Tuesday, May 4, 2010

Melcor Developments Inc

I bought this company (TSX-MRD) in 2008 and because the price really dropped, I picked up a bit more in 2009. My total return on this stock, including dividends is 12.3% per year. However, I have not made any money on the stock I bought in 2008. The reason for the great return is because of my purchase in 2009 at a stock low point. This investment gave me exposure to Western Canada. This stock was on a list of stock for dividend paying growth companies I used to follow, but it is not on the other dividend lists that I follow.

When looking at my spreadsheet on this stock, I see that it has mostly done quite well over the past 5 and 10 year periods. For example, the revenue growth for the last 5 and 10 years are 9.3% and 11.6% per year, respectively. Cash flow growth has also been very good. The cash flow growth for the last 5 and 10 years are 16% and 22% per year, respectively. Good revenue growth and good cash flow growth is what will push good earnings growth in future years.

For the year ending in 2009, I had obtained earning estimate of $.40, but this company earned $.77. This caused the estimate for 2010 to be raised from $.60 to $1.23. However, earnings growth has not been as good as other growth with the 5 and 10 year growth being 4.6% and 12% per year respectively. As you can see the 10 year growth is very good, but the 5 year growth is a little low, but still acceptable.

Dividends are a bit different on this stock. The company declares dividends twice a year, so it is a bit uncertain, exactly what dividends will be received. Until 2009, they had declared progressively higher dividends. In 2009, the dividends declared dropped some 40% from 2008. The growth in dividends, even with this lower dividend for 2009, is quite good. The 5 and 10 year growth in dividends is 15.8% per year and 4.6% per year, respectively. This is good dividend growth, especially, the 5 year growth.

Moving on to the Liquidity Ratio and Asset/Liability Ratio, we find these at very good levels. The Liquidity Ratio is 1.58 and the A/L Ratio is 1.86. Any ratio at 1.50 or above is good. Last year was not a great year for a lot of companies and the Return on Equity for this stock was just 7.1%. However, the 5 year running ROE is 16.9% and this is good.

I am pleased with my investment in this stock. I do not have a lot of it and I will probably buy more in the future.

This company is primarily engaged in the acquisition of land for development and sale of residential communities, multi-family sites and commercial sites. It operates mostly in B.C. and Alberta.
The company also develops, owns and manages commercial income properties, as well as two golf courses. Its web site is here Melcor. See my spreadsheet at mrd.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.

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