Monday, November 2, 2009

* Courier Corp. (CRRC) Dividend Stock Analysis

This article originally appeared on The DIV-Net October 26, 2009.

Linked here is a detailed quantitative analysis of Courier Corp. (CRRC). Below are some highlights from the above linked analysis:

Company Description: Courier Corporation publishes, prints and sells books. Founded in 1824, Courier has two lines of business: full-service book manufacturing and specialty publishing.
Fair Value: I consider four calculations of fair value, see page 2 of the linked PDF for a detailed description:
  1. Avg. High Yield Price
  2. 20-Year DCF Price
  3. Avg. P/E Price
  4. Graham Number
CRRC is trading at a discount to 1.), 2.) and 3.) above. The stock is trading at a 40.2% discount to its calculated fair value of $25.24. CRRC earned a Star in this section since it is trading at a fair value.

Dividend Analytical Data: In this section there are three possible Stars and three key metrics, see page 2 of the linked PDF for a detailed description:
  1. Free Cash Flow Payout
  2. Debt To Total Capital
  3. Key Metrics
  4. Dividend Growth Rate
  5. Years of Div. Growth
  6. Rolling 4-yr Div. > 15%
CRRC earned three Stars in this section for 1.), 2.) and 3.) above. A Star was earned since the Free Cash Flow payout ratio was less than 60% and there were no negative Free Cash Flows over the last 10 years and it earned a Star as a result of its most recent Debt to Total Capital being less than 45%. The stock earned a Star for having an acceptable score in at least two of the four Key Metrics measured. Rolling 4-yr Div. > 15% means that dividends grew on average in excess of 15% for each consecutive 4 year period over the last 10 years (1999-2002, 2000-2003, 2001-2004, etc.) I consider this a key metric since dividends will double every 5 years if they grow by 15%. The company has paid a cash dividend to shareholders every year since 1950 and has increased its dividend payments for 16 consecutive years.

Dividend Income vs. MMA: Why would you assume the equity risk and invest in a dividend stock if you could earn a better return in a much less risky money market account (MMA)? This section compares the earning ability of this stock with a high yield MMA. Two items are considered in this section, see page 2 of the linked PDF for a detailed description:
  1. NPV MMA Diff.
  2. Years to > MMA
CRRC earned a Star in this section for its NPV MMA Diff. of the $56,158. This amount is in excess of the $1,900 target I look for in a stock that has increased dividends as long as CRRC has. The stock's current yield of 5.57% exceeds the 3.9% estimated 20-year average MMA rate.

Other: CRRC is a member of the Broad Dividend Achievers™ Index.

Conclusion: CRRC earned one Star in the Fair Value section, earned three Stars in the Dividend Analytical Data section and earned one Star in the Dividend Income vs. MMA section for a total of five Stars. This quantitatively ranks CRRC as a 5 Star-Strong Buy.

Using my D4L-PreScreen.xls model, I determined the share price would need to increase to $45.05 before CRRC's NPV MMA Differential increased to the $1,900 that I like to see for a stock with 16 years of consecutive dividend increases. At that price the stock would yield 1.86%.

Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the target $1,900 NPV MMA Differential, the calculated rate is 4.7%. This dividend growth rate is significantly less than the 15.0% used in this analysis, thus providing a margin of safety. CRRC has a risk rating of 1.50 which classifies it as a low risk stock.

In 2008, CRRC's EPS was a loss of $0.03/share. For the trailing twelve months the loss has expanded to $0.17/share. Although the stock is trading well below my buy price of $25.24, concerns about is current business prevents me buying. For additional information, including the stock's dividend history, please refer to its data page.

Disclaimer: Material presented here is for informational purposes only. The above quantitative stock analysis, including the Star rating, is mechanically calculated and is based on historical information. The analysis assumes the stock will perform in the future as it has in the past. This is generally never true. Before buying or selling any stock you should do your own research and reach your own conclusion. See my Disclaimer for more information.

Full Disclosure: At the time of this writing, I held no position in CRRC (0.0% of my Income Portfolio). What are your thoughts on CRRC?

Tags: [CRRC]