Textainer: Should You Buy For The Appealing Valuation And Dividend Yield?

Stagnant global economic growth has sent Textainer's (NYSE: TGH) share price down by 71% over the past 12 months, which is about 10x a decline of 7% for S&P 500 Index. Primary factors driving the declining trend are weak global trade growth, easy access to low-cost financing, and low steel price, which have weighed on container demand, leasing rates, and container price and led to declining sales and profitability.
Stock valuation was dragged close to its historical low. The shares now trade at 6.0x 2016 consensus estimated EPS and 0.5x tangible book value. The current P/E multiple remains higher than its trough level at 3.0x in 2009, when the market was overwhelmed by the global financial crisis, and the Price/Tangible Book Value trades in line with its trough level (see charts below). Investors can also enjoy a whopping 9% dividend yield even after the first in history dividend cut in November 2015.


The valuation metrics and divined yield are indeed very appealing. However, I do not foresee sufficient near-term catalysts that could drive material price upside, and there are some uncertainties that could lead to volatile price performance.
Firstly, container price may continue to decline. In Q3 2015 earnings call, management provided a negative outlook for container price based on the rationale that the declining rate of container price has been slower than the drop in steel price. As steel accounts for ~90% of materials for container and containers are... Read more

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