Direct Cash Income Fund

I am reviewing this stock (TSX-DCI.UN) today because I have not done so for a year. I picked up this stock from the Money Show I attended in 2009. It was an income trust company that was recommended as one that will do well when income trusts had to convert to corporations. The company has announced that they will become a corporation on 1 January 2011.

So, how has this income trust done over the past year? First of all, in dividends, these have been maintained. The second thing to mention is that the company will pay a special dividend of $.25 a share early in 2011. This is equal to about 18% of the current dividend. They also made special dividend payments in 2009 of $.12 and this year of $.10. In this respect, this company has certainly lived up to expectation.

Earnings also have been very good. Earnings for 2008 were only $.16, but earnings for 2009 were $1.20 and 2010 is expected to be even better at $1.80. However, earnings are expected to decline in 2011 to $1.45. Revenue increases have not been as good, but they have moved up 9% each year over the past 2 years. Revenues are expected to be up more than 10% in 2010. You get the same story with cash flow. This was up some 23% in 2009 and so far this years, the 12 month cash flow is up by 10% over last years cash flow.

The negatives I find is that, as usually with lots of income trust stock, the book value has been declining since this stock was issued. The decline is at the rate of about 9% per year. The positive thing is that the book value increased so far this year by 50%. The book value at $7.08 is not as high as it was in 2006 at $7.58, but it has started to go in the right direction.

When looking at the Liquidity Ratio, it is quite low with a value of just 0.71 in 2009. This since has moved to 0.91, but it means that the current assets cannot cover current liabilities. The Asset/Liability ratio is much better 2.37. The average leverage ratio is not bad at 1.74; however, this ratio has been increasing from steadily over the years from 1.52 in 2005 to a high of 2.02 at the end of 2009. This has come down for the 3rd quarter of 2010 to a better ratio of 1.73.

I will look and see what the analysts are saying about this stock and how good the current price is tomorrow.

Direct Cash is the leading provider of ATMs, debit terminals, prepaid phone cards and prepaid cash cards in Canada. They have built a substantial technological, sales and service infrastructure that enables them to offer convenient and secure revenue streams for businesses across the country. Direct Cash operates in Canada, the United States and Mexico. Over 40% owned by Gallacher family. Its web site is here Direct Cash. See my spreadsheet at dci.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.