TAL International Group, Inc. (TAL) leases intermodal containers and chassis. The company has 2 segments. One segment leases and disposes containers and chassis from its fleet and also manages containers owned by third parties. The other segment purchases containers from shipping line customers and other sellers and resells these containers to traders and users for storage or one-way shipment. Formed in 1963, it is one of the oldest and largest lessors of intermodal freight containers. The company's fleet includes over 1.9 million twenty foot equivalent units of dry containers, refrigerated containers, tank containers, open tops, flat racks, chassis, generator sets and palletwide containers.
On October 24, 2012, TAL reported the following:
|TAL reported leasing revenues of $135.2 million for the third quarter of 2012, an increase of 11.8% from the third quarter of 2011|
|TAL reported Adjusted EBITDA of $141.0 million for the third quarter of 2012, an increase of 7.1% from the third quarter of 2011|
|TAL continued to invest aggressively in its business during 2012. Year to date, TAL invested over $800 million in new container purchases and sale-leaseback transactions.|
|TAL announced a quarterly dividend of $0.62 per share payable on December 27, 2012 to shareholders of record as of December 6, 2012|
TAL has a strong track record since its October 2005 IPO. Over 7 years, it has an average adjusted pretax ROE of 21%. The cumulative dividends of the company over that time was $9.17. The dividend has not been steady. It goes up and down with the earnings of the company. The dividend has been as low as $.01 at the end of 2009 and as high as $.62 at the end of 2012. Management changes the dividend according to profits each quarter. This fluctuation in the dividend and earnings has given the price of the stock great volatility as well. You can view this volatility in the graph below (taken from Interactive Brokers). Click to enlarge
Based on the dividend provided in 2012, the company offers over 6% at the present price of around $39.00 per share.
Other financial statistics offer some interesting fodder for consideration. The company's payout ratio is around 60%. Its P/E is just shy of 10. Insiders own 13% of the outstanding shares. However, there has been insider selling over the past 6 months of nearly 5 million shares. Institutions own 67% of the shares outstanding. As of 12/14, almost 13% of the outstanding shares were sold short. It appears that investors have strongly divergent views on the future of the company's earnings and dividends. These differing opinions are likely based upon the their various opinions on the outlook for global expansion or contraction.
Analysts such as Credit Suisse and TheStreet are positive on TAL, rating it a buy. Ford Equity Research rates TAL a hold. Upon reading each of these recommendations, I determined that they were based on prior company reports and not upon future global economic activity.
Finally, the basis for my research on TAL came as a follow-up to a recommendation from The Income Investor. Gordon Pape, editor of the publication, lists the stock as a buy.
My research on this company left me feeling that one must be optimistic about the global economy and stout of heart to buy this dividend stock. This is not a buy and hold stock. It is a company that is intimately tied to the vagaries of the worldwide economy. If you are convinced that we are about to have continued worldwide economic expansion, then this stock should suit your fancy. Continued worldwide economic expansion would further increase the value of the company's assets and enhance the returns on its leasing and sales of containers. Global expansion would lead to further growth in earnings and fatter dividends.
However, if you are convinced of economic contraction or stagnation, then you should avoid this stock or perhaps like some others, short it. Global contraction would quickly lower earnings and bring leaner dividends. Predictions vary widely on what the global economy will do over the next year and, therefore, I am wary of this particular stock even though its dividend has been increasing over the past few years.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in TAL over the next 72 hours. 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 with any company whose stock is mentioned in this article.