# Holders of TRI - did you know this?



## dubmac (Jan 9, 2011)

http://web.streetauthority.com/m/tts/TTS05/12-companies-ob-vid.asp

This article suggests that TRI (Thomson Reuters - a media company) has a big problem with it's balance sheet. - way to much debt -- and is at risk of default.
Holders of TRI may want to do some DD and check this out further - 
I do not know anything about the writers of the article - and I don't own TRI - but some of you may own it.
If so, perhaps the article is of interest. - Hopefully the authors are wrong!


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## gibor365 (Apr 1, 2011)

I hold TRI about 1-1.5 month and it was doing pretty good ... above 5% gain + dividends. IMHO if something is true in the article , it would've already get priced in stock price 9even before publishing)...

Would like to hear another opinions on TRI....


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## doctrine (Sep 30, 2011)

I don't own it, but that website is hardly an authority. Their debt isn't abnormal, and their revenues are increasing, as is their dividend 6-7% every year. Its a fairly priced stock and probably not a bad buy under $30. It has something like a 20-25 year streak of yearly dividend increases and a reasonable payout.


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## PMREdmonton (Apr 6, 2009)

Just perusing their finances their debt levels look okay.

The big issue that I have with them is flat revenues, declining margins, declining profits, declining BV per share and rising debt. They had a bad quarter with a big loss mostly due to a write-down on their balance sheet.

Still for a declining business I would want it cheaper with a single digit PE on a normalized basis (they look they are around 20 right now) and P/FCF < 10 or FCF yield > 10%. 

So right now I just think they are overvalued. The debt problem is very manageable if they can get their business more profitable again. I don't follow the company enough to know if there are any upcoming catalysts but I know lots of old media companies are having difficulty monetizing their assets these days and I wonder if that is what the issue is here.


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## gibor365 (Apr 1, 2011)

I bought it below $27. 
TRI is practically the only Canadian dividend stock who is a member of Dividend Contenders list and increasing dividends for last 19 years (more only IMO, but their div is very low).
Also when I bought TRI, it had almost historically high yield.


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## PMREdmonton (Apr 6, 2009)

But yield is only sustainable if there are sufficient earnings and cash flow to maintain it.

This looks like a slowly contracting company to me once you adjust for inflation. While they continue to pay their dividends their book value is declining and their earnings seem to be going sideways. This is not sustainable in the long run. They need to do something - cut costs, find some ways to increase revenues - or they will not have a sustainable dividend and almost certainly will soon have to stop their dividend increases. 

FWIW, their FCF has been declining the last few years and the payout ratio (out of FCF) right now is about 33% in 2008 to 62%. So it is still in the sustainable range and there should be some room for small increases in the future but I don't think they can continue to increase it in a meaningful way and continue to invest in their underlying business.


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## humble_pie (Jun 7, 2009)

when tom glocer retired recently, it was thought that this final departure of the last of the bigtime Reuters journalists would allow tri to concentrate on more profitable parts of its business, which are the data businesses. So it's a bit early to tell what they might be able to accomplish.

agree with Edmonton's view that oldtime media companies are in a very tough spot & have been for some time.

as for this streetauthority website i had never seen it. Looks like just another stocktip newsletter publisher. It's hard to believe investors pay good money to buy these; but alas they do.


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## gibor365 (Apr 1, 2011)

Still S&P gives TRI pretty good Credit Rating A- and 12 mo target price 10% up from current.


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## PMREdmonton (Apr 6, 2009)

I get worried anytime the price taget isn't 20% more than the current price. 

Their credit is good - there are no worries there. Their debt is very manageable, they have a decent balance sheet and they are cash flow positive.

The question to me is whether you are at risk of capital loss and whether dividend growth is sustainable. I would answer yes and no based on what I see at the moment.


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## gibor365 (Apr 1, 2011)

From S&P report , their position is not so bad as in article in the 1st post
"Also during the quarter, the company realigned
the structure of its professional division and announced
plans to sell its health care business.
We expect EPS of $2.08 in 2012.
Investment Rationale/Risk
ä We believe TRI, with longer contracts and a
more diversified product base, is better suited
than in past years to handle economic slowdowns."

TRI's next earnings will be reported in 19 days, so I'm a bit concerned.... how can I know what EPS is expected?


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## PMREdmonton (Apr 6, 2009)

To be honest, I have no idea what to expect.

Clearly this is a company that needs to start increasing revenues and earnings as it has been stagnant for awhile.

Using the G&M website there are 4-4 on earnings over the last 2 years.

There has been recent downvisions in earnings for this quarter, this year and next year for earnings over the past while.

The question is always whether the company will execute in the future. I am no expert on that. I would only argue their payout ratio has been steadily climbing to the point where for it can only sustainable increase in line with earnings growth now. Once you get to 60% payout for most companies you are often weakening the company in the longrun if you raise dividends more than earnings.

The one thing that bothers me about this stock is they are coming off a big write down last quarter and their TTM earnings are negative once you account for that loss. If you go back to the previous twelve months it looked like earnings were in the 1.40 range which puts the PE at 20. I'd normally want to see a company growing the bottom line a consistent 8-10% or so for that ratio.

Think of it this way - how many quality dividend growth companies do you see that have been consistently raising their dividends, pay a 4.5% yield, trade for a fwd PE of 14 but have lost 50% nominal share price over 10 years, 40% over 5 years and 26% over the past year. To me that is an ugly looking chart and I am far from convinced that they have managed to turn this company around. 

I guess I would say that I am skeptical about this one and I would think about writing a stop-loss on this one so that I didn't let it drift down too far.

Think about it this way - for the holders of the stock over the last year they got a 1.25 in dividends but took a 9.62 capital loss. So total return is -8.37 or roughly 30% of the value of a current share in the company. 

Anyways, I'm not an expert in this stock (hardly ever looked at them before) but the technicals look bad, the balance sheet has been deteriorating, the cash flow has been deteriorating and I don't think the stock is appropriately cheap right now based on past performance.

The analysts are talking about $2.03 for the current fiscal year - I would buy this one at a PE of 8.5 which is the value Graham used for non-growing companies. That implies a stock price of around $18 or so before one would consider this one a good value play to me.

I really think the current atmosphere of chasing yield due to lack of appropriate income instruments is making people take questionable positions in declining companies that happen to pay a decent dividend. YLO has hopefully taught everyone a lesson about this. Before buying a stock, think about the company first - how are they doing? I don't see a successful company here right now.

Good luck with this one, gibor. I hope it works it for you but I'd be cautious based on backward looking information.


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## humble_pie (Jun 7, 2009)

dubmac's article is fun.

this is the first time i've ever seen doughty old blue-blooded aristocrat thomson reuters classed with edgy-obscene dov charney's american apparel, which indeed is going bankrupt.

the thomsons would not be amused. However presumably they do not read trash like streetauthority.


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