Thomson Reuters Corp – Financial Connections

TRI - Thomson ReutersThomson Reuters is a provider of information. How is that for simplicity? It provides information to professionals and businesses around the world. Up until 2008, Thomson and Reuters were operating independently with both companies managed by their respective families for nearly 200 years. Reuters was first established in 1799 in London through the Reuters family and Thomson family started with their first newspaper in 1934.

Thomson Reuters provides services in the following sectors:

  • Financial
  • Legal
  • Tax & Accounting
  • Media
  • Governance, Risks & Compliance
  • Intellectual Property
  • Science

My main exposure to TRI is in their financial news around stocks but they also do business with Nike and the Michael J. Fox Foundation. Of all their services, the backbone of their information services is to aggregate information from many sources together and present it in a cohesive manner to their customers based on their needs. In this day and age, information is gold and the faster you can get it and understand it, the better you can do.

The revenue profile for Thomson Reuters is very interesting. I would like to point out the recurring revenue percentage. With 85% of their business generating recurring revenues, it creates a stable business. The revenue by region also provides Thomson Reuters with a varied exposure to different markets allowing to weather the storm in local markets.

Thomson Reuters Revenue Profile
Thomson Reuters Revenue Profile

The merger of both information companies wasn’t without its trouble as they tried to consolidate their information services, Bloomberg took advantage of their challenges by snapping up more market share.

TRI Quick Facts

  • Stock Ticker: TSE:TRINYSE:TRI
  • Market Cap.: 23.79B$
  • P/E: Negative due to negative EPS
  • Forward P/E: 113.573
  • P/B: 1.25 (Price to Book)
  • P/S: 1.78 (Price to Sale)
  • P/CF: 4.34 (Price to Cash Flow)
  • EPS: Negative :(
  • Beta: 0.40
  • Liabilities to Equity Ratio: 0.85
  • Quarterly Dividends: $0.32
  • Dividend Yield: 4.45%
  • Dividend Payout Ratio: 100% due to negative EPS
  • ROE: None due to negative EPS
  • 10 Year EPS Growth Average: -19.17%
  • 10 Year Dividend Growth Average: 7.70%
  • 52-Week Low: $26.20
  • 52-Week High: $30.66
  • 52-Week Range: 57.85%

TRI Dividend Growth

From a dividend growth perspective, the trend is nice. 2003 definitely had an extra return to shareholders but otherwise, the trend is quite nice. It’s not quite exhibiting a 10% growth on average though and it doesn’t fit the profile for the 10-10 dividend growth rule.

TRI Dividend Growth

With my CNQ dividend stock analysis, I started showing what a $5,000 investment would have generated over time and how it compares against the TSE. With TRI, it’s not looking good at all. After 10 years, a $5,000 investment ends up at just a little over $4,000 with re-invested dividends. This alone makes TRI a really poor investment. I can’t even see any indication of an entry point that would make it worthwhile in the short term. The yield is definitely nice but not at that cost.

YearDividendsGrowthStock PriceSharesDividendsNew SharesValue
2000$0.68
2001$0.702.94%
2002$0.700.00%$44.4113$78.831$5,000.00
2003$1.1564.29%$47.74114$130.652$5,423.87
2004$0.76-33.91%$41.15116$87.872$4,757.46
2005$0.793.95%$40.71118$92.912$4,788.01
2006$0.8811.39%$47.25120$105.262$5,651.70
2007$0.9811.36%$39.99122$119.182$4,863.29
2008$1.0810.20%$35.63124$133.503$4,404.32
2009$1.123.70%$34.48127$141.814$4,365.60
2010$1.163.57%$37.24131$151.514$4,864.01
2011$1.246.90%$27.23135$166.926$3,665.50
2012$1.283.23%$28.8141$179.986$4,049.64

TRI vs Market

TRI Dividend Payout Ratio

TRI’s dividend payout ratio went through the roof in the past few years. Just like the stock value, the dividend payout ratio is not stable at all. There is no indication of the target ratio the company likes to maintain from looking at the graph. For me, this stock is lacking stability.

TRI Payout Ratio

TRI EPS Growth

The EPS is very disappointing. You can’t see any growth potential and since the acquisition of Reuters, they have been struggling. I read an article that the integration of the two internal software for financial sectors have been quite challenging and they have been losing business to Bloomberg.

TRI EPS Growth

Thoughts

I like their business and the recurring revenues. It’s an essential service to many companies relying on such information. It’s almost like oil and gas for utility companies but for financial services. It has increased dividends 9 consecutive times so far but their EPS is a concern – it’s very erratic and does not make me confident in the company to invest.

I have to admit that I would wait a few years to see where the stock goes before making an investment. The integration with Reuters is definitely showing challenges and expenses. I would buy CNQ with a much lower yield but with a consistent growth even amid the low natural gas prices.

DISCLOSURE: Please note that I may have a position in one or many of the holdings listed. For a complete list of my holdings, please see my Dividend Portfolio.

DISCLAIMER: Please note that this blog post represents my opinion and not an advice/recommendation. I am not a financial adviser, I am not qualified to give financial advice. Before you buy any stocks/funds consult with a qualified financial planner. Make your investment decisions at your own risk – see my full disclaimer for more details.
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