Investing

Investing Idea - Dividend Growth

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  • Oct 20th, 2019 12:01 am
Deal Addict
Jun 3, 2009
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Montreal
rodbarc wrote:
Jan 14th, 2018 10:57 pm
I will research it further - Impressive REIT, with decent Adjusted Funds from Operations number, decent street estimates with a very reliable score from the firms that are covering this REIT. They operate in an interesting niche (communication / tower real estate), where towers are directly exposed to the growth of mobile data demand and the associated efforts to densify wireless networks, but they are relatively sheltered from the high competition of the wireless carriers and cyclicality of the network equipment vendors.

Rod
How does BIP.UN compare then? I very much respect its management whose record speaks for itself.
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Feb 26, 2017
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rodbarc wrote:
Jan 14th, 2018 10:57 pm
I will research it further - Impressive REIT, with decent Adjusted Funds from Operations number, decent street estimates with a very reliable score from the firms that are covering this REIT. They operate in an interesting niche (communication / tower real estate), where towers are directly exposed to the growth of mobile data demand and the associated efforts to densify wireless networks, but they are relatively sheltered from the high competition of the wireless carriers and cyclicality of the network equipment vendors.

Image
Thanks Rod. Does the 67% Debt to Cap and the BBB- credit rating worry you at all?
Sr. Member
Mar 14, 2015
649 posts
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Edmonton
Hey Rod,

Does the current ratio of .53 of Cineplex concern you? At these low levels it still appears to be slightly overvalued with a P/E of 30 and they appear to be burning thru cash and need to be borrowing. Any thoughts on this?
Member
Aug 20, 2016
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always thought bell, telus, rogers should spin off their cell towers.
so easy and it would pop the stocks.
rogers new ceo has to do something.
maybe rogers will do it.
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rodbarc wrote:
Jan 14th, 2018 10:17 pm
I'm averaging down a bit. Sentiment has been negative for a while, since their revenue is closely tied to earnings, the lower revenue this quarter only reinforces that sentiment that this is a dying business. Corus is a well managed business, with a solid balance sheet, higher margin than their peers in this industry and and enough cash flow to sustain the high yield, with a payout ration of approximately 87%. So I'm not worried about the high dividends (they are sustainable), at least for this year - let's monitor revenue and earnings through FY18, specially on typically strong quarters, like Q2 and Q4.

Remember, 2 years when Corus announced the transformational acquisition of Shaw Media, they stated three financial objectives until their transformation matures. One was to take out $40 million to $50 million of cost in 18 to 24 months: Corus exceeded that significantly, both in terms of the amount and the timing. The second one was stated that Corus was going to de-leverage the balance sheet to 3.5 times by end of fiscal 2017. Corus achieved that a quarter early last year and then they announced their goal to de-leverage it to 3 times for the fiscal 2018 - but then, on this quarter, they announced that they might not achieve the 3 times goal given that revenues on this quarter missed expectations. But they are still making progress, and now are being penalized for setting a goal too aggressive on previous quarter - mostly on factors that they cannot control. The third objective was to maintain a dividend as current level of $1.14 for Class B shares. Management reinforced that they will continue to maintain this objective for Fiscal 2018. My goal is based on income and the growth of that income, so it meets my goals to continue partnering with them until their new strategies give enough fruits to reflect on revenue and earnings growth. But Corus belongs to a business that have been facing several challenges, beyond their control, and only time will tell how they will handle it accordingly. The only way to grow as they used to grow is to adapt and have the strategies in place that can reflect higher revenue if they do a good job following the trend on how content is delivered and doing the right partnerships to monetize this delivery or their own content. That takes time. I will wait at least a year or two before evaluating my partnership with them.


Rod
Thank you for your insight, very helpful
FlyOverMyDoodle wrote:
Jan 15th, 2018 11:47 am
Hey Rod,

Does the current ratio of .53 of Cineplex concern you? At these low levels it still appears to be slightly overvalued with a P/E of 30 and they appear to be burning thru cash and need to be borrowing. Any thoughts on this?
I'm curious about CGX as well. I'm tempted to average down. I'm already down 20% on this :(
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Messerschmitt wrote:
Jan 16th, 2018 9:39 am
I'm curious about CGX as well. I'm tempted to average down. I'm already down 20% on this :(
I would be cautious, if $32 doesn't hold (which is weak), it can drop down to $29 from 2013.
I sold back in the $40s to stop the bleed and will buy back once it hits $30 which is likely.
Member
Sep 18, 2016
242 posts
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jerryhung wrote:
Jan 16th, 2018 10:56 am
ouch, CJR.B -3% to $8.6

not cutting loss at $10 really hurts now :(
we might see 7ish
Index Investors, the Vegans of the Investing Industry
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Oct 23, 2006
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1Ogiku2 wrote:
Jan 16th, 2018 6:59 pm
we might see 7ish
thanks and not questioning your credibility but would like to understand the basis for the 7ish price
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Mar 6, 2017
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rodbarc wrote:
Jan 14th, 2018 10:42 pm
NVDA is a growth stock, and the stock is priced in for their expectation to grow earnings by 47% this year - a bit overvalued considering the earnings growth rate of 39% of the past 3 years and estimated earnings for the next 2 years. They have been exceeding estimates for many quarters in a row, and that fuels overvaluation. However, the market will question its high multiple when earnings slow down or if they disappoint in a future quarter. Earnings are estimated to slow down for FY19 to 16% growth - although it's a good number, it's much smaller than previous growth rate, and the market might question if the current P/E of 50 is justified if earnings is growing 16% that year. I see NVDA as a great company that can turn into a not-so-great investment if you pay too much for it. Hence I'm on it for the short term.

Growth stocks are handled differently in my opinion, you can't treat them like traditional mature companies. There are lots of growth opportunities for stocks trading on Nasdaq exchange, but it's a different dynamic than your typical dividend growth company, specially when it's overvalued. Hence, for growth stocks, I prefer a set of mechanical criteria that deals with fundamentals (more on the sales, revenue and cash flow side, less on earnings) and on technical analysis, to have a controlled exposure of overvaluation, but this enters on other territories tailored to short term investing / swing trading. That's how I'm exposed on the Nasdaq world, as I find that the market doesn't price those companies through the traditional financial methods. BTW, NVDA is one of my holdings on my Nasdaq model, and that's my exposure to them.

So I'd say that it's a great opportunity for the short term and maybe medium term (provided fiscal momentum continues), since they keep exceeding estimates and they check all the financial quality criteria, but given its overvaluation, I wouldn't say that it's a good long term / set-and-forget holding. I will sell them when momentum stops, and might consider a long term partnership once valuation is more attractive.


Rod
Thanks for that... I do think NVDA is overvalued now as their increase is based on future value of what they can do in the future. My instinct is that they can grow to become a top 10 company in market cap within the decade. Of course, the competition will be there but the company seems to have grown at a "grassroots" level and as long as they continue to innovate I feel they could do things that will exceed shareholders expectations. This is just my feeling after seeing companies like google and apple putting so much into AI.
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FlyOverMyDoodle wrote:
Jan 15th, 2018 11:47 am
Hey Rod,

Does the current ratio of .53 of Cineplex concern you? At these low levels it still appears to be slightly overvalued with a P/E of 30 and they appear to be burning thru cash and need to be borrowing. Any thoughts on this?
I'm not worried, because they continue to have a decent free cash flow rate. Remember, dividends come from cash, not earnings, so their P/E has no effect into their payout ratio - you can have a company with positive earnings go bankrupt and you can have a company with negative earnings to continue afloat, so it's is all about cash flow. For this last quarter, adjusted free cash flow was $0.597 per common share, and that's in line with their dividend goal, which is to pay an annualized rate in the range between 60% and 85% of adjusted free cash flow per share. The P/E 30 simply tells the market that Cineplex is trading at a higher multiple that is questionable, but that has no impact in their ability to stay afloat or sustain dividends. From a cash perspective, under Cineplex’s Credit Facilities, which mature in April 2021, Cineplex has a $150.0 million Term Facility and a $475.0 million Revolving Facility which is available to finance acquisitions, new construction, media growth projects, working capital and dividends. With the $75 million increase in the Revolving Facility during the third quarter, as at September 30, 2017, Cineplex had $127.0 million available on the Revolving Facility. As defined under the Credit Facilities, as at September 30, 2017, Cineplex reported a leverage ratio of 2.05x as compared to a covenant of 3.50x.

Cineplex stock was mostly hurt by weak boxes releases, specially 2 quarters in a row, which hasn't happened in years. The North American industry has delivered record-breaking results for 4 of the past 5 years, and also the first half of 2017 - that helped to push valuation higher, so the recent decline as a result of softer quarters doesn't translate to Cineplex being weak financially. This was cyclical, and as record-breaking releases come back this year, associated with growth from their diversification and acquisitions, this will be seen as another opportunity to add more at a very attractive valuation.


Rod
Build a comprehensive portfolio based on Investing and Trading strategies. Check out these threads and join the discussion:

Investing strategy based on dividend growth

Trading strategy based on Graham principles.
Sr. Member
Mar 14, 2015
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Edmonton
Dumb Q Rod but since dividends are paid out through cash and not earnings, if the company doesn't have positive earnings or constantly decreasing earnings, won't the cash eventually deplete unless I guess they get financing?
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Feb 9, 2013
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jdu0ng wrote:
Jan 16th, 2018 10:45 am
I would be cautious, if $32 doesn't hold (which is weak), it can drop down to $29 from 2013.
I sold back in the $40s to stop the bleed and will buy back once it hits $30 which is likely.
Good time to buy now
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FlyOverMyDoodle wrote:
Jan 17th, 2018 11:40 pm
Dumb Q Rod but since dividends are paid out through cash and not earnings, if the company doesn't have positive earnings or constantly decreasing earnings, won't the cash eventually deplete unless I guess they get financing?
Not a dumb question at all. Technically, you can have declining earnings or negative earnings forever as long as you have positive cash flow. In reality it's difficult to implement that because costs can only go down so much, so if revenue starts to decline then eventually the company will be cash flow negative. But it's the cash flow, not earnings, that tells the ability to pay and sustain dividends. More specifically, cash flow from operations (not investing) and adjusted free cash flow. Companies don't have an obligation to pay dividends to common shares, so if after the dividends the company still have free cash flow, then it's a reasonable sign that it's sustainable, as it not only covers the outflow, but also shows that the company has cash left for investments and acquisitions. Hence the importance of a strong balance sheet and being well managed, and Cineplex got that. Given its cyclical nature, the strong cash flow allows them to continue rising dividends even when earnings / revenue aren't that great.


Rod
Build a comprehensive portfolio based on Investing and Trading strategies. Check out these threads and join the discussion:

Investing strategy based on dividend growth

Trading strategy based on Graham principles.
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Nov 9, 2013
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When you basically have a monopoly business, is it fair to blame factors outside of your control for poor earnings?

I think good management (and good companies) find a way in good and bad, and don't blame extrinsic factors for their poor execution.

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