Tuesday, April 26, 2011

Melcor Developments Inc

I first bought this stock (TSX-MRD) in July 2008 and some more in August 2008 and April 2009 and July 2009. I have made a total return on this stock of 16%. The return occurred mainly because I got this stock very cheap in 2009. Probably just over 2% of my return is in dividends.

This stock pays dividend twice each year. They decide each year how much to give in dividends and dividends have not only moved up, but has also moved down. The most recent move down was in 2009, when dividends were decreased by about 40%. They are prudent and this is a good quality to have in management for companies in which you invest. Even so, the 5 year and 10 year growth in dividends over the past 5 and 10 years is 18.5% and 17.5% per year, respectively.

The total return over the past 5 and 10 years has been 7.3% and 27.6% per year respectively. The part of this total return that would be dividends is 2.7% and 5% per year, respectively. As you can see, this company has done very well over the past 10 year, but not so well over the past 5 years. However, this 5 year performance is probably better than the market as a whole. The TSX index growth was just 3.6% per year, over the past 5 years.

For this company, most of the 10 year growth figures are better than the 5 year figures. For example, revenue per shares over the past 5 and 10 years has grown at the rate of 4% and 12.3% per year, respectively. The growth in earnings has grown over the past 5 and 10 years at the rate of 1.9% and 15.6% per year, respectively. The place where this is not true is the growth in book value, which for the last 5 and 10 years has been quite consistent. The 5 and 10 year growth is around 14.5% per year.

For this company, the Return on Equity at the end of 2010 is 12.6% and the ROE has a 5 year median value of 13.2%. With the introduction of the new IFRS accounting rules, it has been suggested that we also look at the ROE using the Comprehensive Income for a company. For this company, these values are not significantly different at 12.4% for the end 2010 and a 5 year median value of 13.8%.

Although this stock constitutes a small part my portfolio, I have been pleased with the results I have received via my investment. I plan to hold on to what I have and might consider getting more when I can invest again.

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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