Seeking Alpha
Home | Portfolio | Market Currents | Investing Ideas | Dividends & Income | ETFs | Macro View | Home | My Portfolio | Breaking News | Latest Analysis | Alpha-Rich Ideas | StockTalks | ALERTS | PRO
Textainer ( TGH ) and TAL ( TAL ) are the leading shipping container leasing companies in the world. Both are similarly sized with similar dividend yields: Dividend Yield Market Cap TAL 5.25% 1.8B TGH 5% 2.1B
About a year ago, these two were compared on Seeking tracking csav Alpha and it is time for another look. In the last year, TALs stock price has outperformed that of TGH and now they have similar dividends. Last year TAL was 7.4% and TGH was 5.6%.
So far these companies look very similar in every aspect. Longer term, we need to pick the company with better dividend growth prospects. Here Textainer seems to be the better bet. TAL pays out a much higher percentage of its earnings as dividends. Only in the last dismal quarter did Textainer's coverage ratio come close to TAL's. This leaves Textainer more room to grow dividends as long as the drop in earnings is temporary.
From the Textainer earnings call transcript , the drop seems to be attributed to one time events related to "container tracking csav write-offs and ... bad debt expense relate[d] to six small lessees, which are in default". However, even other than one time items, Textainer expects earnings to be flat. This would mean dividend growth tracking csav would be pressured for the near term. I got the same impression from TAL's transcript - "we expect our adjusted pre-tax income to decrease slightly from the third quarter of 2013 to the fourth". Textainer management have a 50% earnings payout goal for dividends. That said, they said they would not reduce dividends if they cannot meet that coverage ratio. This quarter was 67%. TAL on the other hand seems to consistently pay a higher portion of its income with upper 60s being the norm.
One more point to consider is that TGH is a lot less leveraged than TAL with a dept to equity ratio of 2.3 compared to TAL's 4.2. Also thanks to the bad quarters TGH trades tracking csav at a lower P/E of 10.8 compared to TAL's 12.2.
You cannot go wrong with either company for long term dividends and dividend growth. However, TGH's 50% coverage goal leaves tracking csav more room for growth and currently TGH is undervalued compared to TAL. So I would pick TGH over TAL as of now.
Disclosure: I am long TGH . I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship tracking csav with any company whose stock is mentioned in this article. (More...)
Tech Investor
BOOKMARK ED / READ LATER
Siddharth is a software engineer at The University of Virginia. He is very interested in personal finance and investing. He follows and writes about Tech Stocks, Indian ADRs and Dividend Stocks. He blogs about finance at Personal Finance Simplified - http://www.parchayi.com/ and about other... More
Mobile Apps | RSS Feeds | About Us | Contact Us
Home | Portfolio | Market Currents | Investing Ideas | Dividends & Income | ETFs | Macro View | Home | My Portfolio | Breaking News | Latest Analysis | Alpha-Rich Ideas | StockTalks | ALERTS | PRO
Textainer ( TGH ) and TAL ( TAL ) are the leading shipping container leasing companies in the world. Both are similarly sized with similar dividend yields: Dividend Yield Market Cap TAL 5.25% 1.8B TGH 5% 2.1B
About a year ago, these two were compared on Seeking tracking csav Alpha and it is time for another look. In the last year, TALs stock price has outperformed that of TGH and now they have similar dividends. Last year TAL was 7.4% and TGH was 5.6%.
So far these companies look very similar in every aspect. Longer term, we need to pick the company with better dividend growth prospects. Here Textainer seems to be the better bet. TAL pays out a much higher percentage of its earnings as dividends. Only in the last dismal quarter did Textainer's coverage ratio come close to TAL's. This leaves Textainer more room to grow dividends as long as the drop in earnings is temporary.
From the Textainer earnings call transcript , the drop seems to be attributed to one time events related to "container tracking csav write-offs and ... bad debt expense relate[d] to six small lessees, which are in default". However, even other than one time items, Textainer expects earnings to be flat. This would mean dividend growth tracking csav would be pressured for the near term. I got the same impression from TAL's transcript - "we expect our adjusted pre-tax income to decrease slightly from the third quarter of 2013 to the fourth". Textainer management have a 50% earnings payout goal for dividends. That said, they said they would not reduce dividends if they cannot meet that coverage ratio. This quarter was 67%. TAL on the other hand seems to consistently pay a higher portion of its income with upper 60s being the norm.
One more point to consider is that TGH is a lot less leveraged than TAL with a dept to equity ratio of 2.3 compared to TAL's 4.2. Also thanks to the bad quarters TGH trades tracking csav at a lower P/E of 10.8 compared to TAL's 12.2.
You cannot go wrong with either company for long term dividends and dividend growth. However, TGH's 50% coverage goal leaves tracking csav more room for growth and currently TGH is undervalued compared to TAL. So I would pick TGH over TAL as of now.
Disclosure: I am long TGH . I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship tracking csav with any company whose stock is mentioned in this article. (More...)
Tech Investor
BOOKMARK ED / READ LATER
Siddharth is a software engineer at The University of Virginia. He is very interested in personal finance and investing. He follows and writes about Tech Stocks, Indian ADRs and Dividend Stocks. He blogs about finance at Personal Finance Simplified - http://www.parchayi.com/ and about other... More
Mobile Apps | RSS Feeds | About Us | Contact Us
No comments:
Post a Comment