Update: out of CLCT today
Something someone said to me in comments prompted me to take another look at CLCT's financials. This is a stock I've owned for a little over a year and a half. Their core business is coin grading, including gold coins, which was what initially attracted me to them; they grade the coins, then seal the coin into a tamper resistant plastic package and collect a fee.
Latest fundamentals: PE 22, 8.5% dividend yield, share price $15.67, long-term debt 0.
I took a look at the income statement, cash flow, and balance sheets, both annual and quarterly for the last 5 quarters, because someone had stated that the payout ratio was 185% and I didn't believe that could be correct.
Turns out it is correct; 185% is the ratio of dividends paid to operating earnings earned in 2011.
The income statement is frustratingly lumpy, even quarter to quarter and I didn't feel like I had a good sense of trends; income appeared to be flat in 2010 and 2011 after a few years of losses in 2008-2009. The dividend payments listed on the income statement were odd because one would expect them to be the same quarter over quarter but they varied by as much as 400%. Looking at cash flow statements gave a clearer picture: every quarter the company generates $9m in free cash flow that is immediately paid out as a dividend.
I also noticed that the company has been diluting itself, issuing about 1% in stock compensation every year for the past 5. And they have deferred $3.5 million in taxes.
I have an 18% gain in the stock for the past 18 months, just a bit more than what the dividend contributed. I still think their business model is a good one, but looking at their financials made me suspicious about how they're running the books, and for whose benefit.
I can't say exactly what it was, but looking at the income statement something looked hinky, and not just that they paid out $1.80 for every dollar they earned (though that's a red flag as well.) Hard to say that a company that pays an 8.5% dividend isn't shareholder friendly, though. If they can put in a few quarters where the numbers start looking normal, I might get back in. But for now I am out and happy to be.