Wednesday, February 25, 2015

Changes in Outstanding Shares

If the outstanding shares do not change much over time, there are no problems in looking at growth in Revenue, Net Income or Cash Flow or Revenue per Share, EPS or Cash Flow per Share. Changes outstanding shares are neither good nor bad. However depending on whether the outstanding shares are increasing or decreasing determines where you should look to see if the company is really growing or not.

If the outstanding shares are decreasing, you have look past the per share value to look at the company’s growth. If share are decreasing, things like Revenue per Share, EPS and CFPS might look good, but you really need to look at Revenue, Net Income and Cash Flow to determine if the company is really growing.

The problem is when Revenue, Net Income and Cash Flow are showing low to negative growth and Revenue per Share, EPS and CFPS is showing good growth. In this case a company is really not growing if there is low to negative growth in Revenue, Net Income and Cash Flow. Sometimes companies will do share buy backs to make the growth in EPS look better.

If the outstanding shares are increasing, then per share values will tell you if the company is growing or not. Here you have to look at Revenue per Share, EPS and CFPS. You have the opposite problem here. A company is really not growing if Revenue per Share, EPS and CFPS is not growing.

On my other blog I am today writing about Goodfellow Inc. (TSX-GDL, OTC- GFELF) ... continue...

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 site for an index to these blog entries and for stocks followed. Follow me on Twitter.

Monday, February 23, 2015

RRSP and RRIF

Because I am taking money out of my RRSP and RRIF accounts, I like to have cash equal to 3 to 5 years of withdrawals in my account. Since I am taking money from these accounts each year I have to sell some stock to raise more money. I generally do this in April or May, but this year I have just sold stock to raise the cash in these accounts. It is currently hard to tell what the market is going to do so I rather be safe than sorry.

Once these transactions go through, I will buy some GICs with the money. Interest rates are currently very low and I no longer like to put my money into MMF Funds. To provide enough money for withdrawals over the next 3 to 5 years I have cash or near cash of 12% to 13% in these accounts. The near cash are short term GICs and Investment Savings accounts.

How I decide what stocks to sell is my dividend yield. I am selling off stocks with the lowest dividend yield. This year I am selling Saputo Inc. (TSX-SAP) and Richelieu Hardware (TSX-RCH) because of their low dividend yields. Saputo currently has a dividend yield of 1.45% and Richelieu currently has a dividend yield of 1.04%. I also sold off a small amount Manitoba Telecom Services Inc. (TSX-MBT) as this is a stock I no longer wish to hold.

On my other blog I am today writing about Bombardier Inc. (TSX-BBD.B, OTC- BDRAF) ... continue...

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 site for an index to these blog entries and for stocks followed. Follow me on Twitter.

Wednesday, February 18, 2015

Dividend Increases

When I was updating my spreadsheets with dividends for January 2015, I noticed that there were no dividend increases for that month. This seldom happens on the stocks I hold. It also happened in July of 2014 and that was an unusual occurrence also.

The other thing that has happened is that my dividend increases for the year of 2014 was just 5.7% compared to 10.5% for 2013. My dividend increases for 2010 to 2012 was at 5.3%, 9.23% and 9.6%.

What this shows is a loss of economic momentum by the dividend stock that I hold. Generally this sort of drop in dividend increases occurs after bear market or a correction. However, the recovery form 2008 and indeed 2000 has a long and slow.

I do not think that this bodes well for a continuing bull market.

On my other blog I am today writing about Absolute Software Corporation (TSX-ABT, OTC-ALSWF) ... continue...

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 site for an index to these blog entries and for stocks followed. Follow me on Twitter.

Tuesday, February 17, 2015

Oil

There was a recent article in the Buy and Sell Advisor talking about how we cannot live with oil and we cannot live without it. This is an interesting article as it talks about how we have seen this all before. This is not the first time that oil has tanked in price and it will probably not be the last time.

There have been fears before that we would run out of oil. At some point in the future I believe it will be replaced by renewable energy. However, I do not think that this will be anytime soon. We have not yet got off coal, let alone oil. It will happen, but who know when.

On my other blog I am today writing about Absolute Software Corporation (TSX-ABT, OTC-ALSWF) ... continue...

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 site for an index to these blog entries and for stocks followed. Follow me on Twitter.

Wednesday, February 11, 2015

Banks and Ratios

The reason to look at company ratios is that the stock price for a company tells you very little. The price of a stock certainly does not tell you if the stock is cheap or expensive. For example a stock price of $10 on one stock could be an expensive price, but a stock price of $20 on another stock could be a cheap price. It is like all stocks have their own currency and you will need a common frame of reference in order to tell how cheap or expensive a stock is.

In this entry I am just looking at Canadian Banks and just the Canadian Banks that I follow. Of course it is not complete without CIBC, but I really have no motivations to start to follow this bank. I have 3 bank stocks already of BMO, RY and TD. My son owns BNS. I thought it might be fun to look at a small Canadian bank, so I have Nation Bank. I do not think I would ever buy CIBC or Canadian Imperial Bank of Commerce (TSX-CM, NYSE-CM). I also do not know of a site that gives similar data.

One of the most common ratios to look at is the P/E Ratio. When dealing with P/E Ratios, the lower the P/E ratio the better the relatively price is. Below is the 5 year low, median and high median P/E Ratios for each bank. Basically what this chart tells you is that investors are willing to pay relatively more money for Royal Bank and TD Bank shares than for other banks.

Bank Symbol Low Median High
Bank of Montreal BMO 10.51 11.34 12.10
Bank of Nova Scotia BNS 10.64 11.88 13.11
Royal Bank RY 11.34 12.60 13.85
National Bank NA 9.26 10.28 11.30
TD Bank TD 11.40 12.63 13.84


The next most common ratio is the Price/Book Value per Share Ratio. For Price/Book Value per Share Ratio, the lower the P/B Ratio is, the more book value you get for your money. Theoretically, the book value is the difference between assets and liabilities and therefore is the potential value a company is worth or the breakup value of the stock for the shareholders.

When valuing a stock, the lower the P/B Ratio is, the better the stock price is on a relative basis. The 10 year median P/B Ratios for our banks are below. From this it is obvious that historically, investors were willing to pay a relatively higher price for Royal Bank shares than other shares. It could also say that the Bank of Montreal offers the best deal when it comes to Book Value per Share.

Bank Symbol P/B Ratio
Bank of Montreal BMO 1.59
Bank of Nova Scotia BNS 2.16
Royal Bank RY 2.25
National Bank NA 1.79
TD Bank TD 1.72


For dividend paying stocks, the Dividend Payout Ratios are important. For the DPRs, lower ratios are better ratios. When looking at these ratios, it would appear that National Bank has the best ones. The problem with cash flow is that for banks they tend to be volatile and often negative. However Royal Bank is ahead as far as cash flow goes as it had one of highest levels of cash flow ever in 2014.

Bank Symbol DPR for EPS DPR for CFPS
Bank of Montreal BMO 47% 37%
Bank of Nova Scotia BNS 45% 36%
Royal Bank RY 52% 25%
National Bank NA 39% 32%
TD Bank TD 44% 31%


When Shares are issued for Stock Options, you want a company that issues around the same relative number of shares for its industry. Of course, the lower the number of shares issued for stock options, the less money comes out of the earnings for shareholders.

In 2014 Royal Bank has one of the lowest percentages of their shares issued for stock options purposes. However, it was only the third lowest when it came to the cost of these stock options.

Bank Symbol Shares % of o/s Shares Value 2014
Bank of Montreal BMO 2.133 0.33% $173.187M
Bank of Nova Scotia BNS 3.493 0.29% $241.121M
Royal Bank RY 2.723 0.19% $217.867M
National Bank NA 2.945 0.89% $155.117M
TD Bank TD 5.000 0.27% $277.350M


For the 10 year Price/Graham Price Ratios, the lower the ratio the lower the relative price of the underlying shares. Here again, this chart shows that investors are willing to pay a relatively higher price for Royal Bank stock than for other bank stocks. It also shows that generally the National Bank has a relatively lower stock price.

Bank Symbol Low Median High
Bank of Montreal BMO 0.82 0.93 1.12
Bank of Nova Scotia BNS 0.97 1.09 1.24
Royal Bank RY 1.03 1.21 1.41
National Bank NA 0.80 0.89 1.05
TD Bank TD 0.88 1.00 1.11


For dividend yields, the higher the dividend yields the better the relative price of a stock is. Here is the 5 year median and historical average and historical median dividend yields based on my spreadsheets for our banks. The BMO seems to be giving the best dividend yields.

Bank Symbol 5 Year Hist. Ave Hist. Med
Bank of Montreal BMO 4.69% 5.30% 4.62%
Bank of Nova Scotia BNS 3.92% 4.18% 3.81%
Royal Bank RY 3.91% 4.23% 3.92%
National Bank NA 4.06% 4.77% 3.84%
TD Bank TD 3.52% 3.49% 3.40%


The problem with the above chart is that I have different years of data for different banks. Here is the 5 year median, historical average and historical median dividend yields going back to 1988 for all banks. From this chart you can see that the TD Bank pays out relatively a lower dividend yield that the other banks. The historical median dividend yield is probably the best measure, and it is clear that the Bank of Montreal pays out the best yield.

Bank Symbol 5 Year Hist. Ave Hist. Med
Bank of Montreal BMO 4.69% 5.13% 4.46%
Bank of Nova Scotia BNS 3.92% 4.18% 3.81%
Royal Bank RY 3.91% 4.05% 3.65%
National Bank NA 4.06% 4.77% 3.84%
TD Bank TD 3.52% 3.40% 3.33%


On my other blog I am today writing about Canadian National Railway (TSX-CNR, NYSE-CNI) ... continue...

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 site for an index to these blog entries and for stocks followed. Follow me on Twitter.

Monday, February 9, 2015

Stock Cheap or Expensive

There is a number of different ways of looking at the stock price of a stock. I look at relative price because I am usually interested in buying for a very long time. I want to buy a stock that is at least relatively reasonable, especially on a historical basis. I would like cheap, of course, but generally good dividend growth stocks are seldom cheap.

On the other hand, I have found that paying a relatively high price for a stock can really affect long term returns if you are into a stock for the very long term. However, at any given time there seems to be some great stocks selling at reasonable prices.

To say is stock is relatively expensive is not saying anything against a company. It just means that perhaps now is now the time to buy. However, I do not sell a stock that I want for the long term just because it is relatively expensive. A company's stock would have to get into a very high stupid price for me to sell.

Generally speaking, stocks tend to be relatively over and underpriced. I know by theory, stocks are supposed to be fairly priced, but this is not generally so. Also, stocks tend to stay relatively over or underpriced for much longer periods that you think.

If you are looking for a stock to buy and hold over a short term, you would look at the stock price differently. You are more interested in how high the stock can go in the current environment. If you are looking for a momentum buy, you would want to a stock that is going up, that has been rising quite nicely and is expected to continue to rise.

This is riskier than the way I invest, but there are often lots of money to be made in a rising market. The problem only comes when there is a market correction. Of course, if the market correction is a mild one, says 10%, it may not be much of a problem. If it is a big one, like over 30%, this can cause investors problems.

On my other blog I am today writing about Exco Technologies Ltd. (TSX-XTC, OTC-EXCOF) ... continue...

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 site for an index to these blog entries and for stocks followed. Follow me on Twitter.

Wednesday, February 4, 2015

Something to Buy February 2015

There is always something to buy in the stock market. On Monday, I put out a list of the stocks that I covered and showed what stock might be a good deal based on dividend yield. Now I am trying to categorize what sorts of stocks may be a good deal based on dividend yield.

The advantages to using dividend yield to judge how cheap or expensive a stock is, is that you are not using estimates or old data (like last reported quarter's data). You are using today's stock price and today's dividend yield.

For other testing, like using P/E Ratios and Price/Graham Price Ratios, you use EPS estimates or from the last reported financial quarter. When using P/S Ratios, P/CF Ratios or P/BV Ratios you are using data from the last reported financial quarter.

However, no system is perfect. But if you are interested in buy a stock a list of stocks cheap or reasonable using dividend yield data might be a good place to start.

Categorizing stocks is not as simple as it might seem. Every site you go to has categorized stocks a bit differently. I try to keep this as simple as possible. See my spreadsheet at here. As in other spreadsheets, you can highlight a line or a number of lines for better viewing.

Of the consumer discretionary stocks, Canadian Tire Corporation (TSX-CTC.A), Dorel Industries (TSX-DII.B A) and Newfoundland Capital Corp (TSX-NCC.A) are showing as relatively cheap by the historical average dividend yield as well as cheap by historical median and 5 year median dividend yields.

Another consumer discretionary stock is showing as cheap by the historical median and 5 year median dividend yields is Goodfellow Inc. (TSX-GDL). Also Leon's Furniture (TSX-LNF) and Thomson Reuters Corp (TSX-TRI) are showing as cheap by the historical median dividend yield. (Note I just added in historical median dividend yield this month. The median values can be different than average values and sometimes a better value to work with.)

Some Consumer Staple stocks are showing as relatively cheap. Jean Coutu Group Inc. (TSX-PJC.A) is cheap by the historical average and the historical median dividend yields. Loblaw Companies (TSX-L) is showing as cheap only by the historical median dividend yield. Rogers' Sugar (TSX-RSI) is cheap using the 5 year median dividend yield.

The US Health Care stocks I follow, that is Johnson and Johnson (NYSE-JNJ) and Medtronic Inc. (NYSE-MDT) are both relatively cheap by the historical average and historical median dividend yields.

Of the Real Estate Stocks, Granite Real Estate (TSX-GRT.UN) and Melcor Developments Inc. (TSX-MRD) are showing relatively cheap by the historical average and the historical median dividend yields. Melcor Developments Inc. (TSX-MRD) is also showing as relatively cheap by the 5 year median dividend yield.

The Canadian banks of Bank of Nova Scotia (TSX-BNS) National Bank of Canada (TSX-NA), Royal Bank (TSX-RY) and Toronto Dominion Bank (TSX-TD) are showing as relatively cheap by the historical median and the 5 year median dividend yields. Bank of Nova Scotia (TSX-BNS) and Toronto Dominion Bank (TSX-TD) are also showing as cheap by the historical average dividend yield.

Of the Financial Services stocks, AGF Management (TSX-AGF), CI Financial (TSX-CIX), DirectCash Payments Inc. (TSX-DCI), Gluskin Sheff & Associates Inc. (TSX-GS), Home Capital Group (TSX-HCG), IGM Financial (TSX-IGM), Power Corp (TSX-POW) and TMX Group (TSX-X) are showing as relatively cheap by the historical median dividend yield. Of these, only CI Financial (TSX-CIX), Home Capital Group (TSX-HCG), IGM Financial (TSX-IGM) and Power Corp (TSX-POW) are showing as cheap by the historical average dividend yield.

Of the above Financial Services stocks DirectCash Payments Inc. (TSX-DCI), Gluskin Sheff & Associates Inc. (TSX-GS), Home Capital Group (TSX-HCG), IGM Financial (TSX-IGM), are showing as relatively cheap by the 5 year median dividend yield.

Of the Insurance group Great-West Lifeco Inc. (TSX-GWO, Manulife Financial Corp (TSX-MFC), Power Financial Corp (TSX-PWF) and Sun Life Financial (TSX-SLF) are showing as relatively cheap by the historical median dividend yield. Of the above group only Power Financial Corp (TSX-PWF) is showing as relatively cheap by the historical average dividend yield.

Of the industrials Bombardier Inc. (TSX-BBD.B), Finning International Inc. (TSX-FTT), Hammond Power Solutions Inc. (TSX-HPS), and Pason Systems Inc. (TSX-PSI) are showing as cheap historically. Canadian National Railway (TSX-CNR), Canam Group Inc. (TSX-CAM), Canexus Corporation (TSX-CUS), Canyon Services Group (TSX-FRC), McCoy Global Inc. (TSX-MCB), Mullen Group (TSX-MTL), PFB Corp (TSX-PFB), Russel Metals (TSX-RUS), SNC-Lavalin (TSX-SNC), Toromont Industries Ltd. (TSX-TIH), Transcontinental Inc. (TSX-TCL) and Wajax Corp (TSX-WJX) are showing as cheap by the historical median dividend yields.

Of the above stocks, only Canexus Corporation (TSX-CUS), Mullen Group (TSX-MTL), PFB Corp (TSX-PFB), Russel Metals (TSX-RUS), SNC-Lavalin (TSX-SNC) and Transcontinental Inc. (TSX-TCL) are showing as cheap by the historical average dividend yields. Also, Pulse Seismic Inc. (TSX-PSD) is showing as cheap by historical average, but not historical median dividend yield.

Of the industrials, also Exchange Income Corp (TSX-EIF) and Stantec Inc. (TSX-STN) are the only just showing as cheap by 5 year median dividend yield.

There are not many companies in the Tech sector, but Calian Technologies Ltd (TSX-CTY), Computer Modelling Group Ltd (TSX-CMG), and Evertz Technologies (TSX-ET) are showing as relatively cheap by the historical median dividend yield. Calian Technologies Ltd (TSX-CTY) and Evertz Technologies (TSX-ET) are also showing cheap by the historical average dividend yield.

A number of energy stocks also seem cheap. Canadian Natural Resources (TSX-CNQ); Canadian Oil Sands Ltd (TSX-COS), Cenovus Energy Inc. (TSX-CVE), Ensign Energy Services (TSX-ESI) and Suncor Energy (TSX-SU) are still showing as relatively cheap historically.

Crescent Point Energy Corp (TXS-CPG), Encana Corp (TSX-ECA), Husky Energy (TSX-HSE) and Penn West Petroleum (TSX-PWT are showing as cheap by the historical median and the historical average dividend yields..

I have two materials stocks and both are showing up cheap. Teck Resources Ltd (TSX-TCK.B) is showing as relatively cheap historically. Barrick Gold Corp. (TSX-ABX) is showing as relatively cheap by the historical average and the historical median dividend yields.

The infrastructure type utility companies only Enbridge Inc. (TSX-ENB) is showing relatively cheap by the 5 year median. The only utility companies that is showing as cheap, is TransAlta Corp (TSX-TA) which is showing as relatively cheap by the historical average and the historical median dividend yields and ATCO Ltd (TSX-ACO.X) which is showing relatively cheap by the 5 year median.

Of the Telecom Stocks WiLan Inc. (TSX-WIN) is showing as relatively cheap historically. Shaw Communications Inc. (TSX-SJR.B) and Manitoba Telecom (TSX-MBT) are showing as relatively cheap by the historical average and the historical median dividend yields..

On my other blog I am today writing about AGF Management Ltd. (TSX-AGF.B, OTC-AGFMF) ... continue...

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 site for an index to these blog entries and for stocks followed. Follow me on Twitter.