Exco Technologies Ltd

I do not own this stock of Exco Technologies Ltd (TSX-XTC, OTC- EXCOF). This is a stock given as a recommendation by Keystone at the Toronto Money Show of 2012. I decided to check into it as it is a small tech company that is paying dividends. Also, I decided to review this stock because Keystone has recommended some very good stocks in the past.

This may be called a tech stock, but it supports the auto industry. This is a tough business to be in at present. The company has high insider ownership which is a plus. The dividends are reasonable with the current one at 3.02% and the 5 year median at 3.16%. Since they started to pay dividends in 2003, they have increased the dividend yield and the Dividend Payout Ratios.

The 5 year median DPRs are 22.5% for earnings and 17.3% for cash flow. They DPRs are similar for the financial year ending in September 2012. These are reasonable DPRs for this type of company. What is also good is the dividend growth which over the past 5 and 10 years was at 17.6% and 11.7% per year.

To the end of 2012, this stock has made money for its shareholders over the past 5 years, with an 11.26% per year total return. The portion of this return attributed to dividends was 1.88% per year. The portion attributable to capital gain was 9.39% per year. About 17% of the total return was dividends.

The stock did not do as well over the past 10 years for its shareholders. The total return over the past 10 years was 0.13% per year, with the portion attributable to dividends at 1.10% per year. There was a capital loss of 0.97% per year. So basically, the shareholders have broken even on this stock over the past 10 years. This stock seems to have peaked in 2006 and then got hurt badly by the bear market in 2008.

The outstanding shares have decreased by 0.4% per year over the past 5 years and increased by 0.3% per year over the past 10 years. Shares have increased due to stock options and have decreased due to the company buying back shares.

Revenues haven't grown much in the past 5 and 10 years. They were dropping from 2004 to 2009. Over the last 3 years the grown in revenue has been good (15% to 20% range). However, analysts' are expecting low growth over the next two years.

For Earnings per Share, after 4 years of negative earnings, the company has been making money over the past 2 years. However, here again, analysts' expect EPS to grow, but not by much over the next 2 years. For cash flows, there is no growth over the past 10 years, but a very good 12.8% growth per year over the past 5 years. There has been no growth in Book Value per Share over the past 5 and 10 years. This is not surprising considering there were a number of years with negative EPS.

Return on Equity was good for the financial year ending in September 2012. It was 17%. The 5 year median is a lot lower at 8.5%. This is because of the negative EPS years of late. The ROE on Comprehensive income is only 3% off the ROE on Net Income and came in at 14%.

For the 12 months ending in December 2012, ROE is also good at 16.7% and the ROE on comprehensive income is also quite good at 16.3%.

As is common on companies with large insider ownership, this company has a very strong balance sheet. The Liquidity Ratio is very good at 3.81 for the September 2012 financial year. The current Ratio is higher at 4.63. The Debt Ratio is also very good with the one for September 2012 at 5.24 and the current one at 6.36. The Leverage and Debt/Equity Ratios are also very good at 1.19 and 0.19 respectively.

This stock is more an industrial stock then tech. It is also rather small. However, management expects to have slow, but steady growth over the next few years and I find this reasonable. They have some very good features, such as a strong balance sheet that will see it through tough times. They have a nice dividend yield at 3%. I would expect the dividends growth to slower in the future, but I am sure growth will be reasonable.

I think it has the potential to be a solid performer with reasonable dividend. You would buy for the rising dividend and some capital gains.

Exco is a global designer, developer and manufacturer of dies, moulds, equipment, components and assemblies to the die-cast, extrusion and automotive industries. The Die Casting and Extrusion Technology groups operations are based in Canada, U.S., Mexico and Colombia and primarily serve automotive and industrial markets throughout the world. The Automotive Solutions Group has facilities are located in Canada, U.S., Mexico and Morocco and supply the North American, European and Asian markets. Its web site is here Exco. See my spreadsheet at xtc.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 or StockTwits.