Calian Technologies Ltd

This is an interesting small cap company (TSX-CTY) with a very nice dividend. This stock came up on a Globe Investor site. The Globe Investor Number Cruncher is an investment column about screening for stocks and funds. They did one on companies with little to no debt. See column called Where ‘debt’ is a dirty word . I also noted that the Financial Blogger has this stock on his Top Ten Canadian Dividend Stocks list. These are certainly good reasons to investigate this stock further and do a spreadsheet on it.

First, let’s talk about dividends. This company just started to pay dividends in 2003. The growth in dividends since then, over some 7 years, is a great 25% per year. The growth is a little lower for the last 5 years, but still at a great 20% per year. The last increase came just recently at 13% this year. Some years they have raised the dividends twice. (Also note that this companies financial year runs to September 30th each year, so when I am talking about years, I am talking about a year ending at September 30th.)

I can only find one analyst looking at this company and he gives a potential EPS at $1.72 in 2011. The company says that they expect to earn between $1.50 and $1.80. However, you slice and dice these figures, they still put the dividend at a potential payout from earnings a little high, from 65% to 56% to 54%. The payout from cash flow could also be quite high with a potential of being around 52%.

This is what the CEO says about the increase in dividends. "Based on our earnings to date, our future outlook and our healthy cash position we have increased our quarterly dividend to $0.25 per share; an increase of over 13%. Our annualized dividend of $1.00 per share represents a yield in excess of 5% relative to recent share prices. We continue to maintain a strong balance sheet that provides not only the basis for future growth and the ability to weather any future downturns, but also the added customer confidence in our ability to execute". He certainly seems confident in the company’s ability to pay the increase dividend.

The total return on this stock has certainly been very good over the past 5 and 10 years. The compounded growth for the last 5 and 10 years has been at 12% and 15% per year, respectively. The compounded growth in stock price for the last 5 and 10 years has been at 7.5% and 12% per year. Compare this to the compounded growth of the TSX index at for the last 5 and 10 years a 4% per year and this company does look very good.

I like to see good growth in revenue, because good growth in revenue bodes well for future gains in earnings and cash flow. However, the 5 and 10 year growth in revenue is ok rather than great at 6% and 8% per year, respectively. Part of the reason is that revenue fell about 5% in 2010 from revenues earned in 2009. Cash flow, excluding changes to current Assets and Liabilities, is the cash flow now thought to be the one to track. This company has done quite well in this category as the growth in this cash flow for the last 5 and 10 years is at 9% and 10% per year, respectively.

The growth in earnings is great for the last 5 years, but low for the last 10 years. However, 10 years ago takes us to 2000, when a lot of tech companies made money. For this company, the earnings crashed in 2001 and have been gradually improving since. The 5 and 10 year growth in earnings is at 11% and 4% per year, respectively. Growth in Book Value is ok. Over the past 5 and 10 years, book value has grown at 5.7% and 5.9% per year.

Now we get to the debt ratios and they are indeed good, especially the Liquidity Ratio and the Asset/Liability Ratio. These ratios are 2.75 and 3.45 at the end of 2010. The 5 year median ratios are 2.23 and 2.81. Any ratios at or above 1.50 are good. The other ratios are good without being great. The Leverage ratio is good at 1.55 and the Debt/Equity Ratio at 0.55 is good at the end of September 2010. A D/E Ratio is considered very good at 0.50 and below. This ratio has been low for a number of years and the current one (1st quarter of 2011) is very low at 0.41.

I find this a very interesting company and worthy of further investigation and possible investment.

Calian sells technology services to industry and government in Canada and around the world. Calian provides customers with ready access to an exceptional team of engineers, telecommunications and technology professionals, health care professionals and other highly qualified staff. Its web site is here Calian. See my spreadsheet at cty.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.