Friday, June 20, 2008

TMX Group

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.

This stock has a recent name change from TSX Group to TMX Group. This was done when it took over the Montreal Exchange. I had looked at this stock after I found it on a list of Strongest Dividend Growth stocks. I am interested in such stocks.

This stock has strong revenue and earnings (EPS) growth. Dividend Growth has been great, as it has increased by 44% per year over the last 4 years. This stock has great growth as the stock price has increased some 41% per year over the last 5 years. It also has great cash flow growth. The Accrual Ratio is not bad at a little under -5%.

There are a number of reasons why I do not like this stock. The dividend growth has been at twice the rate of the earnings growth. In 2007, the payout rate was 70%. This is a little high. The Graham price was, for 2007, $11.25 and the closing price for this stock was $52.80. This is quite a spread. The problem is that the Book Value is declining, not increasing. The Book Value has come down a lot since the IPO. The debt level against the assets is not bad at an Asset/Debt ratio of 1.44, but the leverage ratio (Assets/Book Value) is rather high at 8.8.

I know that a number of places have a buy rating on this stock, but I think I will give it a pass.

See my spreadsheet at See my website at

This company operates three national stock exchanges, the Toronto Stock Exchange (TSX), the TSX Venture Exchange, and the Montreal Exchange (MXX). Toronto Stock Exchange serves the senior equity market. The Montreal Exchange is for Derivative Contracts and Options. The TSX Venture Exchange serves the public venture equity market, Natural Gas Exchange (NGX), a North American exchange for the trading and clearing of natural gas and electricity contracts and Shorcan Brokers Limited, a fixed income inter-dealer broker. Its site is at

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