. However, this is untrue and the BV has increased by 8.3% and 7.3% over the past 5 and 10 years. I have updated my spreadsheet.

The Return on Equity was very good for 2012 coming in at 25.3%. The 5 year median is also quite good at 18%. The ROE on comprehensive income for 2012 was lower by just over 4.9% coming in at 20.4%. You would like to have the ROE on both the net income and comprehensive income quite close and this is not that close.

When the ROE on comprehensive income is close to the ROE on net income, it tends to confirm the quality of the net income. The difference does not tell you a lot, but it is a caution warning.

The Liquidity Ratio and the Debt Ratios are normal for a bank coming in at 1.15 and 1.05 in 2012. However, the Leverage and Debt/Equity Ratios are rather high at 27.55 and 26.27. (You would expect them to be in the 15 to 20 range.) Not good.

This bank has done very well for its shareholders over the past 5 and 10 years. However, I am not putting this bank on my buy list. I like the banks I have presently, which are Bank of Montreal (TSX-BMO), Royal Bank (TSX-RY) and Toronto-Dominion Bank (TSX-TD). I do not need any more bank exposure in my portfolio.

National Bank of Canada provides financial services to consumers, small and medium-sized enterprises, and large corporations & has branches in every province in Canada. It is also represented in the U.S. and Europe through its subsidiaries and alliances. It is also represented in the U.S. and Europe through its subsidiaries and alliances. Its web site is here National Bank. See my spreadsheet at na.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 or StockTwits.

Monday, January 21, 2013

Bank of Nova Scotia 2

On my other blog I am today writing about the high pay of CEOs via stock options...continue...

I do not own this stock of Bank of Nova Scotia (TSX-BNS, NYSE-BNS). However, I have been following this bank for some time. I do not own this bank because I already own Bank of Montreal (TSX-BMO), Royal Bank (TSX-RY) and Toronto-Dominion Bank (TSX-TD).

When I look at insider trading I find no insider buying and insider sell at $40.5M. (This is the second highest net insider selling of the banks I have reviewed so far.) Problem is that insiders have lots of options and look at options as part of their pay.

The CEO has shares worth $15M and options worth $225M. The CFO has shares worth $2M and options worth $13M. An officer has shares worth $0.5M and options worth $3M. A director has shares worth $5M and has options worth 2.63M. This is just to give you an idea on insider share ownership and option values.

It would seem that this bank has some 50% of its outstanding shares owned by institutions. Over the past 3 months institutions have increased their shares by some 7%. This is a positive.

The 5 year low, median and high median Price/Earnings Ratios are 10.66, 11.93 and 14.20. The current P/E is 11.34. This is based on a stock price of $58.05 and 2013 earnings of $5.12. This relatively low P/E ratio suggests that the stock price is reasonable.

I get a current Graham Price $58.56 and the 10 year low, median and high median Price/Graham Price Ratios are 1.00, 1.14 and 1.29. The current P/GP Ratio is 0.99. This relatively low ratio suggests that the stock price is low. Since the P/GP ratio is below 1.00, this also suggests that the stock price is a good one.

The 10 year median Price/Book Value per Share Ratio is 2.40 and the current P/B Ratio is 1.95. The current ratio is 81% of the 10 year ratios and this relatively low ratio suggests that the stock price is low.

The 5 year median dividend yield is 3.96% and the current dividend yield is 3.93%. These yields are relatively close and that suggests that the stock price is reasonable.

When I look at analysts' recommendations I find Strong Buy, Buy and Hold recommendations. The consensus recommendation would be a Buy. (See my site for information on analyst ratings.) The 12 month consensus stock price is $61.30. This suggests a total return of 9.06% with 3.93% from dividends and 5.13% from capital gains.

Analysts have stated that Scotia has Latin American exposure and that this is a good thing. However, ever since I started to invest in the 1970's people have been talking about Latin America coming into its own and doing well. However, it seemed to have its ups and downs, but I cannot say much for progress. A number of South American states seem to have, again, become basket cases. Venezuela currently comes to mind when you talk about countries doing poorly. I wish the people of South America well, but I really have a hard time believing things are going to ever change there.

A number of analysts liked the recent purchase of ING Bank of Canada. See articles in the Financial Post on this purchase. See one dated in August 2012 and one dated in September 2012.

A few analysts liked this bank for a long term buy and liked the current dividend which is around 3.9%. Citigroup Initiates Bank of Nova Scotia at Neutral says Benzinga. (By the way a neutral rating is a Hold rating.)

There is an article on Seeking Alpha about 6 good banks to buy and this bank is included in the list.

I have always liked this bank. It has international exposure (although as mentioned I do not see that exposure to South America gives it much advantage). It is a well-run bank. It has a decent dividend and the stock price is low to reasonable, relatively speaking.

The Bank of Nova Scotia is a bank. They offer personal and corporate banking and wealth management services in Canada and US, which includes looking after banking, financing, investing, credit card and insurance needs. They offer mortgages and mutual funds and they offer full service and on-line brokerage services. It is an international bank having banking in Canada and some 40 other countries around the world in the geographic regions of the Caribbean and Central America, Mexico, Latin America and Asia. Its web site is here Scotia Bank. See my spreadsheet at bns.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 or StockTwits.

Friday, January 18, 2013

Bank of Nova Scotia

I do not own this stock of Bank of Nova Scotia (TSX-BNS, NYSE-BNS). I have been following this bank for some time even though I do not own it. I do not own this bank because I already own Bank of Montreal (TSX-BMO), Royal Bank (TSX-RY) and Toronto-Dominion Bank (TSX-TD). I initially built my portfolio on bank and utility stock.

Dividend growth over the past 5 and 10 years was at 3.63% and 11.11% per year. Dividends were increased twice in 2012 for a total increase of 9.6%. Not quite as good as the 10 year growth rate, but still a good increase. This bank also had level dividends in 2009 and 2010. This is why the 5 year dividend growth rate is so low.

The Dividend Payout Ratios are fine with the 5 year median at 50% for earnings and 34% for cash flow. The DPRs for 2012 came in at 40% and 34% and the DPR for earnings is expected to be at 42% in 2013 so there is some room for more increases. (See my site for information on Dividend Payout Ratios).

The total return for this stock over the past 5 and 10 years was at 6.47% and 12.36% per year. The capital gain portion of this total return was 2.71% and 8.12% per year over the past 5 and 10 years. The dividend portion of this total return was 3.76% and 4.25% per year over the past 5 and 10 years.

The outstanding shares have increased by 3.78% and 1.62% per year over the past 5 and 10 years. Increases have been due to DRIP, stock options and public offerings (for some acquisitions).

This bank has not had much in revenue or revenue per share growth. The revenue has declined over the past 5 by 4.9% per year. The revenue has grown by just 1.2% per year over the past 10 years. Revenue per Share has declined over the past 5 years by 8.4% per year. It has also declined over the past 10 years by 0.4%.

Other growth is better with Earnings per Share grown at 5.4% and 12.2% per year over the past 5 and 10 years. Cash Flow per Share has also grown at 8.5% and 7.6% per year and Book Value per Share at 11.3% and 8.3% per year over the past 5 and 10 years.

The return on equity is good for this stock. The ROE for the 2012 financial year was 18.3% and the 5 year median ROE is 17.1%. The ROE on comprehensive income is similar with the ROE for 2012 at 19.6% and the 5 year median ROE slightly lower at 16.7%.

The debt ratios are normal for a bank with the Debt Ratio at 1.07 and the Leverage and Debt/Equity Ratios at 18.95 and 17.78.

Investing in this bank for the long term would get you a very nice yield on your original investment. After some 20 years you might be looking at the over 30% range. Banks are very good at providing increasing dividend income over time. (See my site for information on dividend yields on original investments.)

As far as dividend increases go over the past 5 years, this stock was only better than BMO. Both RBC and TD did better, as did the National Bank. (I do not follow CIBC.) Their dividend increases were at, 3.6%, at least better than inflation.

You would buy this for dividends and capital appreciation. It would be a long term buy. However, it has not been good at growing revenue.

The Bank of Nova Scotia is a bank. They offer personal and corporate banking and wealth management services in Canada and US, which includes looking after banking, financing, investing, credit card and insurance needs. They offer mortgages and mutual funds and they offer full service and on-line brokerage services. It is an international bank having banking in Canada and some 40 other countries around the world in the geographic regions of the Caribbean and Central America, Mexico, Latin America and Asia. Its web site is here Scotia Bank. See my spreadsheet at bns.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 or StockTwits.

Thursday, January 17, 2013

Toronto Dominion Bank 2

I own this stock of Toronto Dominion Bank (TSX-TD, NYSE-TD). I bought this stock in 2000 because the price was good. I have made 13.81% per year on this stock with 10.41% from capital gain and 3.40% from dividends. However, I have followed this stock for a long time, not just since when I bought it.

When I look at insider trading I find $72.5M of insider selling and $69.5M of net insider selling. There was $3M of insider buying by directors. The CEO’s insider selling was at $16.9M and the CFO was at $3.3M. It would seem that the insider selling was of options. There are not only options for this bank but options like vehicles like Rights Deferred Share Units, Rights Performance Share Units, and Rights Vesting Share Units.

The CEO has shares worth $22.3M and options worth $228.5M. The CFO has shares worth $1.3M and options worth $31.7M. An officer has shares worth $0.3M and options worth $0.7M. A director has no shares but has options worth $3M. This is just to give you an idea on insider share ownership and option values.

According to the NASDAQ site, in the 3 months prior to the year end there are 384 institutions holding 53% of the outstanding shares. They have increased their shares marginally by 0.4%.

The 5 year low, median and high median Price/Earnings Ratios are 10.71, 13.05 and 15.09. The current P/E Ratio of 10.48 based on stock price of $81.82 and a 2013 EPS of $7.81 suggests a relatively low stock price. The Graham Price is $91.90. The 10 year low, median and high median Price/Graham Price Ratios are 0.89, 1.00 and 1.20. The current P/GP Ratio is 0.89 and this suggests that the stock price is relatively low.

The 10 year Price/Book Value per Share Ratio is 1.99. The current P/B Ratio is 1.70 a value of only 85% of the 10 year Ratio. This low ratio suggests that the stock price is on the low side (but to be low, you would want the current Ratio to be only 80% or less of the 10 year median ratio.)

The last thing to look at is the dividend yield. The 5 year median dividend yield is 3.82% and the current dividend yield is 3.76%. The current yield is higher than the 5 year median by 1.5%. This current dividend yield suggests that the stock price is at a relatively average level. However, the dividends have not been increasing over the past 5 year at normal levels.

The stock price testing suggests that the current stock price is relatively low.

When I look at the analysts’ recommendations I find Strong Buy, Buy, Hold and Sell. The consensus recommendation is a Buy. (Most of the recommendations are in the first 3 categories and there is only 1 sell.) The 12 month consensus stock price is $89.80. This implies a total return of 13.64% with 9.88% from capital gains and 3.76% from dividends.

One site thought that the Price/Sales Ratios was high. The 5 year P/S Ratio was 3.14 and the one for 2012 was 3.23. Based on current price it is at 3.10. The trailing P/S is 3.25. The 5 year trailing P/S is 3.39. (With this ratio, lower is better.)

The Passive Income Earner blogger had a good review of this stock. I agree that a good way to buy Canadian Banks is to look at the yields and buy the highest yielding bank. Although I must admit, that CIBC generally has the highest yield or is close to that and this has never been a favourite of mine. This is the only of the big 5 that I do not follow. I think that if you want to hold a bank for the long term, what you need is a bank with a relatively historically low stock price.

Huffington Post has an interesting recent article on this bank. The blog entry at Fully Informed on this bank might also be of interest. This bank was also a top pick for RBC Capital Market for 2013.

I do not know why this bank got one Sell recommendation. I know that one analyst said that the Canadian banks currently are at the high end of their stock price ranges and he suggests waiting for a pull back. However, my analysis in stock price testing shows stock price is at relatively low level. I check relative stock prices rather than absolute stock prices. (Of course, we are in a secular bear market and relative prices will go lower before we get into the next secular bull market. The problem is, we do not know when this will happen.)

The TD bank is a bank with a full range of financial products and services for individuals and corporations in Canada, USA and internationally. Financial products and services include Canadian Personal and Commercial Banking; Wealth Management; U.S. Personal and Commercial Banking; and Wholesale banking products. Its web site is here TD. See my spreadsheet at td.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 or StockTwits.

Wednesday, January 16, 2013

Toronto Dominion Bank

On my other blog I am today writing about a dividend spreadsheet to track dividend payments...continue...

I own this stock of Toronto Dominion Bank (TSX-TD, NYSE-TD). I bought this stock in 2000 because the price was good. I have made 13.81% per year on this stock with 10.41% from capital gain and 3.40% from dividends. However, I have followed this stock for a long time, not just since when I bought it.

This stock also kept dividends level for a couple of years because of the 2008 bear market and following recession. The dividend growth over the past 5 and 10 years is at 6.49% and 9.94% per year. The 5 year dividend increase is quite good for a Canadian bank.

The 5 year median Dividend Payout Ratios are good coming in at 50% for earnings and 31% for cash flow. The DPRs for 2012 were 43% and 31% for earnings and cash flow. If dividends remain level in 2013 the DPRs would be 39% and 32% for earnings and cash flow and shows that there is room for more growth in dividends.

The 5 and 10 year total return to the end of 2012 was 7.19% and 13.34% per year with 3.8% and 9.43% from capital gains per year. The dividend portion of this return was 3.39% and 3.91% per year, respectively.

The outstanding dividends have been growing at the rate of 5.1% and 3.6% per year over the past 5 and 10 years. Growth is from DRIP, stock options and issuance of new shares.

Revenue is up by 3.77% and 6.16% per year over the past 5 and 10 years. Revenue per share is down over the past 5 years by 1.22% per year and is up over the past 10 years at 2.48% per year. Earnings per Share is up by 4.29% and 18.12% per year over the past 5 and 10 years.

Cash Flow per Share is up by 6.88% and 3.95% per year over the past 5 and 10 years and Book Value per Share is up 10.5% and 10.4% per year over the past 5 and 10 years. By far, BV is up the best.

The Return on Equity is good for this stock as it came in at 13.3% for the 2012 financial year and the 5 year median rate is 12.7%. The ROE on comprehensive income confirms the ROE on net income by coming in at 12.3% for the 2012 financial year and having a 5 year median rate of 12.5%.

The debt ratios are not bad for a bank and are quite typical with the Debt Ratio at 1.06% and the Leverage and Debt/Equity Ratios at 18.38 and 17.27.

I have owned this stock for around 13 years and I am earning on my original investment a yield of 8.6%. At this rate after holding this stock for 20 years, I would expect to earnings over 13% on my original investment. (I talk about dividend yields on original investments on my site.)

However, I would expect to do better under this stock as the dividends were stalled for a few years in the time I held this stock. In 20 years' time I could possibly be getting 23 to 25% yield on my original investment. However, no one really knows what will happen in the future.

I am pleased this investment and I will continue to hold this stock. However, I will not be buying any more for the simple fact I have too much of this stock already in my portfolio.

The TD bank is a bank with a full range of financial products and services for individuals and corporations in Canada, USA and internationally. Financial products and services include Canadian Personal and Commercial Banking; Wealth Management; U.S. Personal and Commercial Banking; and Wholesale banking products. Its web site is here TD. See my spreadsheet at td.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 or StockTwits.

Tuesday, January 15, 2013

Royal Bank of Canada 2

I own this stock of Royal Bank of Canada (TSX-RY, NYSE-RY). I have had this stock since 1995, which is some 18 years. I have made a total return 18.35% per year, with 13.06% per year coming from capital gains and 5.29% per year coming from dividends. This is what long term investing can get you.

When I look at the insider trading report I find insider selling at $23.4M and insider net selling at $22.4M. The insider selling by the CEO is at $14M and by the CFO at $6.9M. Insider options are not quite as extensive as BMO was (with some 40 pages of insiders with options.) The whole insider report for Royal Bank is just 12 pages long. Since stock options are considered part of salary you tend to get insiders cashing in stock options.

However, as is the case for many companies nowadays, there are not only options, but Rights - Deferred Performance Share Plans, Rights Deferred Share Units, and Rights Performance Deferred Share Units and Rights RBC Share Units.

The CEO has $43.5M in shares and $91M in options. The CFO has $0.8M in shares and $48M in options. An officer has $0.3M in shares and $13.5M in options. A director has $1M in shares and $3.3M in options. This is just to give you an idea of what the options and insider ownership is like.

According to NASDAQ, there are some 327 institutions that own 45% of the outstanding stock. For the 3 months prior to the 2012 year end, institutions increased their shares by 2.2%.

The 5 year low, median and high median Price/Earnings Ratios are 11.55, 16.09 and 18.04. The current P/E Ratio is 11.40 based on 2013 earnings of $5.34 and a stock price of $60.88. This low P/E ratio suggests that the stock price is low.

I get a current Graham Price of $57.27. The 10 year low, median and high median Price/Graham Price Ratios are 1.08, 1.23 and 1.41. The current P/GP Ratio is 1.06. This low ratio suggests that the stock price is low.

The 10 year Price/Book Value per Share Ratio is 2.27 and the current ratio is 2.23, a ratio that is 98% of the 10 year ratio. This ratio suggests that the stock price is at a relatively normal price.

The current dividend yield is 3.94% and the 5 year median dividend yield 6% higher at 4.19%. What you want is a current yield significantly higher than the 5 year median to show a cheap stock price. However, the current yield shows the relatively stock price to be around normal. Mitigating circumstance is that the bank did not raise the dividends in 2009 and 2010.

When I look at analysts' recommendations I find Strong Buy, Buy, Hold and Underperform. The consensus recommendation would be a Hold. The 12 month consensus stock price is $63.00. This implies a total return of 7.44% with 3.94% from dividends and 3.5% from capital gain.

A business blog says that RBC Leads in Canada as takeovers hit a 5-year high. Royal Bank of Canada was the top investment-banking adviser on Canadian deals for the second straight year as mergers surged to a five-year high, led by energy.

Dale Roberts has an interesting take on Canadian banks at Seeking Alpha. He talks about using banks as a one stock portfolio. I have a similar return on this bank as he does.

There is article in the Financial Post dated in November 2012 that talks about RBC posting the biggest profit in Canadian history. There is an article in Daily Finance that gives 3 reasons to buy this stock.

Analysts do not seem particularly excited by this stock as you can see by the 12 months total return at 7.4%. You can see some comments at Stock Chase. Their recommendations are all over the place.

I think that the stock price is relatively low to average. To do well in a stock for the long term, this is where you want the current price to be. I will continue to hold on to this stock and I expect to do well in it over the long term.

Royal Bank of Canada (RY on TSX and NYSE) and its subsidiaries operate under the master brand name RBC. They are one of Canada's largest banks as measured by assets and market capitalization, and are among the largest banks in the world, based on market capitalization. They provide diversified financial services companies, and provide personal and commercial banking, wealth management services, insurance, corporate and investment banking and transaction processing services on a global basis. They have personal, business, public sector and institutional clients through offices in Canada, the U.S. and 56 other countries. Its web site is here RBC. See my spreadsheet at ry.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 or StockTwits.

Monday, January 14, 2013

Royal Bank of Canada

On my other blog I am today writing about Bear Markets. Is one coming in 2013...continue...

I own this stock of Royal Bank of Canada (TSX-RY, NYSE-RY). I have had this stock since 1995, which is some 18 years. I have made a total return 18.35% per year, with 13.06% per year coming from capital gains and 5.29% per year coming from dividends. This is what long term investing can get you.

The last 5 and 10 years to December 2012 have not been as good as total return was 7.19% and 11.71% per year respectively. Over these periods the capital gain return was 3.37% per year and 7.76% per year respectively. Also, over these periods the dividend return was 3.82% per year and 3.95% per year, respectively.

This bank along with other Canadian banks stopped dividend increases in 2008. The 10 year growth in dividend is at 11.61% per year and this is not far from what I have experienced over the past 18 years at 12.24% per year. However, the 5 year increase in dividends has only been at 5.8% per year, a much lower figure. This is not the first time this bank has stopped dividend increases. It did this from 1990 to 1994.

Current Dividend Payout Ratios are good. The DPR for earnings was 46% in 2012 and is expected to be around 45% in 2013. The DPR for Cash Flow was around 32.7% in 2012 and is expected to be around 37.5% in 2013.

The number of shares outstanding has been increasing over the past 5 and 10 years at the rate of 2.52% per year and 0.83% per year respectively. Increases have been for acquisitions, because of DRIP, Employee ownership plans and stock options and they have been reduced because of share buy backs.

Revenue is up 5.8% and 5.6% per year over the past 5 and 10 years. Revenue per Share is up by 3.2% and 4.7% per year over the past 5 and 10 years. EPS are up by 3.3% and 9.6% per year over the past 5 and 10 years. CFPS is up by 6.5% and 7.9% per year over the past 5 and 10 years. Book Value per Share is up by 9.2% and 7.7% per year.

The growth is generally better over the past 10 years than over the past 5. Growth is generally ok, but there is nothing spectacular in any of it.

The Return on Equity is generally quite good. The ROE for the financial year ending in October 2012 was 19.1% and the 5 year median ROE is 15.3%. The ROE based on comprehensive income is close to that on the net income with ROE for October 2012 at 20% and the 5 year median ROE at 14.4%. (A good ROE is one consistently over 10% and this stock manages that.)

The debt ratios are rather normal for a bank with the Debt Ratio at 1.06 and Leverage and Debt/Equity Ratios at 20.91 and 19.75, respectively.

This bank is doing better than it has since 2008 bear market. The dividend increases for 2012 was at 11.1% which is good. I think that there is room for dividend increases this year also, because the DPRs are good. I am invested in this bank for the long term and I intend to hold on to the shares I have. I will not be buying more for the simple reason that I have enough of this stock already in my portfolio.

Royal Bank of Canada (RY on TSX and NYSE) and its subsidiaries operate under the master brand name RBC. They are one of Canada's largest banks as measured by assets and market capitalization, and are among the largest banks in the world, based on market capitalization. They provide diversified financial services companies, and provide personal and commercial banking, wealth management services, insurance, corporate and investment banking and transaction processing services on a global basis. They have personal, business, public sector and institutional clients through offices in Canada, the U.S. and 56 other countries. Its web site is here RBC. See my spreadsheet at ry.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 or StockTwits.

Friday, January 11, 2013

Bank of Montreal 2

I own this stock (TSX-BMO, NYSE-BMO). This was the first bank stock that I bought and I have had it since 1983. Since 1987 my return has been 15.86% per year with 6.42% from dividends and 9.44% from capital gains.

When I look at insider trading, I find $24.2M of insider selling and $24M of net insider selling. There is a small amount of insider buying by a director. Most of the insider selling is by officers (around $21.2M). The selling seems to be option related. There are lots of options outstanding. There are not only options, but Deferred Share Units, Restricted Share Units and Performance Share Units. The list of insiders with options just goes on and on as there are some 40 pages of this.

The CEO has $13.9M in shares and $102M in options. The CFO has $0.4M in shares and $34.6M in options. An officer has $0.4M in shares and $2.3M in options. A director has $0.7M in shares and $1.7M in options. CEO, CFO, other officers, subsidiary executives and directors all have options.

The 5 year low, median and high median Price/Earnings Ratios are 9.91, 12.14 and 13.77. The current P/E ratio is 10.5 and that is lower than the median value. This is based on a stock price $62.24 and a 2013 EPS of $5.93. (Analysts seem to be expecting earnings to trend down this year before trending up again next year.)

I get a Graham Price of $75.26. The 10 year low, median and high median Price/Graham Price Ratios are 0.87, 1.01 and 1.19. The current P/GP Ratio is 0.83 based on a stock price of $62.24. This suggests the stock price is relatively low.

The 10 year Price/Book Value per Share Ratio is 1.97 and the current P/B Ratio is 1.47. The current ratio is some 74% of the 10 year ratio and this suggests that the stock price is relatively cheap. The stock price is considered relatively cheap is the current ratio is 80% or less of the 10 year value.

The current dividend yield is 4.63% and the 5 year median dividend yield is 4.92% a value some 6% higher. For a stock to show a relatively cheap price, the current dividend yield needs to be significantly higher than the 5 year median. This test shows that the stock price is relatively towards the high side. However, the company has not been raising the dividend lately as it has in the past.

I think my tests by and large suggest that the stock price is relatively on the cheap side.

When I look at analysts' recommendations I find Buy, Hold, Underperform and Sell. The most recommendations are in the Hold category and the consensus recommendation would be a Hold. The 12 month consensus stock price is $63.70. This implies a total return of 7.97%, with 5.63% from dividends and 2.35% from capital gain.

Although analysts with a Buy recommendation has a 12 month stock price of $71 and this implies a 12 months total return of 18.7% with 5.63% from dividends and 14.07% from capital gains. There are lots of analysts following this stock and it is obvious they are of different opinions.

One analyst mentioned this was the worst performing Canadian bank last year and I have to agree with this assessment. However, other analysts see Canadian banks in great shape (compared to banks of other countries) and would buy any of the big 5 Canadian bank. The Seeking Alpha blog has a good item on this stock.

The Bank of Montreal is still dealing with their purchase of Marshall & Ilsley. The financial post has a recent article on this subject.

Personally, I intend to continue to hold this stock. Most of what I own is in my Trading Account, but I also have a small number of shares in my Locked-In RRIF.

BMO is a bank. They offer personal and corporate banking and wealth management services in Canada and US, which includes looking after banking, financing, investing, credit card and insurance needs. They offer mortgages and mutual funds and they offer full service and on-line brokerage services. They are international bank having banking in Canada and US. They have clients, corporate, institutional and governmental, in UK, Europe, Asia and South America. Its web site is here BMO. See my spreadsheet at bmo.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 or StockTwits.

Thursday, January 10, 2013

Bank of Montreal

I own this stock (TSX-BMO, NYSE-BMO). This was the first bank stock that I bought and I have had it since 1983. Since 1987 my return has been 15.86% per year with 6.42% from dividends and 9.44% from capital gains. Since the year end has past, I would like to start first on my bank stocks, which have financial reporting years ending October 31st each year.

This was the last of the big banks to raise their dividends and they raised them only 2.9% at the end of 2012 financial year. There was no rise in dividends since 2008 and that means no dividend rises for almost 4 years. Dividends have increased over the past 5 and 10 years by 0.8% and 8.9% per year, respectively.

Over the long term there is nothing like banks in providing good dividends and good dividend increases. (See my article on my site dividend yields on original investments for an explanation of this concept.) I have had this stock for 29 years and my yield on my original investment is 40%.

The Dividend Payout Ratios are good for this bank as far as earnings go. The 5 year median DPR for earnings is 59%. However, for this bank cash flows have varied and have often been negative. You cannot get a fix on DPR for cash flow for this bank.

The total returns over the past 5 and 10 years to the end of December 2012 are 6.39% and 8.51%. The dividend portion of these returns is 4.83% and 4.66% per year and the capital gain portion is 1.56% and 3.86% per year over the past 5 and 10 years, respectively. The recent economic situation has not be good for banks.

The outstanding shares have been increasing at the rate of 5.47% and 2.83% per year over the past 5 and 10 years. They have increased due to business acquisitions, stock options and DRIPs.

The revenue for this bank has increased by 11.1% and 6.2% per year over the past 5 and 10 years. The revenue per share has increased by 5.3% and 3.3% per year over the past 5 and 10 years.

Earnings per share have grown quite nicely over the past 5 and 10 years at 8.4% and 8.7% per year. It is hard to get a fix on cash flow, but they have grown well over the past few years. (The 5 year running average CFPS has grown at 32% over the past 3 years.) However, both CF and CFPS have fluctuated over the years. The book value per share has grown well over the past 5 and 10 years at 8.5% and 7.3% per year.

Return on Equity has generally been very good. The ROE for the last financial year in October 2012 was 15.2% and it has a 5 year median value of 12.9%. The ROE on comprehensive income at 14.5% generally confirms the quality of the ROE on net income.

The Debt Ratio is 1.06, and this is normal for a bank. Their cash flow may fluctuate, but they seem to have enough cash to cover current liabilities and including dividends.

I must confess that I initially built my stock portfolio on bank and utility stocks. Banks have not been great since the 2008/2009 bear market, but I expect to earn good money from banks over the longer term. As far as BMO is concerned I would probably pick some other bank today if I was looking for a bank to invest in.

My main concern with BMO is their inability to generate positive cash flow.

BMO is a bank. They offer personal and corporate banking and wealth management services in Canada and US, which includes looking after banking, financing, investing, credit card and insurance needs. They offer mortgages and mutual funds and they offer full service and on-line brokerage services. They are international bank having banking in Canada and US. They have clients, corporate, institutional and governmental, in UK, Europe, Asia and South America. Its web site is here BMO. See my spreadsheet at bmo.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 or StockTwits.

Wednesday, January 9, 2013

Penn West Petroleum Ltd

Penn West Petroleum Ltd

On my other blog I am today writing about Tax Free Savings Accounts...continue...

I have more stocks to cover than I have time this year if I do a double report on each stock. So, for the first part of the year, I will do short reports on some of the stocks that I track. This is one stock for the short report.

I do not own this stock of Penn West Petroleum Ltd. (TSX-PWT, NYSE-PWE). The stock I bought was Maximum Trust. My spreadsheet shows some values from Maximum Trust to Petrofund to Penn West and other values of Petrofund to Penn West. I decided to sell Penn West in 2010 because the company changing to a corporation and they are also getting back into exploration, rather than just selling oil from their wells.

I made a return of 8.5% per year on this stock. I made 10.4% per year in dividend income and had a capital loss of 1.9% per year. When this company changed to a corporation, it reduced its dividends from $.15 to $.09 per month, a reduction of 40% (2010). They had also reduced their dividends in 2009 by 35%. However, this company is an oil and gas company and you would expect dividends to fluctuate.

Another way to look at this company is that it is another previous income trust that cannot cover its dividends with its earnings. The 5 year median Dividend Payout Ratio for EPS is 126%. The DPR expected for 2012 is 263% and for 2013 is 720%. This does not give me any confidence that dividends will remain at the current value. The 5 year median DPR for CF is better at 61%.

The current Liquidity Ratio is low at 0.93. The 5 year median ratio is even lower at just 0.62. The cash flow brings this ratio generally up above 1.00. However, since cash flow fluctuates this is rather cold comfort. The current Debt Ratio is strong at 2.32. The current Leverage and Debt/Equity Ratios are also good at 1.76 and 0.76. I do not like low Liquidity Ratios because companies that can survive in the long term should have good Liquidity ratios to survive the bad times.

There is generally no growth in revenue, earnings, cash flow or book value per share. Outstanding shares have increased greatly and are up by 15% per year over the past 5 years and 34% per year over the past 10 years. Outstanding shares are increasing due to acquisitions, stock options and the DRIP plan. The company has also bought back some shares for cancellations. In 2011, shares increased by 2.5% in total and by 1.5% due to stock options.

The 5 year low, median and high median Price/Earnings Ratios are 10.56, 15.65 and 20.65. The current one based on stock price of $10.85 and EPS of $0.15 for 2013 is 72.33, a very high P/E. If you use the expected EPS for 2012 of $0.41, you still get a rather high P/E at 26.46.

Using current the Price/Graham Price Ratio of 1.36, the price also looks high. However, using the current dividend yield of 9.95% against the 5 year median of 7.73%, price is relatively low. Also, using the current Price/Book Value Ratio 0.56 against the 10 year median P/B Ratio of 1.35, the stock price looks low.

Over the past year there was insider buying of $1.8M and insider selling of $0.7M. Net insider buying is at $1.1M. All insiders but directors have more options than shares. There are not only options, but Deferred Share Unit, Rights (CSRIP) and Incentive Award (Cash Based - LTRIP). For example the CEO has $1.6M in shares and $16.3M in options and the CFO has $0.6M in shares and $11.9M in options.

There are some 356 institutions that hold some 47% of the outstanding shares. Over the past 3 months they have decreased their shares marginally.

When I look at the analysts' recommendations I find Buy, Strong Buy, Hold and Underperform. Most of the recommendations are a Hold recommendation and this is the consensus recommendation. The 12 month stock price consensus is $15.50. That implies a total return of 55.12% with 10.23% from dividends and 44.89% from capital gain. (The total return seems a huge return for a Hold recommendation.)

The tests on the stock price are mixed. DPRs for cash flow not bad, but very high for earnings. Oil and gas companies are risky at the best of times. I think that this company is just another previous income trust that cannot seem to get earnings higher than dividends.

It is the largest conventional oil and natural gas producing trust in North America. They operate only in Alberta. Its web site is here Penn West. See my spreadsheet at pwt.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 or StockTwits.

Tuesday, January 8, 2013

Suncor Energy Inc 2

I do not own this stock of Suncor Energy Inc. (TSX-SU, NYSE-SU). I started to follow Petro-Canada in 2008. However in 2009, Petro-Canada merged with Suncor. So my spreadsheet follows Petro-Canada into Suncor. Energy companies are a large part of the TSX, but I think all resource stocks are rather risky.

According to the insider trading report, there was some $28M of insider selling and net insider selling of $27.2M. (In other words there was a little bit of insider buying.) The problem with a company that give out lots of stock options is that insider look at the options as part of their salaries and cash them in.

Although some insiders do own shares, they all have more options than shares. The CEO owns some $7M in shares and has some $84M of outstanding options. The CFO has some $0.25M in shares, but $15.8M in outstanding options. Suncor has been busy lately in buying backs shares for cancellation.

According to NASDAQ there are 510 institutions that own some 50% of the outstanding shares. In the three months to December 31, 2012, institutions increased their shares by 5%.

The 5 year low, median and high median Price/Earnings Ratios are 9.52, 13.89 and 17.37. The current P/E Ratio is 9.62 based on 2013 EPS of $3.45 and stock price of $33.20. This low P/E ratio suggests that the price is relatively low.

I get a current Graham price of $44.63. The 10 year low, median and high median Price/Graham Price Ratios are 1.07, 137 and 1.68. The current P/GP Ratio is 0.74. This low ratio suggests that the price is relatively low. When the P/GP Ratio is 1.00 or lower, it suggests that the stock price is low.

The 10 year median Price/Book Value per Share is 1.89. The current P/B Ratio is 1.29. This is some 68% of the 10 year median ratio. When the current P/B Ratio is 80% or less of the 10 year ratio, it suggests that the stock price is low, as does this low ratio suggests.

The 5 year median dividend yield is just 1.04% and the current yield of $1.57% is some 50% higher. This current high dividend yield suggests that the current stock price is low.

When I look at analysts' recommendations I find Strong Buy, Buy and Hold recommendations. The consensus recommendation would be a Buy. (See my site for information on analyst ratings.) The 12 month stock price is $42.70. This implies a total return of 30.18% with 1.57% from dividends and 28.61% from capital gain.

A number of analysts bought up the fact that companies in the oil sands are having a current hard time in getting the oil to market. One mentioned that this stock is inexpensive. In the blog seeking Alpha there is an article called "The Case For Investing In Suncor Energy". See blog. It is a long article and you may want to just skip to The Verdict paragraph at the end. However, the author made some interesting points along the way.

According to the Jags Report blog there were analysts' recommendation changes recently. (Note that a Neutral rating is like a Hold rating. See above for link to what analysts' recommendations mean.)

I would agree that that the stock is on the inexpensive side. There are also problems with getting our oil sands oil to market and also some economic uncertainty because of the overhanging debt problems. However, you make money long term by buying stocks that are relatively cheap.

Suncor Energy Inc. is an integrated energy company. Suncor's operations include oil sands development and upgrading, conventional and offshore oil and gas production, petroleum refining, and product marketing under the Petro-Canada brand. Suncor is also developing a growing renewable energy portfolio. Their international and offshore business includes operations in the North Sea (United Kingdom, Netherlands and Norway) and the East Coast of Canada. They are also in Libya, Syria and Trinidad and Tobago. Its web site is here Suncor. See my spreadsheet at su.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 or StockTwits.

Monday, January 7, 2013

Suncor Energy Inc

On my other blog I am today writing about the Bond Market bubble...continue...

I do not own this stock of Suncor Energy Inc. (TSX-SU, NYSE-SU). I have always perceived that resource investing was very risky and have done very little investing in this section. I had held some resource stock at various times, but always held them for short periods. Basically make a profit and getting out. I never held any resource stock for more than a few years.

I know that a lot of the TSX market is in resources, so I do follow some resource stock. I have followed this stock since 2008. At that time, I started to follow, Petro-Canada. However in 2009, Petro-Canada merged with Suncor. So my spreadsheet follows Petro-Canada into Suncor. This is a problem when following any company, or owning any company over the long term. They can merge with other companies, be bought out, change their name (and what they do) and, of course, go out of business.

This is an energy company this is paying quite low dividends that increase very nicely. (Any energy company that pays good dividends would have to vary dividends depending on the price of oil and gas.) The 5 year median dividend yield is just 1.04%. The dividend has often been under 1%. The current dividend is 1.57%.

Dividend increases are very good. The 5 and 10 year growth in dividend is at 25% and 23% per year. Latest increase in 2012 is a bit lower at 18.2%. As would be expected the Dividend Payout Ratios and quite good for this company. The 5 year median DPR for earnings is 16.1% and the 5 year median DPR for cash flow is 6.9%.

The total return over the past 5 and 10 years for this stock has not been great. The 5 year total return is a negative 1.99% per year. Dividend returns was 1.05% per year and the capital loss was at 3.04% per year. The 10 year total return was better at 7.92% per year, with 0.96% per year from dividends and a capital gain of 6.96% per year.

The outstanding shares have decreased marginally over the past 5 and 10 years. Over the past 5 and 10 years, outstanding shares are down 0.4% per year and 0.7% per year, respectively. Shares have increased due to stock options and DRIP and have decreased because of share buy backs.

Looking at the financials for 2011, over the past 5 years revenue was down by 3.1% per year and revenue per share down by 2.7% per year. Over the past 10 years revenue is up by 6.2% per year and revenue per share up by 7% per year. Revenue is expected to be up around 1.4% for 2012.

The financials for 2011 show that Earnings per Share is up very nicely by 20% and 18% per year over the past 5 and 10 years. It is expected that EPS will be up by some 24% for 2012 but only by 4% for 2013.

As of the 2011 financials, book value is up by 8.6% and 12.6% per year over the past 5 and 10 years. The book value is up by some 7.5% to the 3rd quarter of 2012.

The Return on Equity for the financial year of 2011 is 11.9% and the 5 year median ROE is also 11.9%. ROE is up by 11.9% for the 12 months ending in September 30, 2012. The ROE on comprehensive income for the financial year of 2011 was 10.9% and for the 12 months ending in September 30, 2012 also at 10.9%. The ROE for net income and comprehensive income is close.

The current Liquidity Ratio is a little low at 1.37, but the company has generally had good cash flow. The 5 year median Liquidity Ratio is a little low at 1.23. Note, however, for oil and gas companies, the cash flow can fluctuate depending on the price of oil and gas. The current Debt Ratio is quite good at 2.07. This 5 year median Debt Ratio is also good at 2.04.

The thing is with this energy company and all energy companies are that they are heavily tied to the price of oil and/or gas or both. No one knows when the economic situation will improve worldwide. I do not see oil and gas prices taking off until the Western World does something to improve their debt overhang situation. So far all countries have just kick the can down the road. They have made no effort to deal with their debt.

One reason to invest in an oil and gas company is that they are a big part of the TSX. One reason not to investment in resource companies is that they are risky investments and I have never felt that energy companies were long term investments.

Suncor Energy Inc. is an integrated energy company. Suncor's operations include oil sands development and upgrading, conventional and offshore oil and gas production, petroleum refining, and product marketing under the Petro-Canada brand. Suncor is also developing a growing renewable energy portfolio. Their international and offshore business includes operations in the North Sea (United Kingdom, Netherlands and Norway) and the East Coast of Canada. They are also in Libya, Syria and Trinidad and Tobago. Its web site is here Suncor. See my spreadsheet at su.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 or StockTwits.