TGH has a track record of 7 consecutive years of dividend increases. It pays quarterly dividends of $0.46 per share in the months of February, May, August, and November. At the current price of $34.11, TGH yields 5.39%.
Over the past 5 years, TGH has outperformed the S&P 500 handily, returning 128% compared with 21% for the S&P 500. The EPS growth rate over this time period is 19%, while the 5-year dividend growth rate is an impressive 52.14%.
Over the past 5 years, TGH has outperformed the S&P 500 handily, returning 128% compared with 21% for the S&P 500. The EPS growth rate over this time period is 19%, while the 5-year dividend growth rate is an impressive 52.14%.
My fair value estimates for TGH, based on the Graham Number method, is $39.76. TGH's current price of $34.11 represents a 12% discount.
TGH passes the following of my selection criteria:
- Sum of dividend yield (5.39%) and 5-yr dividend CAGR (52.14%) is 57.53% (Chowder Dividend Rule)
- EPS% Payout ratio is 48.17% (below 65%)
- 7-year weighted average dividend growth rate is 51.92% (at least 7%)
- Forward P/E ratio is 8.34 and the trailing twelve month (TTM) P/E ratio is 10.06 (below 16%)
- 5-yr total payback percentage is 26.89% (at least 16%)
Except for these concerns, TGH looks like a good candidate for DivGro. It earns 6 stars: (*******)
Other ratings for TGH
| Thomson Reuters StockReport+ | (4/10)Neutral |
| The Motley Fool's CAPS Rating | (*****) |
Final Remarks
TGH pays a very generous dividend and has an impressive earnings and dividend growth history. If I buy 75 shares at the current share price, I can increase DivGro's annual dividend income by $138. Adding shares of TGH would increase DivGro's exposure in the services sector.
I like TGH's business model. It leases containers to customers that need to ship goods. It favors long-term leases, promoting stability. It is the World's larger container lessor and has sustained its container utilization above 95% since 2010. Leasing containers instead of owning them provide customers with more flexibility.
Another risk with TGH is that it has a high Beta of 1.67. This makes the stock quite volatile with market swings (on average 67% more volatile than the overall market).
If TGH continues to perform like it has over the past 5 years and one can tolerate its volatility, I think TGH would be a great dividend growth stock to own.
Full Disclosure: I don't own any shares in TGH, but I'm planning to buy shares.
Thanks for the analysis. I just recently added more shares. I am not too worried about their debt yet since its being used to buy more containers that produce higher returns than the interest on the debt.
ReplyDeleteI bought 75 shares today. You're right -- I would certainly borrow money at a low rate if I'm reasonably assured that I can earn enough to cover the interest and more... and that's what TGH is doing!
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