Monday, July 18, 2011

SNC-Lavalin Group Inc

I own this stock (TSX-SNC). I bought this stock first in December 1998. I sold some in July 2008. Why I sold is because this stock was becoming too big a percentage of my portfolio. I never let anyone stock dominate my portfolio. If a stock becomes 5% of my portfolio, I keep an eye one it to sell some. I definitely sell some if a stock becomes 10% of my portfolio.

To date I have a total return of 30% per year on this stock. Only 1.8% of this total return can be attributed to dividends. This stock is considered to be a dividend paying growth stock. The current dividend yield is 1.5% and this is above the 5 year median dividend yield of 1.1%. Although for the last 3 years, the median dividend yields have been higher around 1.3% or 1.4%.

I have a mix of high dividend yield, but low dividend increase type stock and low dividend yield and high dividend increase type stock and some in between. This stock is a low dividend yield and high dividend increase type stock. The 5 and 10 year dividend increases has been at 24% and 23% per year, respectively.

I have a mix because it provides a bigger pool of stocks to choose from and provides me with a reasonable dividend yield and a reasonable dividend increase each year. I generally do not invest in stocks with less than 1% dividend yield. I also do not chase after stocks with very high dividend yields. My 5 year median dividend yield is 3.5% and my 5 year median dividend increase is 11%.

When you review this stock, you find that growth in revenues, earnings per share, cash flow and book value are all great. For example, the revenue per share growth over the past 5 and 10 years has been at 11% and 13% per year, respectively. Book Value growth has been at 17% and 16% per year, respectively.

The Return on Equity has generally always been good, especially over the past 3 years. The current ROE for the financial year ending in December 2010 is 25.6%. The ROE for the 12 months ending at the end of March 2011 is a bit lower at 22.8%.

As far as debt ratios goes, this company has been fine, but not great. However, it is considered an industrial stock and ratios are pretty normal for this sort of stock. The Liquidity Ratio is current at 1.20 and the Asset/Liability Ratio is at 1.35. These are both better than the 5 year median ratios of 1.09 and 1.21, respectively. The current Leverage Ratio is 4.12 and the Debt/Equity Ratio is at 3.06. These are better than the 10 year median ratios of 5.03 and 3.79.

I plan to continue to hold this stock in my portfolio. It is currently in my RRSP funds portion of my portfolio. If I sell from this set of funds, I will buy into it from my trading funds portion of my portfolio.

SNC-Lavalin are involved with engineering and construction work around the world, this includes infrastructure and Buildings; infrastructure and construction; power (nuclear, thermal, hydro etc.); chemicals and petroleum; environmental projects; mining and metallurgy projects. They have offices and Canada and around the world, from Algeria to Vietnam, including Australia, Europe, Russia, Africa, Middle East, Asia, South America, USA. Its web site is here SNC-Lavalin. See my spreadsheet at snc.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. Susan,

    Thank you for your comment on my question regarding the dividend investing strategy. I have been buying a number of dividend yielding stocks in small amount (about $2,000 each) in the past few months. I got the most recent dividends averaging 3.5%. So I got on average about $17.50 for each stock for the last quarter.

    Most of my stock holdings are now underwater since the market has been going down. Since the next dividend payout is at least 2 months from now, I am thinking of doing stop loss, sell the stocks and buy them back at lower prices before the next ex-div date. What would you do in this situation?

    I think you are perfectly correct saying that we should focus on cash flow and not on the portfolio balance. I guess the right thing to do is to keep the stocks, buy more when their prices drop lower, and wait for the next dividend payout?

    I look forward to more of your writing on this subject.