I do not own this stock of Dorel Industries Inc. (TSX-DII.B, OTC-DIIBF), but I used to. This was a stock recommended by Investment Reporter as a conservative investment. I sold the stock in 2006 because I had it for 7 years from 1999 and it was going nowhere. I bought this stock before I stopped working and at that time I did not mind buying stocks with no dividends. It started dividends in 2007, just after I sold.
When I was updating my spreadsheet, I noticed that the current Long Term Debt/Market Cap ratio is 1.00 in US$. This means that the Long Term Debt equals the market cap. This is not a good sign. The Long Term Debt after fall for a couple of years increased in 2017 by 22%. The Long Term Debt/Market Cap for 2017 was only 0.69. Since then the stock price has fallen. This is a vulnerability.
Dividends are paid in US$ which they started to pay in 2007. There were some good increases early on, but dividends have been flat since 2013. As the company has been doing poorly and the stock price has been dropping the yield is gone up. The historical median is 2.86% US$. The current yield is 6.43% US$.
Analysts do not think that the dividend is at risk, but they have not been able to afford it since 2014. The current Dividend Payout Ratio for EPS for 2017 is 143% with 5 year coverage at 250%. If the percentage is over 100% it means that they are paying out more than the earnings. What saves the dividend is that the DPR for CFPS is good with the 2017 ratio at 24% with 5 year coverage also at 24%.
As I mentioned above, the Long Term Debt/Market Cap is above 1.00 in US$. This is never a good sign. However, the other debt ratios are fine. The Liquidity Ratio for 2017 is 1.91 with 5 year median at 1.88. The Debt Ratio for 2017 is 1.96 with 5 year median at 1.95. For these ratios I like them at 1.50 or above. The Leverage and Debt/Equity Ratios at 2.04 and 1.04 are typical for a consumer stock.
The Total Return per year is show below for years of 5 to 25 in CDN$ and 5 to 10 in US$. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See charts below.
This is the CDN$ chart. The only acceptable return is the 25 year return. This company has not been making money for the shareholders for a long time.
| Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|
| 5 | 10.95% | 1.68% | -2.68% | 4.36% |
| 10 | 11.79% | 3.80% | 0.46% | 3.34% |
| 15 | 1.35% | -0.77% | 2.12% | |
| 20 | 4.81% | 2.96% | 1.84% | |
| 25 | 8.98% | 7.22% | 1.76% |
This is the US$ chart. I did not calculate longer terms in US$, but the company has not done well in US$ term either as shown by this chart.
| Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|
| 5 | 5.92% | -3.31% | -7.22% | 3.91% |
| 10 | 9.15% | 1.12% | -2.13% | 3.25% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 17.33, 20.34 and 23.35 CDN$. The corresponding 10 year ratios are 7.00, 8.77 and 10.41 CDN$. The historical corresponding ratios are 9.31, 12.16 and 14.80 CDN$. P/E Ratios often go up when a stock’s price goes down because the stock price does not always fall as fast as the EPS. The current P/E Ratio is 12.39 CDN$ based on a stock price of $24.76 CDN$ and 2018 EPS estimate of $2.00 CDN$ or $1.52 US$. This is probably not a good test for this stock. However, this stock price testing suggests that the stock price is relatively reasonable.
I get a Graham Price of $44.70 CDN$. The 10 year low, median, and high median Price/Graham Price Ratios are 0.64, 0.73 and 0.73 CDN$. The current P/GP Ratio is 0.55 CDN$ based on a stock price of $24.76 CDN$. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median Price/Book Value per Share of Ratio 0.76 CDN$. The current P/B Ratio is 0.56 CDN$ based on Book Value of $1,442M CDN$, Book Value per Share of $44.45 CDN$ and a stock price of $24.76 CDN$. The current ratio is some 27% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I get an historical median dividend yield of 2.64% CDN$. The current dividend yield is 6.37% CDN$ based on dividends of $1.58 CDN$ ($1.20 US$) and a stock price of $24.76 CDN$. The current yield is some 141% above the historical dividend yield. This stock price testing suggests that the stock price is relatively cheap.
The 10 year median Price/Sales (Revenue) Ratio is 0.36 US$. The current P/S Ratio is 0.23 US$ based on a stock price of $18.66 US$, Revenue estimate for 2018 of $2,615 US$ and Revenue per Share of $80.61 US$. The current P/S Ratio is some 36% below the 10 year median P/S Ratio. This stock price testing suggests that the stock price is relatively cheap.
When I look at analysts’ recommendations I find Hold (4) and Sell (1) recommendations. The consensus recommendation would be a Hold. The 12 month stock price consensus is $20.93 US or $27.55 CDN$. This implies a total return of 17.62% with 11.25% from capital gains and 6.37% from dividends CDN$.
The company on Globe News Wire announced sale of their apparent lines of SUGOI and Sombrio brands. Alex Johannesen on Simply Wall Street looks at debt levels and finds them acceptable. Will Ashworth of Motley Fool thinks it is a value play but risky. See what analysts say on Stock Chase. Most recent recommendations are “Don’t Buy”.
Dorel Industries Inc is a consumer products company. It designs, manufactures or sources, markets, and distributes a portfolio of product brands, marketed through Dorel Juvenile, Dorel Sports and Dorel Home segments. Its web site is here Dorel Industries Inc.
The last stock I wrote about was about was Obsidian Energy Ltd TSX-OBE, NYSE-OBE) ... learn more. The next stock I will write about will be Pulse Seismic Inc. (TSX-PSD, OTC- PLSDF) ... learn more on Friday, July 27, 2018 around 5 pm. Tomorrow on my other blog I will write about TSX Underperforming.... learn more on Thursday, July 26, 2018 around 5 pm.
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