Methanex Corp

I am starting to review this stock (TSX-MX; NASDAQ-MEOH) as I have read some good reports on it lately. It is also got a solid “C” grade in the recent money sense review of stocks. You might be interested in this link to Money Sense. Money Sense rated the top 100 Canadian Dividend Paying stocks. Money Sense was looking for stocks that provided generous income at reasonable prices.

The problem for a Canadian investing in this company is that, not only does the company report in US$, but it also pays dividends in US$. That means that if you invest in this stock in a Canadian currency account your dividends will fluctuate with the US-CDN currency exchange. One way around that is to have a US account to hold this stock in. The stock is traded on the TSX and the NASDAQ exchanges. As with a lot of companies reporting in US$, this stock has done better in US$ terms than in CDN$ terms. This is because of the relative strength of our currency recently to US currency.

As far as dividends go, they only started to pay them in 2002 and they have a good record of increases, so that, in Canadian Terms they have increased at an average of just over 16% per year. If they continue with this record, you could be getting a 4.5% return on today’s investment in this stock in 5 years time or a 9.5% return on today’s investment in this stock in 10 years time. The payout ratio for both earnings and cash flow is just over 20%, so that continuation of these dividends should not be a problem for this company.

A lot of the growth figures are low (or non-existent) because the company has been hit hard with the latest recession. This is not unusual with an industrial type stock. For example, revenue has been hit. This company had revenue per share of $30.78 in 2008 and it dropped to $13.66 in 2009. However, if you look at revenue for the last 12 month, the company has $19.66 of revenue per share.

Where this company has not done badly is the growth in Book Value. This has increase by 5.7% per year over the past 10 year and 8.1% per year over the past 5 years. The 10 year rate is a little low, but the 5 year rate of increase is good.

One very good thing about this stock is the Liquidity Ratio, which is at 2.41. Its 5 year average is 2.35 The Asset/Liability ratio is also quite good at 1.71. The A/L Ratio has a 5 year average of 1.85. What you want is debt ratios of at least 1.50 and therefore the ratios for this company are very good. When looking at Return on Equity, this company has not done well over the past two years. The ROE for 2009 was just 1%. The ROE for the first 3 quarters of this year is a better 7.9%.

In total returns, a long term investment of 10 years would get you a 15% to 20% annual return with some 3 – 4% of this return in dividend. However, the total return over the past 5 years might get you 0% to 2% per year with 3 to 4% of the return in dividends. Considering how hard this stock was hit in this recession, this is not bad at all. The dividends paid on this stock turn its return over the past 5 years from a loss to a small gain. This is often why people like to invest in dividend paying stock.

They on the dividend lists that I follow of Dividend Achievers and Dividend Aristocrats (see indices).

Tomorrow, I will take a look at what the analysts are currently saying about this stock.

Methanex is the world's largest supplier of methanol to major international markets in North America, Asia Pacific, Europe and Latin America. Methanol is an important ingredient in many of the essential industrial and consumer products. Its web site is here Methanex. See my spreadsheet at mx.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.