Goodfellow Inc.

First of all my two articles reviewing the Industrial stocks I follow was unpopular (by number of people reading these entries), so I will stop doing such reviews. Also, I will start reviewing the bank stocks I follow after the audited statements are published, which should not be too long from now.

The stock I want to talk about today is Goodfellow Inc. (TSX-GDL). This is a stock I own. I bought some at the end of 2010 and more in February 2011. It seemed to be a good small cap and the Investment Reporter has been pushing this stock. See their site, called Advice for Investors here.

For this stock, dividends can fluctuate, so it has a bit of a mixed record. Over the past 5 years, the dividends have gone down by 7.75% per year. However, over the past 10 years they have increased by 10%. Also, the total dividends payable in the financial year ending in August 2012 will be down by 50% from those payable in the financial year ending in August 2011. This is projected dividends, and since the company only declares the dividends as they are payable, this could change. They also have given out special dividends in the past.

The current dividend yield is just 2.25% and this is quite a bit lower than the median dividend yield on this stock, which has a 5 year median of 5.4% and a 10 year median yield of 4.1%. The reason for this is probably that the financial year ending in August 2011 was not a good year for this company. Earnings were down 76% and cash flow down 65%.

The Dividend Payout Ratio was higher in 2011 at 88% for earnings and 73% for cash flow. The 5 year median values are better at 60% for earnings and 21% for cash flow. The DPR values were probably another reason for this company to lower dividends. They are doing the prudent thing. (See my site for information on Dividend Payout Ratios).

The best growth rate for this stock is their 10 year growth in Total Return. The 10 year total return was 15% per year with some 7.4% of this return from dividends. However, if you bought this stock 5 years ago, you would have lost money or broken even as far as the total return is concerned. The portion of the 5 year total return for dividends would be around 5% per year.

The next best growth rate was for book value. The 5 and 10 year growth was 4% and 7% per year. All other growth rates are negative. This includes revenues, earnings and cash flow. However, note that here was no year with negative earnings or negative cash flow.

This company is 60% owned by insiders. The thing I have noticed with companies with lots of insider ownership is good debt ratios. This stock is not different. The current Liquidity Ratio is great at 2.49 and a 5 year median ratio also at 2.49. The Asset/Liability Ratios is even better at 3.01 with a 5 year median ratio of 2.96. The current Leverage and Debt/Equity Ratios are also very good at 1.50 and 0.50. With these debt ratios they can survive a lot of hard times.

As I have said, the financial year ending in August 2011 was not a good year for this company. The Return on Equity Ratio was just 2.6%. The 5 year median ROE was better at 9.8%. That is not that good. However, most years, this company has had ROEs of at least 10%, a much better rate.

I realized when I bought this stock that there would be future trouble. This company will not really do well until we get over this current recession thing. I do not know, as same as everyone else, when this might be. In the meantime, I will be holding on to what I have bought in this stock. It is a small cap, so my investment is small.

Goodfellow Inc. is one of eastern Canada's largest independent re-manufacturers and distributors of lumber and hardwood flooring products. The company serves customers throughout Canada, the United States and abroad including the UK and China and the Middle East. H.Q is Delson, Québec, just outside Montreal.
It is about 60% owned by insiders. Its web site is here Goodfellow Inc. See my spreadsheet at gdl.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.