Tuesday, May 17, 2011

Davis & Henderson Corp

I first bought this stock (TSX-DH) in 2009 and I have since bought more in 2010 and 2011. I have made a total return of 31% per year on this stock. Dividend payments probably are around 11% per year of this total return. The reason I have done so well is because I bought this stock at a very good price in 2009.

This stock started out as a Unit Trust company and as such, it paid a dividend yield of around 10% per year. However, it has converted to a corporation and has cut its dividend by 35% and the yield is now at 5.9%. This was a necessary change so that the Payout Ratios as a corporation would be sustainable. As an income trust, they had a fairly good record of increasing dividends, as they were increase by 4.9% per year over the past 5 years. They have stated that they intend to grow dividends in the future as their business grows.

Total return over the past 5 and 10 years was lower than mine was. This stock hit highs in 2005 that they have not yet managed again; however, they are getting close. The high for 2005 was $23.84. The high so far for 2011 the high is $22.04. The 5 and 10 year total returns were 5% and 18.5% per year, respectively. The portion of this total return that was dividends was around 8% and 11% per year, respectively.

The best growth figures for this stock were for revenue. The 5 and 10 year growth in revenue per share was 10.5% and 8.8% per year, respectively. Cash flow growth was the next best, but lower, at 4.7% and 5% per year over the past 5 and 10 years. Earnings growth is poor to non-existent as 2010 was not a good year for this company. Book Value is the same, but then most Unit Trust companies did poorly in this regard.

The next thing to talk about is debt ratios. The Liquidity Ratio is the only poor one. The company has very high Accounts Receivables and Accounts Payables. The current Liquidity Ratio is 0.91. This means that current assets cannot cover current liabilities. However, they do a good enough cash flow to make up the difference.

Beyond the Liquidity Ratio, the other debt ratios are quite good, as they do not have much in the way of debt. The Asset/Liability Ratio is very good at a current 2.33. The Leverage ratio is rather average at 1.75 and the Debt/Equity Ratio is quite good at 0.75.

The last item is the Return on Equity. The ROE has always been quite good on this stock. The one for the end of 2010 was 14.7% and the one for the last 12 months is 16.4%. The 5 year median ROE is 16.5%.

I am pleased with my investment in this company and I think it was a good investment for me. I plan to hold on to what stocks I now own. I have a reasonable investment in this company and may not buy anymore because of this.

Davis & Henderson is a leading solutions provider to the financial services marketplace. Founded in 1875, the company today provides innovative programs, technology products and technology based business services to customers who offer chequing accounts, credit card accounts and personal, commercial, and other lending and leasing products. Its web site is here Davis & Henderson. See my spreadsheet at dh.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.

1 comment:

  1. Good review! I love DH too. This year was good, with their special dividend. I hope you'll cover their latest acquisition in mortgage software.