Goodfellow Inc

Today, I want to review a small cap stock that I recently saw a write-up on. The stock is called Goodfellow Inc (TSX-GDL). It is not well followed, and it looked interesting. I have been interested in small cap dividend paying stocks. After this, I want to go back and review some good conservative dividend paying stocks.

The growth figures on this stock are a mixed bag, but they are mostly not good. First of all, I should say that I could find the figures I needed for the last 5 years, and some going back 7 years. The company does not post their financial statements on their site, so they were difficult to pick up. One thing to note is that over the last 7 years, the revenues for this company have gone nowhere. The 5 year growth is almost -3%. Earnings are the same and the 5 year growth is just over -8%.

This stock does pay dividends, but they are not consistent. They seem to fluctuate with what they can afford, but this is not particularly clear. Perhaps it has more to do with the fact that insiders own around 60% of the outstanding stock of this company. The 5 year growth for dividends is some 3.3%. This looks good until you see that the dividends paid in 2006 and 2007 where higher than the current dividends. It is hard to tell if there were special dividends paid. Certainly, a dividend payment in 2006 was a special dividend, but that just means that the 2006 dividend is the same as the one today.

Now, I want to talk about what I like about this stock. First of all the Liquidity Ratio and the Asset/Liability Ratio are great. The Liquidity Ratio at the August 2009 year end was 3.25. The 5 year average is 3.00. Also, the Asset/Liability Ratio was 3.94 at the August 2009 year end and the 5 year average is 2.77. This stock has a very strong balance sheet.

Another good thing is that the growth in cash flow is very good; it has grown by about 30% per year over the last 5 years. However, the 6 year growth in cash flow is only 11% per year, so this 5 year growth looks better than it actually is. However, the 6 year growth rate is still good. The Book Value has also grown, and although the 5 year growth rate of just over 6% is not great, it is not particularly bad either.

The last thing to mention today is the Accrual Ratio. This is great because it is negative and it is below -5% as this ratio sits at -6%. This stock certainly looks like it has possibilities. If you held this stock over the last 5 years, you would have broken even. However, if you had held it over the last 10 years, you would have made a total return of just under 8.5%. This stock has been hard hit by the current recession and it should recover nicely. I have finished my stock purchases for the year, so I will not be buying this, but I will track it for a while and see where it goes.

Goodfellow is a wholesaler and distributor of wood and wood by-products with headquarters located in Delson, Québec. We have wood treating facilities and offer a full inventory of exterior siding, flooring,
plywood, treated wood and prefabricated products as well as a broad range of hardwood, softwood and exotic woods. It has distributions centers in Canada and US. Its web site is www.goodfellowinc.com. See my spreadsheet at www.spbrunner.com/stocks/gdl.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. Also, look at other investing notes on my website at www.spbrunner.com/investing.html.