Thursday, June 7, 2012

Enghouse Systems Ltd

I do not own this stock (TSX-ESL). This stock was also recommended by Keystone as a good Small Cap stock with dividends in 2011.

This company has only been paying dividends since 2008. However between then and 2011 dividends were increased at a rate of 23.9% per year. A dividend increase of 30% has been made for 2012. This is a dividend paying growth stock. It has a very low dividend, currently at 1.9% but a strong increase rate.

Coinciding with the low dividend yield is low Dividend Payout Ratios with 5 year median ratio of 39% for earnings and 19% for cash flow. The DPR for 2011 are even lower at 29% and 12%, respectively for earnings and cash flow.

Total Return over the past 5 and 10 years is 5.9% and 9.1% per year, respectively. The dividends portion of this return is 1.23% and 0.66% per year, respectively. Dividends made up 21% and 7% of the total return on this stock. (Note that dividends have been paid only for last 4 years, so this affects the 10 year dividend figures.)

On other growth fronts, 10 year figures are generally better than the 5 year figures. Revenue per share is up 15% and 19% per year over the past 5 and 10 years. Earnings per share are up 9.5% and 6.9% per year over the past 5 and 10 years. Cash Flow per share is up 8% and 11% per year over the past 5 and 10 years. Book Value per shares is probably the lowest growth with growth at 3.7% and 6.3% per year over past 5 and 10 years.

Return on Equity is quite good for 2011 at 12.5%; however the 5 year median growth at 5.8% is low. ROE on comprehensive income is confirms the ROE on net income coming is at 13.5% for 2011 and is also low for the 5 year median at just 5.5%.

As with a number of dividend paying small caps, this stock has a strong balance sheet. Debt ratios are very good with a current Liquidity Ratio of 2.24 and a current Debt Ratio of 3.02. The current Leverage and Debt/Equity Ratios are also very good, currently at 1.50 and 0.50.

This stock is both a small cap and a tech stock, so it is risky. However, if you can stand the risk you could possibly do well with dividend growth and capital gain growth over the long term.

Enghouse Systems Limited is a global provider of enterprise software solutions serving a variety of distinct vertical markets. Its strategy is to build a large diverse enterprise software company through strategic acquisitions and managed growth. Its web site is here Enghouse. See my spreadsheet at esl.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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