Davis & Henderson Income Fund

I am reviewing this stock (DHF.UN) today as I have recently been reading about it and I am considering buying it. This is an income Trust stock and it has been recommended a number of times by the Investment Reporter.

At this point, I usually talk about the 5 and 10 year growth figures that are good and then talk about the ones that are not good. However, this information can be seen on my spreadsheet, and to just repeating the figures here is boring. So instead, I will talk about the growth figures I like. First of all, I should point out that this stock went public in 2001, so there are no 10 year figures. The best figures are the 5 year growth in the Closing Price. This is 8%. The reason it is so high is because of the dividends paid.

This stock has gone down a lot in this present bear market and has recently recovered with the market recovery. The decline at present is close to 40%. This decline has shoved up the yield from around 8% to 14%. Most analysts think that the dividend is fairly safe, so you can earn a good return while the stock recovers. However, please note that the distributions on this stock are considered to be interest, so you would not get the dividend break on any money received.

Most of the 5 year growth figures on this stock are rather mediocre. However, there are two I would like to point out. The first is the growth in distributions, which for the last 5 years is 5.8%. The other thing to point out is that a lot of what is earned is paid in distributions, so the growth in book value for the last 5 years is a meager 1.7%.

The next thing to talk about is the liquidity and this is low at .72. However, the Asset/Debt ratio is a healthy 3.10. So this means the balance sheet is relatively strong. The Accrual Ratio is neither good nor bad at 2.8%. The Return on Equity (ROE) is good at a running 5 year average of 17% and a 2008 number of 17.4%. This stock has not been given a stability rating, but it would be considered to be a medium risk. It is a profitable company, and while it will not make you rich, it should provide a reasonable return.

Davis & Henderson provides programs to customers who offer chequing account and lending services within Canada. It manages the cheque supply programs for virtually all of the financial institutions in Canada, including the Big Six banks. Its web site is www.dhltd.com. See my spreadsheet on this company at www.spbrunner.com/stocks/dhf.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 at www.spbrunner.com/stocks.html for a list of the stocks for which I have put up spreadsheets on my web site.