I own this stock (TSX-DH). I first bought this stock in2009 and then bought more in 2010 and 2011. I have made a total return of 15.9%. Of this total return, 10.3% is attributable to dividends and 5.6% to Capital Gains. Dividends make up almost 75% of my return.
When I bought this stock it was an Income Trust company with a symbol of DHF.UN. They were making monthly distributions. When they changed to a corporation, they changed the dividend payments to quarterly and they decreased the amount of the dividends. The decrease was almost 35%. Midway through 2011 they increased the dividend by 3.3%.
It was expected that dividend yields on Income Trusts would come down to 4 to 5% by combinations of dividend decreases, or no increases and gains in the stock price. I may have made dividend returns of 10.3% in the past, but this is not going to reoccur. The current dividend yield is 6.55%.
While this was an Income Trust the Dividend Payout Ratios for earnings and cash flow were high as was typical of Income Trust companies. The 5 year median DPRs for earnings was 98% and for cash flow was 68%. These DPRs are better for 2011 at 78% and 52%. The DPRs for 2012 are expected to be lower at around 69% and 47%.
The company had the habit of raising dividends every year until it was forced to change the corporate structure from an Income Trust to a corporation. If you look at the growth of dividends to 2011 you have no growth over 10 years and a 4% per year decline over the past 5 years. However, I would suspect that the company will go back to annual dividend increases. They have stated that they understand the importance of increasing dividends to their shareholders.
The total returns over the past 5 and 10 years are 12.3% and 16.8% per year. The portion of these returns due to dividends is 10.6% and 12.1%. So dividends made up 86% and 72% of the return, respectively. The capital gain was just 1.7% and 4.75 per year, respectively. As I said above, the dividends portion of the total returns are going to be lower moving forward.
One of the problems with this stock is that the stock price has not really moved much since this company became public in 2001 It went up somewhat until 2004 and has since just been mucking about. Analysts have given it a 12 months stock price of $20.70 which would be a rise of just over 7% from current prices. However, this is where it was at in 2004. The stock price has hit peaks in 2005, 2007 and 2011, but it has never quite made it back to the first 2005 peak, which was $23.85.
Growth in revenues per share has not been good as it is running at 0% for last 5 years and 1.8% per year over the past 10 years. EPS is a bit better running at 0% for last 5 years and 4.4% per year over the past 10 years. Cash flow growth is better running at 6% and 5.5% per year over the past 5 and 10 years.
Debt ratios are rather mixed. The current Liquidity Ratio is low at 0.93, but they have a strong enough cash flow to pay current liabilities and dividends. The current Debt Ratio is very good at 2.24. The current Leverage and Debt/Equity Ratios are fine at 1.81 and 0.81. (See my site for further information on Debt Ratios.)
The last thing to talk about today is Return on Equity. The ROE is good at 12.7% with a 5 year median of 16.5%. The ROE based on comprehensive income is better at 14.4% with a 5 year median of 16.6%. (You only worry if the ROE based on comprehensive income is significantly lower than the ROE based on net income.)
At the moment I will hold on to my shares and see how this investment works out. On good dividend paying stocks, the stock price has a tendency, over the long term, to increase at the same rate as the increase for dividends. It will be interesting to see what sort of dividend increase I receive in 2012.
Davis & Henderson is a leading solutions provider to the financial services marketplace. Founded in 1875, the company today provides innovative programs, technology products and technology based business services to customers who offer chequing accounts, credit card accounts and personal, commercial, and other lending and leasing products. Its web site is here Davis & Henderson. See my spreadsheet at dh.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.
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