Monday, February 28, 2011

Those against Dividend Investing

I should probably start off with what I like about dividend investing. I do it because it works for me. Other dividend investors seem to do it for the same reason, that is, it is working for them. There are a number of bloggers blogging about their dividend investing styles and why they like it.

One of the things that anti-dividend investors talk about is that we should instead be investing in ETFs (Exchange Traded Funds). These are baskets of stocks that people can use to make money from the stock market. It is also called passive investing. This is because the people investing in ETFs do not make any judgment about the stocks in the stock market. I sort of wonder what sort of stock market we would have if every investor was a passive investor. That is no one made any judgment calls on any stock. Just how would such a market work? Or, would it work? I am just wondering.

The other thing that is talked about a lot is that capital gains are just as valid as dividends. That is you take money out of capital gains made on stocks rather than getting money from dividends. In theory, this is correct, but I have yet to see anyone make income this way. You get lots of people blogging about collecting dividends to live on etc, but I see none collecting capital gain to do this. Theories do not always work in a practical sense. I would be more impressed with this if someone actually did it and talk about how they went about this.

Do not get me wrong, I am not saying that dividend investing is the only way to invest. I have certainly invested in companies for capital gain. This was especially when I was building up my portfolio. However, I always kept a watch on them and often did not hold them for long periods of time. Why? Because I found these companies to be much more volatile as far as stock prices went.

Also, getting a steady stream of dividends from a company reassured me that the company was doing fine and allowed me to sleep at nights. Emotional? Yes. On the other hand, I do value sleeping at night. And, let’s face it investing is emotional. If it were not, then technical analysis would not work. But, perhaps if you can be less emotional than others can, it might be of benefit. Personally, when the market takes a dive, I avoid looking at it. I spend little time ever looking at the market. However, I do spend time on what I have invested in and how well the company is progressing.

Another thing that people talk about is that it is just as good for company to buy back stock as to give dividends. However, why is it that most companies do not seem to be buying back stock when the price is really low? Also, companies that do buy back stock do not seem to be making much head way into lower the number of shares outstanding. Could it be that buy backs are to cover options given to insiders? Could this be better in theory than in practice? I am just asking.

Another thing that is talked about is using bonds for income. I must admit I had bonds in the past when interest rates were really high. I have not had any bonds for sometime. I personally think that the bond market is more volatile than the stock market, if you buy and sell bonds. There is also much less transparency in fees paid for buying and selling bonds than for stocks. I currently do not have any bonds in my portfolio. However, I have had experience in this market and you never know; I might again, if I thought that interest rates justified the risks. However, this is just my personal opinion on this.

The other thing is that I am not out to beat the market. I am not out to beat anyone in investing, in actual fact. What I am doing is, in a very practical way, getting an income. What I am doing, is blogging about the companies I am investing in or tracking. I have no particular axe to grind on how anyone might want to go about investing.

I guess the last point to mention that yes; I basically only have Canadian Stocks in my portfolio. There are a couple of reasons that I feel comfortable about this. First is that I do not have that much money. If I was a multimillionaire or multibillionaire, I might be concerned about only investing in Canada. For a small investor I think there is plenty of scope for investing in Canada. The other thing is that some of my “Canadian” companies are in fact international companies. So in actual fact, I have much more internationally diversified portfolio than it would initially appear.

This, of course, comes back to the first thing that I talked about. Dividend investing is working for me. If, that changed, I would rethink how I want to invest.

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.

Friday, February 25, 2011

K-Bro Linen Inc 2

I started to follow this stock (TSX-KBL) because it was mentioned as one to watch at the Money Show I attended last November. This is another income trust company that has changed to a corporation and it has changed it symbol from KBL.UN to just KBL.

The unfortunate thing when a company converts to a corporation is that Insider Trading reports, after the conversion only cover from the conversion date. So the insider trading report for this company starts at January 1, 2011. So the report only covers 2 months, not the normal 12 months. For this company there has been no insider selling or insider buying since the first of the year. This does not tell you much.

For this company, the 5 year median low Price/Earnings Ratio is 12 and the 5 year median high P/E Ratio is 18.8. The current P/E Ratio of 17.4 is close, but under the 5 year median high. I get a current Graham Price of $15.42 and the current stock price is some 31% higher at $20.15.

This is the highest the stock price has ever been above the Graham Price. The average difference between the Graham Price and the average high price is 12%. Do not forget that the P/E Ratio and Graham Prices I am using include estimates for earnings for 2011. The earnings estimates may or may not be correct. These calculations are done to give you an idea of where the current stock price stands on a relative basis. The other thing to note is that the Graham Price uses the book value and this has not been growing while the stock was an income trust.

I get a 5 year average Price/Book Value Ratio of 1.36. I am using a 5 year average here because that is all I have since this company only started in 2005. The current P/B Ratio is 2.21 and this is over 60% above the 5 year average. The P/B Ratio is also the highest it has ever been. One explanation is that book value has not increase much over the past 5 years. However, I do not think this explains all of the 60% difference. A P/B Ratio of 2.21 is not particularly high, but it is not low.

The current yield is 5.5% and the 5 year average is 8.44%. This can be explained because the dividends have never been increased and the stock price has over the past 5 years. A yield of 5.5% is a good yield in itself. But you just have to wonder after this comparison of the current stock price ratios that the current price is not a little too high currently for this stock?

Well, when I look at what analysts recommend for this stock, they do not seem to think that the current price is too high. There are not many analysts following this stock, but the only recommendations are Strong Buy and Buy. (See my site for information on analyst ratings.) The consensus recommendations would be a Strong Buy. One analyst says this is a defensive small cap with growth potential. (The Debt Ratios are good, so I can see why it might be a defensive stock.) However, I cannot find much in the way of comments on this stock.

K-Bro is the largest owner and operator of laundry and linen processing facilities in Canada. K-Bro provides a comprehensive range of general linen and operating room linen processing, management and distribution services to healthcare institutions, hotels and other commercial accounts. K-Bro currently has seven processing plants in six Canadian cities: Quebec City, Toronto, Edmonton, Calgary, Vancouver and Victoria. Its web site is here K-Bro. See my spreadsheet at kbl.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.

Thursday, February 24, 2011

K-Bro Linen Inc

I started to follow this stock (TSX-KBL) because it was mentioned as one to watch at the Money Show I attended last November. This is another income trust company that has changed to a corporation and it has changed it symbol from KBL.UN to just KBL. Also, this company has only been around since 2005, so I have only 5 years of figures for it.

This company is giving out a very good dividend yield as it is still at 5.5%. However, they have never increased the dividend payment. They were not doing badly in the Payout Ratio under this Distributable Cash basis, however, the Payout Ratio as far as earnings and cash flow goes is high. They have been lowering it as far as these ratios goes, but not yet far enough to consider rising the dividend. Of course, since this is now a corporation, the Payout Ratios as far as earnings and cash flow goes, is now what counts.

When you look at total returns, investors have done very well with this stock. Over the past 5 years, investors could have made around 15% total return, with around 7.5% from dividends. To me, it will be a more interesting stock if they start to raise the dividend payouts. They have done moderately well in increasing the value of this stock over the past 5 years at 7.5%. They did very well during the last recession and this is a very nice thing to have in a stock over the long term. There is always going to be recessions.

The Revenue has grown at the rate of 16% per year over the past 5 years. However, the revenue per shares has not done as well, rising only 3.5% per year over the past 5 years. This is because this company did two public offerings in 2006 and 2008 after the initial public offering of shares in 2005. Earnings per share have done well as it has grown at the rate of 10.7% per year over the past 5 years.

Cash Flow growth is rather low at 2% per year over the past 5 years. However, Cash Flow excluding working capital changes, which many analysts think we should look at, is healthier at 7.7% growth over the past 5 years. The last growth figures to look at is growth in Book Value and this has not been great at 1.7% per year over the past 5 years. This is rather typical of income trust companies that based their payouts on distributable cash.

The debt ratios on this company are good. The Liquidity Ratio is currently at 1.54 with a lower 5 year average of 1.48. An average of 1.48 is a little low. The Asset/Liability Ratio currently at 3.19 with an average of 3.29 is very good. The Leverage Ratio at 1.48 and the Debt Equity Ratio at 0.46 is also good. You want to keep an eye on debt ratios as they talk to how safe it is to invest in a company.

The last thing to look at is Return on Equity. The ROE for the financial year ending in December 2009 was 12.2% with a 5 year average of 9.1%. The ROE for the 3rd quarter ending September 2010 was 13%. All this ROE figures are good.

Tomorrow I will look at my spreadsheet with a view to the current stock price and also look to see what analysts are saying about this stock.

K-Bro is the largest owner and operator of laundry and linen processing facilities in Canada. K-Bro provides a comprehensive range of general linen and operating room linen processing, management and distribution services to healthcare institutions, hotels and other commercial accounts. K-Bro currently has seven processing plants in six Canadian cities: Quebec City, Toronto, Edmonton, Calgary, Vancouver and Victoria. Its web site is here K-Bro. See my spreadsheet at kbl.htm.

I recently bought some TECSYS Inc stock as a filler stock. It is selling at $1.91 a share and has a 2.5% dividend. This is another dividend paying small cap. I will review this stock shortly.

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.

Wednesday, February 23, 2011

Loblaw Companies Ltd 2

This is a company (TSX-L) that I track but currently do not own. I bought some in 1996 and again in 1998. I sold in 2007 because this company was in trouble. I make a return on this stock, over this period of 10% per year, including dividends.

When I look at the insider trading report, I find insider buy of $1.5M over the past year. The buying was by directors of the company. There was no insider selling. Also, stock options seem mainly to be kept recently. These are both positive points. Everyone, but the directors seem to have lots more stock options that shares. George Weston Company Limited owns about 60% of this company.

The 5 year median low Price/Earning Ratio is 12.6 and the 5 year median high P/E Ratio is 16.8. The current P/E ratio of 14 is slightly below the P/E Ratio average of 14.7. This shows the price to be reasonable. I get a current Graham Price of $39.48 and the current stock price of $40.09 is only 1.5% higher. This shows a reasonable price. The other thing is the price is good on a relative basis also; as on average, the stock price is 70% above the Graham Price.

The 10 year average Price/Book Value Ratio is 2.95 and the current P/B Ratio is 60% lower at 1.66. A good stock price is when the current P/B Ratio is 20% lower than the 10 year average. So, this also shows a good current price.

The last thing to look at is the yield. The current yield is 2.1% and the 5 year average is 2.2%. Problem with this stock is that the dividends have not been raised since 2006. I do not see them raising the dividend in 2011. When they were increasing the dividends, the Dividend/Earnings Payout Ratio was around 20%. The Dividend/Cash Flow Payout Ratio was around 14%. The expected D/E Payout Ratio is expected to be around 29% in 2011 and the expected D/CF Payout Ratio around 16%.

Of course, these payout ratios were much higher from 2006 to 2009. That is why you have to look at what the company was doing prior to the current problems. When dividends were being raised on an annual basis, usually around 20% per year, the dividend yield was 1% or less. The current dividend yield is at 2.2%.
The company has not given any indication that dividends would be raised anytime soon.

The analysts’ recommendations cover ones from Strong Buy, Buy, Hold, Underperform and Sell. The consensus would be a Buy. (See my site for information on analyst ratings.) Most recommendations are Strong Buy, Buy and Hold. The expected 12 month share price between Buy and Strong Buy go from $45 to $53.

Many analysts think that this company has good potential, is on the way to a long term recovery, and therefore is a good buy. One analyst points out that over the past 6 months, the stock price has hit lower lows and lower highs. If you look at a chart, you can see this. If you follow charting, this is not good. Some analysts are concerned about Loblaw’s ability to compete against Wal-Mart. There is certainly a wide range of opinion on this stock. There are lots of Strong Buys and Buys, but sometimes the majority can be wrong.

Loblaw, a subsidiary of George Weston Limited, is Canada’s largest food distributor and a leading provider of general merchandise, drugstore and financial products and services. Corporate owned store banners include Atlantic Superstore, Dominion(1) (in Newfoundland and Labrador only), Extra Foods, Loblaw, Maxi, Maxi & Cie, Provigo, the Real Canadian Superstore and Zehrs and wholesale outlets operating as Cash & Carry, Presto and The Real Canadian Wholesale Club. The Company’s franchised and associated stores operate under the trade names Atlantic SaveEasy, Fortinos, no frills, SuperValu, Valu-mart and Your Independent Grocer. W. Galen Weston and George Weston Ltd own 63% of this company. Its web site is here Loblaw. See my spreadsheet at lob.htm.

I forgot to mention that I replaced the remaining Pareto (TSX-PTO) stock in my trading account with Goodfellow Inc (TSX-GDL). I have more flexibility in my trading account. So, I bought Goodfellow now and will get this money back when Pareto is bought out at the end of March.

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.

Tuesday, February 22, 2011

Loblaw Companies Ltd

This is a company (TSX-L) that I track but currently do not own. I bought some in 1996 and again in 1998. I sold in 2007 because this company was in trouble. I make a return on this stock, over this period of 10% per year, including dividends. Probably about 1 to 2% of this was dividends and the rest capital gain.

I sold this stock on it way down in 2007 and before it crashed later in that year. I sold some at the beginning of 2007 when it was having trouble and sold off the rest by mid-year. I was probably a bit slow to sell as it had been a great stock and I thought it would pull itself out of its troubles. However, in 2007, I was skeptical that it would recovery anytime soon. This stock did start to cover in 2008, but it has been very slow and no one over the past 5 and 10 years has made any money on this stock.

Average dividend returns over the last 5 years have been around 2.2%. This means that over the last 10 years, you might have broken even in the investment. This is not a great showing. Over the past 5 years, you would have lost money, even when including the dividends, of around 4 to 5% per year. However, I am still tracking this stock, as it might be a good one again in the future.

For this stock, all the figures of growth over the past 10 years have been better than over the last 5 years. For example, growth in revenue has been at 3% per year over the past 5 years and at 5% per year over the past 10 years. Cash flow, net of changes in non-working items, has been at -4.4% per year over the past 5 years, but at a respectable, if not great, 7% per year over the past 10 years. And, book value per share has grown only at 2.5% per year over the past 5 year, but at 8% per year over the past 10 years.

When I look at Return on Equity, the 5 year average is ok at 7%. The ROE has been increasing each year since it hit a low in 2006. For the year ending in 2009, ROE was 10.5%. For the last 12 months, the ROE is at 10.3%. This is a good ROE.

The debt ratios are also ok. The current Liquidity ratio is at 1.20 and is a little low, but slightly higher than the 5 year average of 1.19. The current Asset/Liability ratio at 1.77 is quite good and it is also better than the 5 year average of 1.71. The current Leverage Ratio at 2.30 is ok and better than the 5 year average of 2.41. What you want to see is the Liquidity Ratio and A/L Ratio at 1.50 and above. For the Leverage Ratio, the lower the better and a ratio of 2.30 is fine.

Tomorrow, I will look at what my spreadsheet says about the current stock price and how analysts are saying about this stock.

Loblaw, a subsidiary of George Weston Limited, is Canada’s largest food distributor and a leading provider of general merchandise, drugstore and financial products and services. Corporate owned store banners include Atlantic Superstore, Dominion(1) (in Newfoundland and Labrador only), Extra Foods, Loblaw, Maxi, Maxi & Cie, Provigo, the Real Canadian Superstore and Zehrs and wholesale outlets operating as Cash & Carry, Presto and The Real Canadian Wholesale Club. The Company’s franchised and associated stores operate under the trade names Atlantic SaveEasy, Fortinos, no frills, SuperValu, Valu-mart and Your Independent Grocer. W. Galen Weston and George Weston Ltd own 63% of this company. Its web site is here Loblaw. See my spreadsheet at lob.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.

Friday, February 18, 2011

McCoy Corp 2

This is a stock (TSX-MCB) I have been tracking, but until yesterday, I had not owned. I came across and started to track this stock when I was looking for a filler stock for left over money in my TFSA after I bought the main stock I wanted.

When I look at the insider trading report, there was a tiny amount (less than $1,000) insider buying late last year. There is no other insider buying or insider selling. It would also seem from the report that recent options granted have been retained. The other positive thing is that the dividends have been reinstated. The company feels that have enough cash flow for this.

This is a more positive view than I had for Nordion Inc when it restated its dividend. This is because for Nordion, the dividend was generous and I wondered about affordability of the new dividend for the company. For Nordion, it just seemed that the dividend was a ploy to get conservative investors to buy the stock. I certainly wondered if Nordion would be a good investment or not.

When I look at the Price/Earnings Ratio, I find that there is a 5 year median low of 5.6 and a 5 year median high of 17.5. This is an unusually wide spread. The current P/E Ratio based on a stock price of $4.00 is 10.3 and this is a little lower than the 5 year average of 11.5. I think that this points to a current reasonable stock price.

When I look at the Graham Price, I get a current one of $4.30 and the stock price at $4.00 is some 7% below this. This also points to a current reasonable stock price. The low Graham Price spread is -22%, but the average is 45%. The high Graham Price spread is 114%. So this also points to a reasonable stock price.

The 10 year Price/Book Value Ratio is 2.43 and the current P/B Ratio is 72% lower at 1.76. This points to a reasonable stock price also. The only ratio that does not show a current reasonable stock price is the yield. The current one is 1% and the 5 year average is 1.9%. However, they have just reinstated the dividend, so it is not surprising it is low.

There are not many analysts following this stock. The only recommendations I find is Strong Buy and Buy. The consensus is probably a Buy. (See my site for information on analyst ratings.) I see that analysts remark that this company is the world's largest manufacturer of drilling tongs for oil rigs. They also mention that it has very little debt. This stock gets a mention in the Canadian Tech Letter as a stock that doubled in 2010. See Can Tech.

As I had said before, this is a filler stock for me. It is of interest because it is a small cap dividend paying Canadian Stock.

McCoy provides innovative products and services to the global energy industry. McCoy's two segments, Energy Products & Services and Mobile Solutions, operate internationally through direct sales and distributors with its operations based out of the Western Canadian Sedimentary Basin and the US Gulf Coast. McCoy's corporate office is located in Edmonton, Alberta, Canada with offices in Alberta, British Columbia, Louisiana, and Texas. Its web site is here McCoy. See my spreadsheet at mcb.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.

Thursday, February 17, 2011

McCoy Corp

This is a stock (TSX-MCB) I have been tracking, but until yesterday, I had not owned. I came across and started to track this stock when I was looking for a filler stock for left over money in my TFSA after I bought the main stock I wanted. You can only move in $5,000 a year, so you can not do much with that. After I bought Shoppers for this account, I had just over $500 left and I was looking for a small cap dividend paying stock.

This was one of the stocks that came up. There were other stocks that I like better at that time. Also, at that time, McCoy Corp seemed to be struggling a bit. But now I think that things are looking up for the company. Also, the two other filler small cap dividend paying stocks that I liked better have both been bought out. I just hate it when I find a great stock and it gets bought out.

2008 and 2009 were not great years for this stock. The financials are not yet in for 2010, but the stock is expected to do much better. It is expected to have positive earnings for 2010. For both 2008 and 2009, the company had negative earnings or a loss.

As far as dividends go, they started in 2004 and then when up substantially until they were cut and then discontinued in 2009. McCoy has announced that dividends are being restarted for 2011, because they again have sufficient cash flow. Cash Flow has increased over the past 5 and 10 years by 15% per year and 5.5% per year, respectively.

However, if you exclude working capital from the cash flow, which many analysts now feel you should, there is no growth in cash flow and in fact, cash flow has declined over the past 5 years. I cannot get a 10 year figure, because 10 years ago, cash flow excluding working capital was negative. Cash Flow excluding working capital is positive today. So this is progress.

Revenue growth over the past 5 years has been good, as it has been growing at around 13% per year. However, revenue per share growth is not as good. It has been growing at the rate 4.5% per year. There was a big increase in shares in 2007 due to an acquisition and the pay down of debt.

The best 5 year growth has been in book value and this has grown at the rate of 25% per year. The 10 year growth is not as good and the growth here is only at a moderate 5% per year. This company is expected to do much better in 2010 and 2011 than for 2008 and 2009 in revenues, cash flows and earnings.

One very good thing about this company is the debt ratios. Around 60% is owned by insiders and investment companies and this is probably why these ratios are so good. The Liquidity Ratio is currently at 2.62 and it has a 5 year average of 2.12. The Asset/Liability Ratio is currently at 3.00 and it has a 5 year average of 2.56. Any of these ratios over 1.50 is very good. The Leverage Ratio is at 1.91 and this is also good.

There is not much to say about the Return on Equity, because frankly there has not been any lately. You can only get a ROE if the company is making money. This is expected to change with the financial report for 2010.

Tomorrow, I will talk about what my spreadsheet says about the current stock price and also what analysts have to say.

McCoy provides innovative products and services to the global energy industry. McCoy's two segments, Energy Products & Services and Mobile Solutions, operate internationally through direct sales and distributors with its operations based out of the Western Canadian Sedimentary Basin and the US Gulf Coast. McCoy's corporate office is located in Edmonton, Alberta, Canada with offices in Alberta, British Columbia, Louisiana, and Texas. Its web site is here McCoy. See my spreadsheet at mcb.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.

Wednesday, February 16, 2011

Linamar Corporation 2

This is a stock (TSX-LNR) that I track, but I do not own. This is a manufacturing company, so they tend to have a low payout ratio on both earnings and cash flow. Over the longer term, the dividend growth is 4.1%, but the dividends have not grown over the past 5 years. This stock may be an interesting industrial stock, but it is not one I am currently interested in investing in.

When I look at the Insider Trading information, I find that that there was a small amount of buying in December of 2010. There was no insider selling over the past year. What I like about this company is that insiders seem to have more shares than options. It would also seem that recent options granted to the CEO were retained. The company has also shown faith in the near future of the company by reinstating the full dividends for 2010. The dividends were cut in half for 2009.

For the Price/Earnings Ratio, I get a 5 year median low of 8.4 and a 5 year median high of 16.4. The current P/E of 12.8 is between these values and a little higher than the average of 10. I get a current Graham Price of $23.15. The current stock price of $23.09 is slightly below this. This is good in itself, but on average, the Graham Price has been some 18% higher than the stock price. So, on a relative basis, the stock price is high.

The 10 year average Price/Book Value Ratio is 1.22. The currently one at 1.75 is almost 45% above this. This tends to point to a rather high stock price. The current dividend yield at 1% is lower than the 5 year average of 1.6%. The growth potential of this dividend is not great either. If we assume a growth of 4% per year over the next 10 years, the dividend would only be 1.5% in 10 years time. You would not buy this stock for its dividends.

When I look at analysts’ recommendations, I find lots of Strong Buy and Buy recommendations. There are also Hold and Underperform recommendations. The consensus is probably a Buy (but close to a Strong Buy). (See my site for information on analyst ratings.) Analysts remark that this stock is recovering. It is in auto parts industry, but it tends to do more in the precision type of auto parts, which has little competition, so it is well placed to recover as auto industry recovers.

Linamar Corporation is a diversified global manufacturing company of highly engineered products. It is a world-class designer and diversified manufacturer of precision metallic components and systems for the automotive industry, and mobile industrial markets. Its web site is here Linamar. See my spreadsheet at lnr.htm.

My stock Pareto Corp (TSX-PTO) is being bought out at the end of March this year. I see no sense in waiting until its buyout in connection with my TFSA. I got a price of $2.69 (plus commission of $9.99) compared to the buy out price of $2.72. I have replaced this stock with Davis and Henderson (TSX-HD), a stock I already own. I also bought a filler stock called McCoy (TSX-MCB) which I will be reviewing shortly. I have some Pareto also in my Canadian Trading account and I will replace it now, but hold Pareto until after the forced buyout and get the $2.72 for my shares.

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.

Tuesday, February 15, 2011

Linamar Corporation

This is a stock (TSX-LNR) that I track, but I do not own. This is a manufacturing company, so they tend to have a low payout ratio on both earnings and cash flow. Over the longer term, the dividend growth is 4.1%, but the dividends have not grown over the past 5 years. They do not often increase their dividend. Also, because they had problems in 2009, they decreased their dividends for that year.

This company has had some ok growth over the past 5 and 10 years. However, I see nothing to get excited about. Total Growth has been at 13% and 7.4% per year, respectively. The dividends portion would be around 1.5% per year. The risk of an investment in this firm would be average.

They manufacture for the automotive industry and this is probably why there is no strong growth in the company. Don’t get me wrong, this company has done fine, I just do not think that it is a great dividend paying investment and that it the sort that I like. However, if you need some diversification into the industrial area, this might be a stock to hold for the long term. It is just never going to be a great dividend payer.

They have not done that well in increasing their revenue with the short term figures being down and the long term figures growing at about 3% per year. However, revenue is expected to pick up over the next few years. Earnings have not been great, with current long term growth at 2% and short term close to 0%. Earnings are also expected to pick up this year and next.

Growth in Cash Flow is very good at around 14% per year over both the short term and long term. However, if you excluding working capital from the cash flow, which a lots of people now think you should, the growth in cash flow is only 2.3% per year over the long term and slightly negative per year over the short term.

When I look at growth in book value, this is rather low also. The 5 and 10 year growth is 5% and 6% per year respectively. This is a bit subpar. You expect the 5 year to be low, but I would expect a better 10 year showing. The 5 year average for Return on Equity is usually not bad being around 10% to 11%. However, for the financial year ending in 2009, the 5 year average just below 8%. There was an earnings loss in 2009.

I guess the best part is the debt ratios. The Liquidity Ratio is very good currently at 1.62. The Asset/Liability Ratio is also very good at1.89. The Leverage Ratio (Assets/Book Value) at 2.00 is also good.

Tomorrow, I will talk about what my spreadsheets says about the current stock price and also what analysts are saying about this stock.

Linamar Corporation is a diversified global manufacturing company of highly engineered products. It is a world-class designer and diversified manufacturer of precision metallic components and systems for the automotive industry, and mobile industrial markets. Its web site is here Linamar. See my spreadsheet at lnr.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.

Monday, February 14, 2011

MI Developments 2

I had read some favorable reports on this stock (TSX-MIM.A, NYSE-MIM)) in 2003 by TD Newcrest and so, I bought some stock. It was probably a flavor of the month type stock. It seemed to have good coverage and I have always like Frank Stronach. However, it was not a good investment. It is good that I generally try out stocks with some small purchases and seeing how things go before making a stock a core of my portfolio.

The first thing I looked at was Insider Trading. There has been no insider buying or insider selling over the past year. A positive thing is that lately, options issued have been kept. However, the CEO and CFO both only have options and no stock whatsoever.

It is also interesting that Greenlight, a NY Hedge fund is not on board with paying Frank Stronach to leave. They have been trying for years to get rid of the special voting he has. I also think that the recent decrease in dividends is not good. I think that it shows that this company cannot afford to pay the dividends and there is no indication I can see that this company will solve their problems anytime soon.

I think if you hold a company that decreases their dividends, you have to take a very close look at it. It may be time to sell, buy more or just hold on. My decision, even before they cut their dividend, was I did not think this was a company I wanted to hold.

The first thing to look at is Price/Earning Ratios. For this stock, this is impossible to get a fix as it has so many years of not making any earnings. I also can not get one for now, as there were no earnings last year or over the last 12 months. I can find nowhere on the internet that anyone is taking a guess at the earnings for this company for last year, this year or the next one. I also cannot get a current Graham price for this stock because of lack of earnings.

The current dividend yield of 1.4% is lower than the 5 year average of 3%. However, this is to be expected since they just lowered the dividend. The only real fix I can get on this stock is the Price/Book Value Ratio. Currently, this ratio is at 0.79. If the ratio is below1.00, it means the stock is trading below its book value. Usually this is a very good sign that a stock is underpriced. However, this stock has always traded below the book value. The 8 year average is 0.59. The current P/B Ratio is therefore some 35% above the average. This shows that the stock price, on a relative basis, is high.

When I bought this stock there were a number of analysts following. However, I cannot find any following this stock at the moment. The one thing that stands out is that there has been a lot of trading on this stock and the price has zoomed up. It is hard to know whether this is solid support for this company or just speculation. Currently, I have no interest in this stock, but it is interesting to see what happens to it over the next while.

There are always going to be stock purchases that turn out to be mistakes. It happens. In retrospect, I think that buying this stock was a mistake for me. I had done some diversification into real estate for my portfolio. This had looked like an interesting stock. I also think that it is important to talk about stocks that were not good purchases for me as to talk about ones that were.

This is a real estate company that currently owns, leases, manages and develops a predominantly industrial rental portfolio. Almost all of their income producing properties is leased to Magna and its subsidiaries. It also holds a 53% equity and 95% voting interest in Magna Entertainment Corp (MEC.A). Its web site is here MI Developments. See my spreadsheet at mim.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.

Friday, February 11, 2011

MI Developments

I had read some favorable reports on this stock (TSX-MIM.A, NYSE-MIM)) in 2003 by TD Newcrest and so I bought some stock. I also bought more in 2006. I was sort of trying it out. I sold my shares in 2009. I decided that this stock was going nowhere and was not the sort I wanted in my portfolio. I lost 22% per year on this stock. Good job I did not invest much in it.

No one over the past 5 or 8 years has made much money on this company. Those that bought at the beginning, as this company has only been trading since 2003, have basically broken even on the share price and made just over 2% in dividends since 2003. Dividends would have been a problem with this company for Canadians as they are paid in US$. They remained flat in US$ between 2006 and 2009 until they were decreased by 1/3 in 2010. However, in CND$ terms the dividends would have fluctuated a fair bit.

Of course, this stock is in real estate, and we all know the recent recession has not been kind to real estate companies. Also, this company is closely tied to Magna and Magna hasn’t done that well over the past 5 and 10 years either. As far as I can see, the only growth figures for this company are for cash flow and this for the last 5 years. Cash Flow has grown at the rate of 6% per year and cash flow exclusive of non- case items has grown at the rate of 15% per year. This is not a bad showing.

This company has had no earnings since 2007 and it is not expected to have any for 2010. I know that since it is a real estate company people like to look at FFO (Funds from Operations) rather than earnings. However, even though the FFO is positive, the growth in FFO over the past 5 years is -12% per year. There is also no growth in revenues or in book value. It does not matter if you look at the US$ figures or the CDN$ figures, there is no growth.

The really only good thing to report on this stock is the good debt ratios. The Liquidity Ratio is at 1.66, which is a good ratio. (However, this ratio has fluctuated quite a bit over the years.) The Asset/Liability Ratio is great at 4.53. This ratio has always been good and the 5 year average is 3.15. The Leverage Ratio is also good. In the case of the Leverage Ratio, the lower the better and at1.43, this ratio is low.

In the newspapers, I have been reading lately that this company and Magna are paying a lot to get rid of Frank Stronach. You have to ask yourself whether it is worth it. I know that the stock soared after Frank agreed to give up his control. However, can someone else run this company better? You have to wonder.

It reminds me of the action to get rid of Conrad Black from Hollinger International. No matter what you might think of the man, the average shareholder lost when he left. The newspaper business is a tough business, but he produced returns of around 8% per year for the shareholder. The people that took over bankrupt the company. They spent more time going after Conrad than looking after the company. The average shareholder lost big time as they do whenever a company goes bankrupt.

Tomorrow, I will look at what analysts are saying about this stock. However, there are few following this stock compared when I first bought it in 2003.

This is a real estate company that currently owns, leases, manages and develops a predominantly industrial rental portfolio. Almost all of their income producing properties is leased to Magna and its subsidiaries. It also holds 53% equity and 95% voting interest in Magna Entertainment Corp (MEC.A). Its web site is here MI Developments. See my spreadsheet at mim.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.

Thursday, February 10, 2011

The North West Company 2

I first heard about this company (TSX-NWF) at the 2009 Money Show in Toronto. This is one of the income trust companies (TSX-NWF.UN) that has recently changed into a corporation. It was one that many thought was worth while watching and that it would be one of the income trust companies to do well. And, it has done well. It also has not missed a beat in the change to a corporation with the dividends remaining the same in the change over.

When I looked into Insider Trading, I can only find information for this year. This is because the company has changed to a corporation and has changed it TSX symbol. There was a very small amount of insider selling by some directors in 2011. What would be of more interest is to see what the company does in regards to dividends.

The 5 year median low Price/Earnings Ratio is 9.5 and the 5 year median high P/E Ratio is 13.6. That makes the current ratio of 15.7 rather high. However, a P/E ratio of 15.7 is a moderate rather than a high P/E Ratio on an absolute basis. Part of the reason for the current high P/E ratio is that this company is not expected to earning as much in 2011 as it will in 2010. Earnings are expected to again pick up in 2012. However, even if they made the same in 2011 as 2010, the P/E ratio would still be around 13 and this is high for this stock.

Because of the drop in earnings for 2011, the current Graham Price I get is $13.92. This is lower than the Graham Price I estimate for 2010, which is $15.33. However, using either Graham Price, the Graham Price is still 40% to 50% below the stock price. The average difference between the Graham Price and the stock price is close to 0%. The average high difference between the Graham Price and the stock price is 16%. So, no matter how you look at this stock price, it is way off the Graham Price and way off the usual difference.

I get a 10 year average Price/Book Value Ratio of 2.25 for this stock. The current P/B Ratio is 3.37 and this is some 50% higher than the 10 year average. By this measure, the stock price is high. The last thing to look at is the Dividend Yield and 6.4% and this is low than the 5 year average of 7%. This is another indicator to say the stock price is high.

When I look at analysts recommendations, all I find are Hold recommendations. So, the consensus recommendation would be a Hold. (See my site for information on analyst ratings.) Mind you, no one says anything negative about this stock or the company. The analysts that I read say that they like this company. The analysts that follow this stock just think that this price is too high. Some analysts recommend that you buy the stock on any dip in price.

The North West Company is a leading retailer of food and everyday products and services to rural communities and urban neighborhoods in Canada, Alaska, the South Pacific and the Caribbean. North West operates 225 stores under the trading names Northern, NorthMart, Giant Tiger, AC Value Center, and Cost-U-Less. Its web site is here North West. See my spreadsheet at nwf.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.

Wednesday, February 9, 2011

The North West Company

I first heard about this company (TSX-NWF) at the 2009 Money Show in Toronto. This is one of the income trust companies (TSX-NWF.UN) that has recently changed into a corporation. It was one that many thought was worth while watching and that it would be one of the income trust companies to do well. And, it has done well. It also has not missed a beat in the change to a corporation with the dividends remaining the same in the change over.

This has been a great little company for people who are invested in it. Dividends have been increasing at the rate of 17% and 13% per year over the past 5 and 10 years respectively. The Total Returns on this stock has been at the rate of 19% and 27% per year over the past 5 and 10 years respectively. Included in the Total Returns is dividends and they made up 8 – 10% per year of the 5 and 10 year Total Returns.

I want to caution you on the future. The last dividend increase in 2010 was only for 6.3%. This is a lot lower than the average increases for this company. Most companies that changed to corporation have trouble with dividend (or distributions) payments. Distribution from income trust companies were from pre-tax money and dividends from corporations is from after tax money.

For this company, the payout ratio from Cash Flow is increasing. It is expected to be around 69% for 2010. The 5 year average payout from cash flow runs lower at 57%. The thing is, dividend increases will be lower over the next while, or they may be non-existent for a while. The company has no plans on lower dividends that I know of.

Basically, this company has great growth rates. The 5 and 10 year growth in revenues per shares has been at 13% and 8% per year, respectively. The growth in cash flow over the past 5 and 10 years has been at the rate of 13% and 9% per year, respectively. The lowest growth rate has been for book value and over the past 5 and 10 years, the growth has been at 4% and 5% per year, respectively. However, this is common for income trust companies.

The debt ratios are also good for this company. The Liquidity Ratio is currently at 1.89 and has a 5 year average of 1.86. The Asset/Liability Ratio is currently at 1.92 and has a 5 year average of 2.06. For these ratios, anything over 1.50 is good. The Leverage Ratio is also good at 1.99, a rather average ratio.

The last thing is the Return on Equity. The ROE for the financial year of 2009 was 28%. The ROE for the first 9 months of 2010 is 26%. The 5 year average is 24%. These are all very good ratios.

Tomorrow and I will talk about what my spreadsheet says about the current price and what the Analysts have to say about this stock.

The North West Company is a leading retailer of food and everyday products and services to rural communities and urban neighborhoods in Canada, Alaska, the South Pacific and the Caribbean. North West operates 225 stores under the trading names Northern, NorthMart, Giant Tiger, AC Value Center, and Cost-U-Less. Its web site is here North West. See my spreadsheet at nwf.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.

Tuesday, February 8, 2011

Molson Coors Canada 2

The reason I started to follow Molson’s was that it was recommended as a good stock. Molson’s was bought out in 2005 by Coors and the company became Molson Coors Canada (TSX-TPX.B) in Canada and Molson Coors Brewing Company (NYSE-TAP) in US. My spreadsheet and reviewing are basically from the view of Molson Inc (TSX-MOL.A) changing into Molson Coors Canada (TSX-TPX.B). Molson (MOL.A) reported in Canadian dollars and the new company is reporting in US dollars. So, I have used the applicable exchange rate on values reported from 2005. However, my US stuff is Adolph Coors Co (NYSE: RKY) changing into Molson Coors Brewing Company (NYSE-TAP).

There is no Canadian Insider Trading report, but there is a US one. It provides no summary, like the Canadian one does. However, it would appear that over the past year there has been more Insider Selling than Insider Buying. Since October of 2010, there has only been Insider Selling. The company has shown faith in their future earnings as they raised the dividends 20% in 2009 and almost 17% in 2010. However, Canadians did not benefit as much because of the rise in our currency.

When I look at the Price/Earnings Ratio, I find that the 5 year median low P/E Ratio is 14.6 and the 5 year median high P/E Ratio is 18. I get a current P/E Ratio of 12.3. So, this P/E Ratio is relatively low.

I get a current Graham Price of $59.25 and a current stock price of $47.22. So the stock price is some 20% lower than the Graham Price. The low difference between the Graham Price and stock price is 22% and the average difference is 6%. So this places the current stock price in a good light.

When I look at the Price/Book Value Ratio, I get a 10 year average of 1.18 and a current Ratio of 1.16. This is just slightly lower than the 10 year average.

The last thing to look at is the dividend yield. The 5 year average is just 1.8% and the current one is 2.4%. This also shows the current stock price in a good light. The stock price is shown to be reasonable and this is usually the best for which you can hope. Do not forget that when stock prices are too cheap, it can be because the stock is not a great stock, so having a cheap stock price is not always good.

When I look at the analysts’ recommendations, I find Strong Buy, Buy and Hold recommendations. The consensus recommendation is a Buy. (See my site for information on analyst ratings.) There is some concern that the beer market in both US and Canada is both competitive and mature. Some think that the stock is attractively price at the current time.

Molson Coors Brewing Company is a leading global brewer delivering extraordinary brands that delight the world's beer drinkers. It brews, markets and sells a portfolio of leading premium brands such as Coors Light, Molson Canadian, Carling, Blue Moon, and Keystone Light across North America, Europe and Asia. It operates in Canada through Molson Coors Canada; in the US through MillerCoors; and in the U.K. and Ireland through Molson Coors UK. Under the US stock exchange, this company is called Molson Coors Brewing Co. Its web site is here Molson Coors. See my spreadsheet at tpx.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.

Monday, February 7, 2011

Molson Coors Canada

The reason I started to follow Molson’s was that it was recommended as a good stock. Another thing is that I had the Labatt’s stock as one of my first. I bought it in 1983, but I was forced to sell it in 1995 when the company was bought out. Labatt’s had been a great stock. However, even though I have followed Molson’s, I never liked it well enough to buy it. Molson’s was bought out in 2005 by Coors and the company became Molson Coors Canada (TSX-TPX.B) in Canada and Molson Coors Brewing Company (NYSE-TAP) in US.

My spreadsheet and reviewing are basically from the view of Molson Inc (TSX-MOL.A) changing into Molson Coors Canada (TSX-TPX.B). Molson (MOL.A) reported in Canadian dollars and the new company is reporting in US dollars. So, I have used the applicable exchange rate on values reported from 2005. However, my US stuff is Adolph Coors Co (NYSE: RKY) changing into Molson Coors Brewing Company (NYSE-TAP). This last thing to mention is that there was some unhappiness about the Molson buyout and that is the reason for the special Molson dividend of $5.44 in 2005.

The questions is, being a Canadian investor in Molson, would you have made any money over the past 5 and 10 years. The answer to that is yes. The 5 and 10 year total return would be about 8% and 17% per year, respectively. This stock has had some trouble with the recent recession as a lot of companies have had. The dividend portion of these total returns would have been 2% and 5% per year respectively. The 10 year is high also because it includes the special dividend.

There is another thing I want to mention concerning the dividends. Since the dividends are paid in US$, each dividend would fluctuate in the amount paid in CDN$. This can make things for difficult for Canadian investors because you never know the exact amount of your dividend until it is paid and translated into CDN$.

For both Canadian and US investors, the growth in earnings and cash flow has been good. US investors have had a better growth in Dividends as the Coors dividends seem to have started at a lower rate. What has been low growth for both Canadian and US investors is the growth in book value. For Canadians book value has grown at a rate of less than 2% per year and the US book value growth is not much better.

The real problem is the lack of growth in revenues. Revenues have been coming down since hitting a peak in 2008. It looks like the revenues might grow modestly in 2010 and this is hopeful.

One good indicator is the Liquidity Ratio. For the 3rd quarter of 2010, this ratio is 1.53. This is what I like to see. However, in the past, the Liquidity Ratio has been much lower and it has a 5 year average of just 0.95, although it has been over 1.00 since 2007. A Liquidity Ratio of 1.00 says that the company’s current assets equal its current liabilities. You want a better margin than that. The Asset/Liability Ratio has always been better and it is currently at 2.68.

The last thing to mention is the Return on Equity. For the financial year ending in 2009, the ROE was 10.2% and for the 12 months ending in September 2010, it was again at 10.2%. This is a good ROE. However, the 5 year average is a bit lower, but still at an acceptable level at 8.9%.

Tomorrow, I will look at what the analysts are saying about this stock and what my spreadsheet is saying about the current price. I must admit, there is not much coverage in Canada and this company seems to be looked on as an American company.

Molson Coors Brewing Company is a leading global brewer delivering extraordinary brands that delight the world's beer drinkers. It brews, markets and sells a portfolio of leading premium brands such as Coors Light, Molson Canadian, Carling, Blue Moon, and Keystone Light across North America, Europe and Asia. It operates in Canada through Molson Coors Canada; in the US through MillerCoors; and in the U.K. and Ireland through Molson Coors UK. Under the US stock exchange, this company is called Molson Coors Brewing Co. Its web site is here Molson Coors. See my spreadsheet at tpx.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.

Friday, February 4, 2011

PFB Corp 2

I have followed this stock (TSX-PFB) for sometime. It is a stock that the Investment Reporter has recommended. The Investment Reporter is an MPL Communications investment letter. See Advise for Investors site and click on publications tab. Personally, I think that this company puts out some of the best in investor newsletters. This is a rather small company with a cap of around $38M. Insiders own just under 80% of the company.

The first think I like to look at is the Insider Trading report. What I find on this stock is that there has been no insider buying or insider selling anytime during the past year. However, there are a couple of things to point out. First both the CEO and the Directors have lots more shares than options. The other thing is that Insiders seem to be retaining the options granted last year. The company also has a share buyback plan and the outstanding stock is being reduced, but only marginally (less than 1%).

When looking at P/E Ratios, I get a 5 year median low P/E Ratio of 12 and a 5 year median high P/E Ratio of 17.5. The current P/E Ratio, based on last 12 months earnings is 17.2. I can find no estimates for 2011 and the company does not provide any guidance. So, on both a relative and absolute basis, a P/E of 17.2 is rather high. I can find nothing to give any indication on where earning might go in 2011.

In regards to the Graham Price, the one at the end of 2010 was $7.41. The current stock price of $6.19 is some 16% lower than this so this points to a current good price. However, the stock price, on average has been about 15% lower than the Graham Price. This makes the stock price look about average. The current yield at 4.2% is higher than the 5 year average of 3.2%. This would show a good current stock price.

The last thing I looked at was the Price/Book Value Ratio. The 10 year average was 1.18 and the current P/B Ratio is 0.85. There are two good things about this Ratio. The current one is some 71% lower than the 10 year average and the current one is below 1.00. This last item shows that the stock price is below the Book Value and this is usually a very good indicator that the stock price is low. So, most of these indicators show me a good current stock price.

I can only find one analyst’s recommendation and that recommendation is a Buy. (See my site for information on analyst ratings.) The comment that I see that the company is improving and is a long term buy for both dividends and capital gains. This company has a lot of insider ownership. The major owners, own some 77%, but there are lots of insiders with shares around 25,000.

Personally, I do not mind companies with lots of insider ownership. I think that they try harder to promote the long term growth for a company. I like companies that look for long term rather than short term growth. I also like companies that have good debt ratios like this company. This gives a company the ability to survive bad times. Let’s face it, there are going to be bad times. When investing in stocks, you only really lose big time when I company goes bankrupt.

It would be a company you would buy for long term gains and dividend income. However, as far a dividend income goes, you would have to be able to stand the inconsistency in dividend increases and special dividend payments.

PFB Corporation, through its wholly-owned subsidiaries, is a vertically-integrated manufacturer of proprietary insulating building products that are based on expanded polystyrene (EPS) technology. This expanded polystyrene (EPS) rigid insulation is used in a wide variety of residential and commercial construction projects across North America. It was founded in 1968 as Plasti-Fab Ltd, now a subsidiary of PFB. Directors and officers own 57% of the issued and outstanding common shares as of December 31, 2008. Its web site is here PFB. See my spreadsheet at pfb.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.

Thursday, February 3, 2011

PFB Corp

I have followed this stock (TSX-PFB) for sometime. It is a stock that the Investment Reporter has recommended. The Investment Reporter is an MPL Communications investment letter. See Advise for Investors site and click on publications tab. Personally, I think that this company puts out some of the best in investor newsletters. This is a rather small company with a cap of around $38M. Insiders own just under 80% of the company.

As far as dividends go, this company has been rather inconsistent. They seldom give dividend increases, but when they do, they are big. In 2001, they raised the dividend 50% and in 2005, they raised the dividend 60%. They have in the past also given out special dividends when they can. However, they also have not raised their dividend nor given out special dividends since 2005. They sell insulation products for residential and commercial buildings in North America and it is no wonder they are having a hard time, especially considering the real estate market in the US.

If you have been invested in this company for the last 10 years, you would have made a very decent return on your money. Your Total Return would have been around 14% per year, with the dividends portion being around 8% per year. The Total Return over the past 5 years is in negative territory, with only 3% belong to dividends.

The growth figures for this company are rather inconsistent. The best was for the last 5 years in earnings, which increased about 11% per year. However, the earnings over the past 10 years have only increased about 2.5% per year. Both the growth in Revenues and Book Value are rather mediocre. The growth in Revenue per shares has only increased just over 5% over the past 5 and 10 years. The growth in Book Value has increased over the past 5 and 10 years at the rate of 7.8% and 4% per year respectively.

The very good think about this company is low debt and good Liquidity and Asset/Liability Ratios. The Liquidity Ratio is currently at 2.60 and it has a 5 year average of 2.16. The Asset/Liability Ratio is currently at 3.41 and it has a 5 year average of 3.37. The Leverage Ratios (Asset/Book Value) is currently at 1.41 and it has a 5 year average of 1.43. There is one think I notice about companies with lots of insider owners and that is good debt ratios. This gives a company the ability to weather the bad times.

The Return on Equity at the end of the financial year of December 2009 was 8.3% with a 5 year average of 9.4%. However, using the last 12 months earnings, the current ROE is just 5.2%.

Tomorrow I will talk about what my spreadsheet says about this company and what analysts say. However, few analysts cover this stock.

PFB Corporation, through its wholly-owned subsidiaries, is a vertically-integrated manufacturer of proprietary insulating building products that are based on expanded polystyrene (EPS) technology. This expanded polystyrene (EPS) rigid insulation is used in a wide variety of residential and commercial construction projects across North America. It was founded in 1968 as Plasti-Fab Ltd, now a subsidiary of PFB. Directors and officers own 57% of the issued and outstanding common shares as of December 31, 2008. Its web site is here PFB. See my spreadsheet at pfb.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.

Wednesday, February 2, 2011

Nordion Inc 2

In October 2010, MDS Inc (TSX-MDS) changed its name and stock symbol to Nordion Inc and TSX-NDN. Also, the NYSE changed the symbol for this company from MDZ to NDZ. I bought stock in the old MDS company in 1996, 1997 and 1998. I sold all my shares in 2006. On this stock, I made a total return per year of 5%.

When I look at the Insider Trading report, I find that there has been some insider buying over the past year, with a little bit of insider selling. Considering that this is a $755M insider buying at $.7M is rather small. However, it is a positive note. All the insiders, except for directors, have more stock options than shares. Although another positive note is that insiders seems, for the most part, to be keeping their stock options.

The other positive note from this company is that they are reintroducing a dividend. The new dividend is $.10 a quarter or $.40 a share per year. The old rate in 2006 was $.13 a share, so this is a nice increase. It certainly shows that the company is confident in producing positive earnings and positive cash flow for the financial year ending in October 2011.

Since this company has had several years of negative earnings and before that, it took awhile for the stock price to fall when earnings fell; it is hard to pin down median Price/Earnings Ratios. However, it would seem that low P/E Ratios were around 15 and high P/E Ratios around 25. The current P/E Ratio I get is 19.6 and this is rather high, whether you look at this in relative or absolute terms. Sites that use the last 12 months earnings for the current P/E ratio haven’t got one as the financial year ended in October 2010 and there was no positive earnings.

In looking at the Graham Price, I get one for 2011 of $8.10. The current stock price of $11.17 is some 38% higher than this Graham Price. When I look at the Price/Book Value Ratio, I get a 10 year average of 1.73. The current one, at 2.18, is about 25% higher than the 10 year average. A P/B Ratio of 2.18 is neither particularly low nor high.

When I look at the dividend yield, I get a current one of 3.6%. Dividends paid under this stock were always very low, with the 5 year average from 2002 to 2006 at around .5%. That is ½ of 1%. The company paid out a very small portion or their earnings and cash flow. Under the new dividends, it is expected that the cash flow payout ratio will be around 31% for 2011. It will be 27% for 2012 if the dividends are not increased. A 30% payout is not a bad ratio, but I would not like to see it much higher.

Looking at analysts’ recommendations, I find they cover all the possible ones of Strong Buy, Buy, Hold, Underperform and Sell. It might be a toss up, but the recommendations are probably just into the Buy territory. (See my site for information on analyst ratings.) On this stock, analysts seem to like the short term prospects of the company better than the long term. Some think that long term prospects may be iffy.

I found one blog entry on this company at Nuclear N Former. There is also an article in the Ottawa Citizen on this company.

This company restated the dividend and at good rate to try to attract dividend investors. However, it is not clear wither or not this is a good investment for dividend investors or for long term investors.

Nordion Inc. is a global life sciences company that provides products and services for the development of drugs and diagnosis and treatment of disease. The company is a provider of pharmaceutical contract research, medical isotopes for molecular imaging, radio therapeutics, and analytical instruments. Its web site is here Nordion. See my spreadsheet at ndn.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.

Tuesday, February 1, 2011

Nordion Inc

In October 2010, MDS Inc (TSX-MDS) changed its name and stock symbol to Nordion Inc and TSX-NDN. Also, the NYSE changed the symbol for this company from MDZ to NDZ. I bought stock in the old MDS company in 1996, 1997, and 1998. I sold all my shares in 2006. On this stock, I made a total return per year of 5%. Basically, in 2006 I thought this company had lost its way and was going nowhere. I had invested in it as it was one of very few Health Care sector in Canada and it was considered to be a very good company.

This stock has a financial year ending at October 31 of each year. MDS did have earnings and cash flow in 2007; however, 2007 was also the year that they cancelled their dividends. In 2008, 2009 and 2010 they did not have any earnings. This company is expected to have some earnings in the financial year ending in October 31, 2011. This company started to report in US$ in 2007. However, no matter how you look at the company, in US$ or CDN$, this company has not done well over the past 5 years.

All my growth statistics for the past 5 and 10 years are negative or non-calculable due to negative figures in the financial year ending October 31, 2010. For example, the growth in revenue for the last 5 and 10 years is a negative 16% and a negative 30% per year, respective. Interestingly, the growth in revenues per shares is not as bad as this, at a negative 19% and negative 9% per year, respectively. This is because the number of outstanding shares has been decreasing since 2006. This company has been restructuring itself in 2010 and it is probably about time.

I guess a bright spot is that the Liquidity Ratio and the Asset/Liability Ratio is good. The latest Liquidity Ratio is 1.96 and the Asset/Liability Ratio is 2.56. You want both of these ratios to be at least 1.50 and this company’s ratios are certainly good. The Leverage Ratio (Assets/Book Value) is also good at 1.67. There is, of course, no Return on Equity figures, as this company has had no earnings for the last while.

Tomorrow, I will look at what my spreadsheet says about the current price and what analysts are saying about this stock.

Nordion Inc. is a global life sciences company that provides products and services for the development of drugs and diagnosis and treatment of disease. The company is a provider of pharmaceutical contract research, medical isotopes for molecular imaging, radio therapeutics, and analytical instruments. Its web site is here Nordion. See my spreadsheet at ndn.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.