Monday, December 2, 2013

Finning International Inc.

On my other blog I am today writing about Buy and Sell Advisor's Canadian Dozen for 2014...continue...

I do not own this stock Finning International Inc. (TSX-FTT, OTC-FINGF). When I was in the market to buy an industrial stock in this area in 2007, I look at this stock was well as Toromont Industries (TSX-TIH). At the time I liked Toromont better, so that is what I bought.

This stock has a decent dividend with the 5 year median dividend yield at 2.1%. It also has decent dividend increases with the 5 and 10 year growth in dividends at 8.9% and 13.9% per year. I have tracked the dividends since 1988. They have increased the dividends every year since 2002. They had a couple of decreasing dividend years in 1991 and 1992 and dividends were flat between 1995 and 2001.

The current dividend is at 2.46%. The most recent increase was in 2013 at 8.9%. The Dividend Payout Ratios are good with the 5 year median DPR for earnings at 34% and the 5 year median DPR for cash flow at 29%.

There has not been much change in outstanding shares. Shares have gone down slightly (less than 1% per year) over the past 5 years and have gone up 1% per year over the past 10 years. Shares have increased due to stock options and share issues. They have decreased due to buy backs.

Revenue has increased by 3.2% and 7.5% per year over the past 5 and 10 years. Revenue per Share has increased by 3.7% and 6.4% per year over the past 5 and 10 years. Revenue per Share, using the 5 year running averages shows increase at 4% and 6.3% per year. This is similar to the 5 and 10 year increases.

Earnings per Share have increased at 5% and 8.8% per year over the past 5 and 10 years. However, if you look at the EPS using the 5 year running averages, EPS is down by 3% per year over the past 5 years and up by only 6.3% per year over the past 10 years. Differences occur between the exact 5 and 10 year increases and use of the 5 year running averages if exactly 5 or 10 years ago the company had a particularly good or bad year.

Cash Flow per Share is up by 15.7% and 6.7% per year over the past 5 and 10 years. Using 5 year running averages I get similar results. The results show that the company is growing. The only caution is the EPS/CF Ratio is above 1.00 at 1.03. This ratio was also above 1.00 in 2011 at 1.36. The problem is that companies that have this ratio above 1.00 tend to do worse over the longer term than companies that keep this ratio below 1.00. This is just a cautionary note.

The company has mostly but not always kept its Return on Equity Ratio above 10%. The 5 year median ROE is 12.3% and ROE for 2012 is 21.6%. The ROE is for 2013 is expected to be around 20.4%. The ROE on Comprehensive Income for 2012 is lower at 19.9%, but this is only some 8% off the ROE on Net Income. There have been bigger differences in the past.

The Liquidity Ratio is often low, but it is above 1.00. The Ratio for 2012 was 1.47. The current Ratio is quite good at 1.91. The Debt Ratio has been low at times, but also has been above 1.00. The Ratio for 2012 was just 1.44 and the current is better at 1.51. I prefer both these ratios to be at 1.50 or above.

The Leverage Debt/Equity Ratios are on the high side for an industrial stock at 3.27 and 2.27. However, they are back to a better ratio for an industrial stock current at 2.95 and 1.95.

The total return to date is good at 14.63% and 7.63% per year over the past 5 and 10 years. The dividend portion of this return is 2.88% and 2.05% per year and the capital gains portion is 11.76% and 5.17% per year. The 5 year return to the end of 2.12 was not so good with a total return loss of 1.25% per year and a 3.03% capital loss per year and 1.78% per year in dividends.

The thing is that the stock price hit a high in 2007 that it has not yet got back to. This, of course, points to a problem when stocks are bought at a too high a price.

This is a dividend growth stock that seems to have done fine over the years for shareholders. See my spreadsheet at ftt.htm.

This is the first of two parts. Second part will be posted on Tuesday, December 3, 2013 and will be available here.

This company sells, rents and provides customer support services for Caterpillar equipment and engines. They cover Canada, UK, Argentina, Bolivia, Chile and Uruguay. Its web site is here Finning.

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.

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