Mullen Group Ltd

I do not own this stock (TSX-MTL). This is another Industrial type stock. It has recently converted from a Unit Trust stock (2009). Around the time of conversion, the company reduced the dividend by 83%. Since then it has increased dividends by 233%, but the dividends are still some 44% lower than they were at the peak.

The reduction in dividend brought the Dividend Payout Ratios down to a place that would allow for the company to begin growing again. At the height of their dividends, DPR was 129% for earnings and 59% for cash flow. The DPR for 2011 is expected to be 62% for earnings and 33% for CF.

This must have been hard to people who bought this stock for income purposes, but the company did act prudently, and the result is that they are growing dividends again. DPR are important and all companies that converted from Unit Trusts to corporation will have to get their DPRs under control. (See my site for information on Dividend Payout Ratios).

I must admit that when the dividends were lowered, the stock price did fall initially (by some 36%); however, it did recover fairly quickly. The other thing to note is that even though dividends are down some 5.8% over the last 5 years, they are up some 15.8% over the past 10 years.

When looking at growth for this company, there is not much, if any, over the past 5 years, but growth over the past 10 years is, generally, ok. If you have invested in this company 5 years ago, your total return would probably be a negative 2% per year. However, if you had invested in this company 10 years ago, your total return would probably be around 14% per year, with some 5.5% of this growth in income.

The next best growth is in revenues where growth is at 4.9% and 5.5% per year over the past 5 and 10 years. Growth in earnings and cash flow is not as good, as earnings are not up over the past 5 years, but are up some 3% over the past 10 years. Cash flow is similar with no growth in the past 5 years, but over the past 10 years, cash flow is up 7.8% per year.

There is a problem with growth in book value. Book value growth looks good until you see the book value for the 3rd quarter of 2011. This is because the company took a hit by writing off balance sheet good will and therefore damaged book value. The result of this is that book value is up only 4% over the past 5 years and (not bad) 8.2% over the past 10 years.

The other thing to note is that growth is expected to be quite good for 2011. For example, earnings are expected to be up some 44% from 2010. The 12 month earnings to the third quarter of 2011 are up some 33% over 2010. They seem to be on track to have a good year for 2011.

Looking at debt ratios, I find that they are fine. The current Liquidity Ratio is very good at 2.04 and the same can be said for the current Asset/Liability Ratio at 1.83. Both the Leverage and Debt/Equity Ratios are fine, with current ratios at 2.23 and 1.22.

The Return on Equity was very good for 2010 at 26.9%, with a 5 year median ROE a bit low at 9%. The ROE for the 9 months ending in September 2011 is very high at 62%, but this is because book value has gone down so far.

This company was damaged with the most recent recession, but seems to be recovering well. One thing that I like is that there are a number of insiders with millions of dollars in shares in the company. Insider own just over 6% of this company. I just started to follow this stock in June 2010 because it was recommended as a small cap stock to buy. I thought it would be an interesting one to follow.

Mullen Group Ltd. is a corporation that owns a network of independently operated businesses. Mullen is recognized as the largest provider of specialized transportation and related services to the oil and natural gas industry in western Canada and is one of the leading suppliers of trucking and logistics services in Canada - two sectors of the economy in which Mullen has strong business relationships and industry leadership. Its web site is here Mullen Group. See my spreadsheet at mtl.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.