Friday, November 18, 2011

Methanex Corp

I do not own this stock (TSX-MX). I first talked about this stock a year ago. It is a Canadian company with a global reach. It is also traded on NASDAQ as MEOH and its annual reports are in US$. They also pay dividends in US$.

Because dividends are declared in US$, the dividends payable to Canadian stockholders can fluctuate with the exchange rate of currency. This can affect dividend payments and also dividend increases. For example, over the past 5 and 8 years the dividends, in US$ terms have increased by 8.6% and 25.6% per year. In CDN$ terms over the past 5 and 8 years, dividends have increased by only 4.4% and 18.6% per year. However, the only year dividends decreased for Canadian investors was in 2010, when the US$ dividend did not change.

The Dividend Payout Ratios for this stock started over quite low and then peaked in 2009 and 2010. The 5 year median DPR is 30% for earnings and 15% for cash flow. These ratios are expected to be 34% for earnings and 17% for cash flow in 2011.

What you notice for this company is that the per share growth is better than actual growth. This is because this company has been buying shares back for cancellation. (They also give out stock options.) Over the past 2 years shares have increased marginally because of stock options. Before that there were many years of stock repurchasing. Shares over the past 10 year have a median decline of 5.2% per year. The growth has also been better in US$ terms, because of the increased value of our Canadian dollar.

For example, revenue in US$ has grown over the past 5 and 10 years at the rate of 3.5% and 6.4% per year, respectively. In CDN$ terms, revenue has grown at the rate of only 0% and 2% per year, respectively. Revenue per share in CDN$ terms has grown at the rate of 4.5% and 7.7% per year over the past 5 and 10 years, respectively.

There is little if any growth in Earnings per Share. Over the past 10 years EPS has grown about 3% per year in US$ terms, but has gone down 1.5% per year in CDN$ terms. Over the past 5 years, there has been no growth in EPS in US$ term nor in CDN$ terms.

On the other hand, in Total Return, Canadian investors have made, over the past 5 and 10 years 11% and 8% per year. The portion of this return from dividends would be around 3% and 2.6% per year. I am sure it is needless to say that US investors would have made more.

As far as growth in Cash Flow is concerned, there isn’t any. Cash Flow has marginally increased over the past 10 years in US$ terms, but not in CDN$ terms. Over the past 10 years, when we exclude non-cash items from Cash Flow from Operations, there has been no increase in CDN$ terms over the past 10 years.

Book Value growth is not so dismal. In CDN$ terms, book value per share has increased 7% and 3% per year over the past 5 and 10 years. Total Book Value, in CDN$ terms has decreases marginally over the past 10 years. They have had no recent year of negative EPS, but 2009 came close with earnings of 1 cent.

The company’s debt ratios seem fine. The current Liquidity Ratio is good at 1.58, but is the lowest it has been for some time. This because of a current portion of the long term debt is included in current liabilities. The 5 year median Liquidity Ratio is 2.47. The Asset/Liability Ratio is still quite good at 1.92 and is close to the 5 year median of 1.95. Both the Leverage and Debt/Equity Ratios are fine, with current ratios at 2.38 and 1.24, respectively.

The Return on Equity for this year and last year were low at 8% and .1%, respectively. However, the ROE for the 12 months ending in September 2011 was much better at 13.8%. The 5 year median ROE is good at 13.1%.

This is also an industrial type stock. The good thing about it is that it is an international company, and we should all have international exposure in our portfolios. All Industrial type stocks have been hit by our recent recession. This company did its poorest in 2009. Things have picked up in 2010 and they are expected to do even better in 2011. The company certainly expects to, as they raised their dividend by 9.7% in 2011.

Methanex is the world's largest supplier of methanol to major international markets in North America, Asia Pacific, Europe and Latin America. Methanol is an important ingredient in many of the essential industrial and consumer products. Head Office is in Vancouver, B. C. Canada. Its web site is here Methanex. See my spreadsheet at mx.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. Chemtrade Logistics CHE.UN is another great Canadian based chemical company. Pays a really good dividend and has made a number of moves to reduce the payout ratio and provide an avenue for growth.

  2. Thanks for this review!

    I had invested in Methanex (MX) way back when stock price was about 15$. Following what, it as almost double, but now decreased a bit, but it worth more than the 15$ I initially pay for.

    I just don't understand why they pay their dividend in US dollars. However, in term of grow, MX had been fantastic. This is the kind of investment I plan to keep like forever.