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Textainer (NYSE:TGH) and TAL (NYSE:TAL) are the leading shipping container leasing companies in the world. Both are similarly sized with similar dividend yields:

Dividend YieldMarket Cap

About a year ago, these two were compared on Seeking 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%.

TAL Chart

Textainer's underperformance can be attributed to poor earnings in the last two quarters compared to TAL.

TAL Dividend Chart

However, longer term, Textainer has shown more consistent revenue growth compared to TAL.

TAL Revenue (Quarterly) Chart

Except for the last two quarters, Textainer has also shown more consistent earnings growth than TAL.

TAL Net Income (Quarterly) Chart

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 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 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 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 more room for growth and currently TGH is undervalued compared to TAL. So I would pick TGH over TAL as of now.

Source: Shipping Container Dividends: Textainer Group Holdings Vs. TAL International Group