Toromont Industries Ltd

This is a stock (TSX-TIH) I own. I bought this stock first in 2007 and some more in 2008. I have made a return on 6.6% per year with probably 2% per year being from dividends. The total return on this stock over the last 5 years has been low at around 5.8% per year. I reason I have done better is that I bought more stock at the low point in 2008. Over the past 10 years, the return has been much better at around 15% per year.

Still dividends are low and portion of the 10 year return attributable to dividends would be around 2% per year. The current dividend run around 2.1/% and the 5 year average is around 2.1%. However, the dividend growth has been good with 5 and 10 year growth rates at 14% per year. The dividend potential after 10 years at 14% growth would be around 7.8%. However, if you shave around 2% per year off this for inflation, the dividend growth potential in 10 years time would be around 6.5%.

For this stock, the 10 year growth rates are much better than the 5 year growth rates. In fact, the last couple of years have not been kind to this stock. For example, the 5 and 10 year growth rates for revenues are 4% per year and 8% per year, respectively. For cash flows and earnings, there is no 5 year growth, but the 10 year growth figures are 9% per year.

The best growth rates are in book value, and for the 5 and 10 year periods, they have grown at 15% per year. The Return on Equity has generally been good with the ROE for 2010 at 8.2% and the 5 year median ROE at 17.6%.

The last thing to talk about is debt ratios. All these ratios are fine. The Liquidity Ratio is for 2010 is 1.83 and it has a 5 year average of 2.08. The Asset/Liability Ratio is 2.14 and it has a 5 year average of 2.11. What you want to see in these ratios are ones at 1.50 or higher. The Leverage Ratio is 1.88 with a 5 year average of 2.13 and the Debt/Equity Ratio is 0.88 with a 5 year average of 1.13. With these two ratios, lower is better.

I have pleased with my investment in this company. Toromont is on the dividend lists that I follow of Dividend Achievers and Dividend Aristocrats (see indices). The dividend increase last year was 6.7%. This is lower than the 5 year average and the increases have been lower over the last couple of years. I think this is sensible so that Payout Ratios remain sustainable.

There are two sections to this company. The Equipment Group is for Caterpillar dealerships. The Compression Group designs, engineers, fabricate and install compression systems for natural gas, fuel gas and carbon dioxide. This last group also has industrial and recreational refrigeration systems. Its web site is here TransCanada. See my spreadsheet at tih.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.