RE:us market for chw getting betteri think Pawnee/Tandem will do very well in the coming quarters. I see that confidence indicator is at an all-time high. They did 4% receivable growth last quarter - i cannot imagine them being less active in Q1!
i was looking at CHW dividend payout as a percentage of maximum allowable dividends. going back to pre-pandemic, it looks like they were getting more conservative and opted not to increase in '18/'19. I think that they could have afforded $0.01/month more heading into the crisis
then i think about earning potential of the current business and it seems like $6 million a quarter is reasonable. i mean on a FCF basis as the originations are going to have to be provisioned for upfront, but it shouldn't affect the dividend calc. that is the Q1 starting point and then we grow from there.
I am trying not to get carried away with my estimates, but a $6 million per quarter FCF run rate equals $5.4 million is permissible dividends. Put another 85% buffer onto that (arguably you could go higher since we are in the beginning stages of an expansion) and you have $4.6 million in dividends - or $0.09/$0.10 per share. They averaged an 8% dividend yield in '18 and '19 and 7% in '16 & '17. That gets you to $15-$17 per share valuation in a relatively conservative fashion THIS year.
i feel very comfortable holding this stock. it hasn't spent a meaningful amount of time above $12 since 2014, but with the growth outlook - i am even questioning whether the 7% average yield between 2016 and 2017 too conservative. The stock went on an impressive run coming out of the last financial crisis - maybe we are in the beginning stages of a similar move!