I own this stock of Transcontinental Inc (TSX-TCL.A, OTC-TCLAF). This is a dividend growth stock. It was on a number of dividend lists. However, it fell on hard times after 2008, but currently seems to be recovering. It is was on the Canadian Dividend Aristocrats Index when I bought it in 2015. It is still there today.
When I was updating my spreadsheet, I noticed Dividend increases have been low since 2012 when they suffered an earning loss. The stock price has dropped and my total return on this stock was 21.6% last year but only 10.2% this year. This is still a good return, but it is half of what it was.
Also, long Term Debt and Goodwill have gone up dramatically this year because of acquisitions. See the press release here. There was a lot of insider buying in 2018. The Net Insider Buying was 0.10%. What is normal is 0.01 to 0.02%, so this is high.
Revenue is hardly moving with growth over the past 5 and 10 years at 2.12% and -0.01% per year in Revenue per Share. However, EPS is moving up dramatically with growth at 72.24% and 41.09% per year. In 2018 there was a bit of a reversal with Revenue per Share up 16.06% and EPS down 8.42%. In 2018 Revenue is up by 30.70%. The financial year end is in October each year, so the last financial year ended October 31, 2018.
Current dividend yield is in the moderate range with dividend yield at 4.07%. It is in the top of the moderate range now, but they used to be in the middle, with 5 and 10 median year dividend yields at 3.82%, 3.81%. The historical median yield is much lower at just 1.31%. That is because dividend yields were low until 2008.
Dividend growth used to be higher in a moderate range mostly. But it has been low lately. See the chart below. The last increase was 5% and it occurred in 2018. So, this stock when from low dividend yield and high dividend growth to moderate dividend yield with a current growth level that is low. The company only states that it wants to pay an attractive dividend, whatever that means.
Currently, they can afford their dividends. The Dividend Payout Ratio at 33.2% in 2018 with 5 year coverage at 30.8%. The DPR was higher than 100% in 2014 to 2016 inclusive. The DPR for CFPS for 2018 was 19.1% with 5 year coverage at 17.5%. Prior to 2008, the DPR was less than 20%.
The debt ratios are fine. The Long Term Debt/Market Cap Ratio for 2018 is 0.64. It was just 0.16 last year, but the 5 year median is 0.24. The Liquidity Ratio for 2018 was low at 1.31 with 5 year median at just 1.31 also. If you add in cash flow after dividends you get a ratio of 1.65 with a 5 year median at 1.78.
The Debt Ratio for 2018 is very good at 2.33 with 5 year median at 2.08. Leverage and Debt/Equity Ratios are also quite good at 1.75 and 0.75 respectively. The 5 year medians are a bit higher at 2.08 and 1.08.
The Total Return per year is shown below for years of 5 to 25 to the end of 2018. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See charts below.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2013 | 5 | 7.43% | 10.13% | 5.71% | 4.42% |
| 2008 | 10 | 10.35% | 11.86% | 6.85% | 5.01% |
| 2003 | 15 | 7.05% | 1.01% | -1.44% | 2.45% |
| 1998 | 20 | 12.41% | 7.77% | 4.82% | 2.95% |
| 1993 | 25 | 11.08% | 8.47% | 5.77% | 2.70% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 8.06, 8.74 and 10.49. The corresponding 10 year ratios are 6.01, 7.50 and 8.46. The corresponding historical ratios are 9.64, 13.51 and 13.52. The current P/E Ratio is 9.43 based on a stock price of $20.66 and 2018 EPS estimate of $2.16. This stock price testing suggests that the stock price is reasonable but above the median. This is using the most recent ratios.
The company is also using an Adjusted EPS (that excludes unusual items). The 5 year low, median, and high median Price/Earnings per Share Ratios are 6.36, 7.46 and 8.55. The corresponding 10 year ratios are 6.01, 6.99 and 8.17. The current P/AEPS is 7.54 based on a stock price of $20.66 and 2018 AEPS estimate of 2.74. This stock price testing suggests that the stock price is relatively reasonable but above the median
I get a Graham Price of $28.24. The 10 year low, median, and high median Price/Graham Price Ratios are 0.51, 0.65 and 0.77. The current P/GP Ratio is 0.73 based on a stock price of $20.66. This stock price testing suggests that the stock price is relatively reasonable, but above the median.
I get a 10 year median Price/Book Value per Share Ratio of 1.35. The current P/B Ratio is 1.48 based on Book Value of $1,219M, Book Value per Share of $15.95 and a stock price of $20.66. The current ratio is some 9% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable, but above the median.
I get an historical median dividend yield of 1.31%. The current dividend yield is 4.07% based on dividends of $0.84 and a stock price of $20.66. The current dividend yield is some 210% higher historical one. This suggests that the stock price is relatively cheap.
Both the 5 year and 10 year median dividend yields are much higher than the historical one. The 5 year median dividend yield is 3.82% and the 10 year one is 3.81%. The current dividend yield is higher by 6.5% and 6.8%. This stock price testing suggests that the stock price is relatively reasonable and below the median.
The 10 year median Price/Sales (Revenue) Ratio is P/S Ratio is 0.56. The current P/S Ratio is 0.58 based on 2018 Revenue estimate of $3,123 and Revenue per Share of $28.71. The current ratio is some 3.1% above the 10 year ratio. This suggests that the stock price is relatively reasonable but above the median.
What makes results of stock price testing harder to judge is that the company is in the midst of a transition. They were a printing company and now they are into packaging. The 10 year ratios are quite low for any company. The most reasonable P/E Ratios are the historical ones with the others being quite low. A low P/B Ratio is thought to be 1.50 and below.
The dividend yield test says it is cheap, but the historical median dividend yield is much lower than both the 5 and 10 year median dividend yields. You have to wonder how good a test this is. Testing by using the 5 and 10 year dividend yields show that the stock price is reasonable and below the median. All the others say it is reasonable and above the median.
When I look at analysts’ recommendations, I find Strong Buy (1), Buy (5) and Hold (2). The consensus would be a Buy. The 12 month stock price consensus is $27.88. This implies a total return of $39.01% with 34.94% from capital gains and 4.07% from dividends based on a current stock price of $20.66.
See what analysts are saying about this stock on Stock Chase. They are transitioning their company and has made a large US acquisition which analysts think will be fine in the end. Victoria Hetherington on Motley Fool thinks this company currently has great value. Sadie Atkinson on Simply Wall Street thinks this stock is selling below its intrinsic value. Sonia Dale on Kentwood Post says that the company as a Value Composite score of 4 and so is undervalued. TC Media Staff on Seaway News introduces its 100% recyclable tea pouches.
Transcontinental Inc is a Canadian media company that publishes, prints, and packages various properties across North America. The company operates over 175 regional newspaper publications throughout Canada, including Les Affaires, Metro, Finance et Investissement, and Investment Executive. The largest source of revenue for the company is its printing and packaging segment, which is one of the largest operators in Canada. Its web site is here Transcontinental Inc.
The last stock I wrote about was about was Canadian Imperial Bank of Commerce (TSX-CM, NYSE-CM) ... learn more. The next stock I will write about will be Sylogist Ltd (TSX-SYZ, OTC-SYZLF) ... learn more on Friday, January 25, 2019 around 5 pm. Tomorrow on my other blog I will write about Dividend Yield and Growth.... learn more on Thursday, January 24, 2019 around 5 pm.
Also, on my book blog I have put a review of the book 21 Lessons for the 21st Century by Yuval Noah Harari. learn more...
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. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.
See my website for stocks followed and investment notes. I have three blogs. The first talks only about specific stocks and is called Investment Talk. The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter or StockTwits. I am on Instagram. Or you can just Google #walktoronto spbrunner8166 to see my pictures.
great analysis.
ReplyDeleteI hold the company and think they are a great buy at these levels.
Thanks again for the writeup.
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