Gennum Corp

I do not own this stock (TSX-GND). This is another industrial stock that I follow. I did own this stock at one time. I held it between 1998 and 2006 and I made 5.5% per year total return. Of this total return 0.75% would be attributable to dividends. I sold because I did not see this company going anywhere anytime soon.

This Canadian company changed the reporting currency to US$ in 2008, however, it left the dividends in CDN$. Certainly, there is little, if any growth for this stock over the past 5 and 10 years. The dividend growth is probably the best, with dividends growth at the rate of 3% and 2% per year over the past 5 and 10 years.

Certainly inflation has been low over the past 10 years, with Bank of Canada saying it has been running just below 2% over the past 5 and 10 years. This is for both core and total inflation rates. However, when you have very low dividend yield you expect to get much higher dividend growth. The 10 year median dividend yield is below 1%. The current dividend yield is 2.28%, but this is because the stock price has fallen quite far.

This company does not increase their dividends yearly at the best of times. However, there has been no increase in dividends since 2006. Dividend Payout Ratios are fine at a 5 year median rates of 14.9% for earnings and 22% for cash flow. This company is, supposedly, a growth company, so you would expect low DPRs.

The real bottom line is here that if you have invested in this company 10 years ago, you would have lost something like 6% per year. The dividend portion of this return would be around 1.3%. The stock price at the end of November 2010 was some 55% lower than at the beginning of this 10 year period. You would also be receiving a dividend yield, on your investment of around 1.08%.

There was no growth in revenue per share or earnings per share over the past 5 years. There was only minimal growth in these values over the past 10 years. However, there was only 2 years with negative earnings over the past 20 years.

Cash Flow growth is a bit better with 5 and 10 years growth in cash flow per share at 5% and 3.6% per year over the past 5 and 10 years. Over the past 10 years, there was only one year of negative cash flow. There has also been some growth in book value per share. Over the past 5 and 10 years, book value has growth at the rate of 4.6% and 6.9% per year, respectively.

When you look at debt ratios, all the ratios of this company are very good. The current Liquidity Ratio is 4.15 and the current Asset/Liability Ratio is 8.12. The current Leverage and Debt/Equity Ratios are also very good at 1.16 and 0.16.

Generally speaking the Return on Equity is also fine. The ROE for the financial year ending November 2010 was 11.2% with a 5 year median ROE also of 11.2%. The ROE for the 12 months ending August 2011 is lower at 9.2%. The ROE at November 2010 is a respectable ROE, the 12 months ending August 2011, not so much. (A respectable ROE is at least 10 %.)

There is an article on this company at Crunch Base.

I do not expect much to happen on this stock any time soon and it would appear from the estimates of the analysts that they feel the same way. Tomorrow, I will look at the current price to see how reasonable it is and also what analysts are saying about this stock.

Gennum Corporation designs innovative semiconductor solutions and intellectual property (IP) cores to serve the rising global demand for high-speed data transmission products in the broadcast, networking, storage and telecommunications markets. They sell in North America, Europe and Asia Pacific. Its web site is here Gennum Group. See my spreadsheet at gnd.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.