Friday, October 1, 2010

Dorel Industries Inc

I do not current own this stock (TSX-DII.B). I held it at one time from May 1999 to July 2006. I did not make any money from it as it sold it at about what I paid for it. This stock was not given dividends at that time. I had bought it because it was a favorite stock of a newsletter I like. It is still a favorite, I must say. I sold it because I had had it more than 5 years, and it had not gone anywhere. I also did not expect it to do anything anytime soon. I liked Manulife better and sold this to buy Manulife.

This stock has been reporting in US$ since 2000 and has done better in US currency, than in CDN currency. The company does business world wide (in about 17 countries). The other thing to note about this company is that there are two classes of shares. Most of the voting rights belong to two families (Schwartz and Segel). This company just started to pay dividends in 2007. They also pay dividends in US$, so dividends will fluctuate with the currency exchange rates.

As with a lot of industrial stocks, the dividend yield is quite low. It has a 3 year average of 1.7% and a current yield of 1.8%. I must say that the payment of dividend adds an interesting aspect to this stock. The dividends have increased on average at 15% per year. However, there was no increase between 2008 and 2009. It will be interesting to see if the average good increase in dividends will be permanent or not.

The company has not done a bad job in increasing Revenues and Cash Flows over the last 10 years. The 5 years figures are not so good. The best growth is probably for the Book Value that has had growth in the last 5 and 10 years of 7.5% and 14% per year, respectively. However, investors in this stock would probably not have made much money on it over the past 10 years and not any money at all over the past 5 years. The stock hit a peak in price in 2004, 2005 and then started to fall. It fall sharply in March of 2009 and has since gain some 80% over those 2009 lows.

Analysts seem to expect this stock to have good increases in earnings for 2010 and 2011. Net income is certainly up in the 2nd quarter of 2010. Compared to the 2nd quarter of 2009 net income is up some 40%. Getting on to what is currently good, this stock has a strong balance sheet. The current Liquidity Ratio is 2.04 and it has a 5 year average of 1.86. The Asset/Liability Ratio is 2.16 and it has a 5 year average of 2.11. For both these ratios, anything over 1.50 is good. Also, the Return on Equity is good with a 5 year average of 10.9% and with a second quarter of 2010 at 13%.

I will continue to track this stock as it might, in the future make an interesting investment, considering that it is now paying a dividend. I can see why people might like this stock. It has a strong balance sheet and it has been able to growth both revenue and cash flow. I am not surprised that it has not made much money for investors over the past 5 and 10 years because Industrial stocks tend to get hit harder in recession than say utility stocks. On Monday, I will look at what the analysts say about this stock.

Dorel Industries Inc. is a world class juvenile products and bicycle company. Dorel’s branded products include Safety 1st, Quinny, Cosco, Maxi-Cosi and Bébé Confort in Juvenile, as well as Cannondale, Schwinn, GT, Mongoose and SUGOI in Recreational/Leisure. Dorel’s Home Furnishings segment markets a wide assortment of furniture products, both domestically produced and imported. Dorel has facilities in seventeen countries, and sales worldwide. There concentrated ownership of this company by the Schwartz family (66%) and Segel family (17%). There are two classes of shares, Class A with multiple voting (10) and Class B, with subordinate voting rates (1). Its web site is here Dorel. See my spreadsheet at dii.htm.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on twitter.

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