Yes, I know the market is crashing. All of a sudden investors got worried about Europe and panicked. However, if you have good quality Canadian dividend paying stocks, the value of the company on the stock market may go down, but nothing much is changing for your companies. The vast majority of Canadian Dividend paying stocks will continue on to make money and pay you dividends.
Now, on to the stock I want to talk about today, which is Bombardier, a stock that I own this stock (TSX-BBD.B). I first bought this stock in 1987 and I have made a return of 12.9% per year with 4.4% per year return due to dividends and 8.5% per year due to capital gain. I have certainly been though a lot of ups and downs with this stock. It still has not fully recovered from the 2000 bear market, let alone the latest one.
Bombardier restored their dividend payments in 2009, but they are still some 44% lower than what they were when they were cancelled in 2003. They have not increased the dividends since they were restored. The Dividend Payout Ratios are good with 5 year ratios at 21% for earnings and 10% for cash flow. For 2011, the one for cash flow is high at 71%, but it is expected to be at 13% for 2012.
This is a stock you would buy more for capital gain than dividends as dividends as always been low. The stock has a 5 year median dividend of just 1.9%. The dividend yield on this stock is below 2% most of the time. This stock would be considered to be a dividend growth stock.
I have not done badly with stock, but this stock has not done much for its shareholders since it hit a high in 2001. However, I must admit that the family has been working hard to revive this company. This stock has two levels of shares, one voting and one non-voting. The Bombardier family has some 64% of the voting rates on the company.
Over the past 5 years I have broken even on my investment in this company. And over the past 10 years, I am down 11% per year. These figures include both dividends and capital gain.
This stock is reporting in US dollars. And, as all Canadian stocks reporting in US currency, this company has done better in US currency than in Canadian currency. The company was making progress before the latest bear market. Sales have dropped, but they continue to make progress in earnings. Cash flow has always varied a fair bit.
The book value is down considerable for 2011. Part of the reason is the change to the new accounting system, but mostly it has to do with the fact that comprehensive income is negative this year. Net income is positive, but a negative comprehensive income calls into questions the quality of the net income. That is it may not be a good as it looks.
The Return on Equity is high for 2011 at 286%. However, this is because the book value is so low, so this really does not tell us anything at all. As I have said above, because of the difference between the comprehensive income and net income (which ROE is based on), you probably cannot believe the net income and therefore the ROE is rather meaningless.
The debt ratios are low. The current Liquidity ratio is not bad at 1.11, but the Debt Ratios (which looks at Assets and Liabilities) is even lower 1.03. Because the book value has dropped so much the current Leverage and Debt/Equity Ratios are meaningless. The debt ratio on this stock has never been good. They have been sort of in the ok region.
I am holding on to my shares in this company. I still believe it will revive. However, I could be wrong on this.
Bombardier is a world-leading manufacturer of innovative transportation solutions, from commercial aircraft and business jets to rail transportation equipment, systems and services. Headquartered in Montréal, Canada, Bombardier has a presence in more than 60 countries. The Bombardier family controls 64% of the voting rights under this stock. Its web site is here Bombardier. See my spreadsheet at bbd.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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