Can you please comment on:
- Balance sheet quality
- Management
- Current valuation relative to its history
Considering its 12-year dividend-raising drought, is there a history of companies going long periods without raising before resuming once again. Wondering if there is any hope.
A somewhat related question.......
KBL is rated B+ in your reports. Does your rating system take into account any risk profile? For instance, I believe PRL is also rated B+. So from an overall risk standpoint, would you see these two companies at roughly a similar level of risk?
KBL has recently grown its equity position in recent quarters, and it has a fairly leveraged balance sheet. Its net debt/EBITDA ratio is 3.8X (slightly higher than our preferred 3.5X levels) and a debt/equity ratio of 1.2, also a bit higher thna preferred. Balance sheet strength is just OK. But its free cash flows are solid, and more than enough to cover dividends.
The CEO has been in the role over the past 25 years, and insider ownership is decent, but somewhat small at 2.7%.
Relative to its historicals, KBL trades mostly at a discount to its long-term averages.
There have been other stocks which have paused dividend raises for an extended period of time, and then resume raises afterwards. But we would remain cautiously optimistic on any potential for dividend increases going forward, we think the likelihood is low.
The report cards do not take into account risk levels, however, much of these factors are discussed in the key risks section of the reports. Our rating system looks at holistic fundamental profiles of each company, but in terms of 'growth', 'balanced', or 'income' profiles, these are mostly found through our model portfolios.