I am reviewing this stock (TSX-RCH) today as I received the annual reported dated November 30, 2009 and I own this stock. I bought it because this stock is well liked by some investor new letters I like and follow sometimes. I first bought this stock in 2007 and then made two purchases in 2009. My return on this stock is, including dividends, 16.7% per year. I have no made any money on my original purchase. The reason for the good return is the follow up purchases at very good prices.
2009 was not a good year for Richelieu Hardware. The 5 year growth figures for Revenues, Earnings, Total Return and Cash Flow are acceptable, with the 10 year figures being good. For example, the Earnings growth figures for the last 5 and 10 years was 4.3% per year and 13.5% per year. As you can see, the 10 year figures are quite good, with the 5 year figures not so great.
The good growth figures were for Dividends and Book Value. The 5 and 10 year growth figures for Dividends were 14.9% per year and 16.5% per year respectively. The 5 and 10 year growth figures for Book Value were 12.9% per year and 15.8% per year. I would like to note that the dividends were not increase for 2009. However, the dividends have been increase by 12.5% for 2010. This last increase is quite a health one.
Generally, in a stock I like to see total return divided between dividends and capital gain, with 4% dividend income and 4% capital gains for total return of 8%. However, this, of course, is not possible. Some companies that pay dividends are growth companies, and the return is more heavily to the capital gains part. This is the case with this company. It is a dividend paying growth company and as such, dividend yield is generally low, but dividends increase strongly.
The good thing about this stock is the strong balance sheet. The Liquidity ratio for 2009 is 4.66 and the 5 year average is 3.95. The Asset/Liability Ratio for 2009 was 6.23 and this ratio has a 5 year average of 5.33. When looking at these ratios, what you want is ones of 1.50 or above, so you can see why I consider these strong ratios. This company has virtually no debt and lots of cash. The next thing to talk about is the Return on Equity. This is also strong for this company and the ROE for 2009 is 16.9%, with the ROE 5 year average at 16.6%.
I guess the last thing to mention is the Accrual Ratio and this is at -8.25%. This usually signals a buy, so on Monday I will look to see what the analysts recommend. I intend to continue to hold my shares in this company.
This company is a distributor, importer and manufacturer of specialty hardware and complementary products. Its products are kitchen and bathroom cabinets, furniture, and window and door. It is also involved with residential and commercial woodworking industry. It has a large customer base of hardware retailers. This stock is widely held, but QV Investors hold about 10% of outstanding shares. They are Institutional Investors looking after Mutual Funds, Pension Funds and Foundation Funds. Its web site is www.richelieu.com/. See my spreadsheet at www.spbrunner.com/stocks/rch.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. Follow me on twitter.
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