Friday, May 25, 2012

SNC-Lavalin Group Inc 2

I thought it might be useful to sort my dividend paying stocks by Dividend Payment Cycles. See comments blog for information on all stocks I follow. To get new Table of stocks I follow and their Dividend Payment Cycles click here.

I own this stock of SNC-Lavalin (TSX-SNC) and I had for some time. I first bought this stock in 1998. I sold some in 2008 because it had grown so much and was too high a percentage of my portfolio. I have a total return of 27.2% per year on this stock. Some 2.1% per year of this return is dividends and the rest at 25.1% per year is capital gain. Only some 7.8% per year of my return is attributable to dividends.

Over the past year there has been $7.5M of insider selling and $7.5M of net insider selling with a very minimal insider buying. However, all the selling was at the end of last year, a couple of months prior to the drop in the stock that occurred in late February 2012. Over the past month, insiders have been retaining their options and this is a good sign.

There are 130 institutions that hold 42% of the shares of this company. Over the past 3 months they are bought and sold this stock and there were net sellers of 6 (with 104 buyers and sellers). However, overall institutions have lowered their investment in this company by 3%. This is a negative. (You should not read too much into this as institutions tend to trade like a herd sometimes.)

The 5 year median low and high Price/Earnings Ratios are 14.63 and 24.93. The current P/E at 16.2 is just below the 5 year median of 20.50. This would show that the current price is reasonable.

The Graham price is $26.66 and the stock price of $39.72 is less than 1.5% higher. The10 year low, median and high difference between the Graham price and stock price is the stock price being 56%, 96% and 138% higher than the Graham price. (This is a growth stock, and so it is quite usual for the stock price to be higher than the Graham price.) This would indicate that the stock is cheap, especially since it is so close to the Graham price.

The 10 year median Price/Book Value Ratio is 5.06 and the current P/B Ratio is 2.82. The current Ratio is just 60% of the 10 year median ratio and this would point to a cheap stock price.

The 5 year median dividend yield is 1.34%. The current dividend yield is 2.22%, which is some 66% higher. This shows a cheap stock price. (10 year median dividend yield is even lower at 1.09%.)

When I look at analysts’ recommendations I find Strong Buy, Buy and Hold recommendations. There are as many Strong Buys and there are Holds. The consensus recommendation is a Buy.

Consensus 12 months price is $47.50. This implies a 21.8% total 12 month return. A Buy recommendation came with a 12 months stock price of $48.00 and this implies a 23% total 12 month return. Do not forget that most analysts consider this stock a high risk.

There are a lot of negative comments on this stock. Some analysts are worried that the company was making too much money in the Middle East and this may have to be replaced. Others are worried about the company getting new contracts. However, there are two recent G&M articles about the company getting new contracts. See SNC-Lavalin-LED joint venture awarded contract to execute EPCM services on Cobre Panama project article. Also see SNC-Lavalin/Cintra Awarded 407 East Highway Project in Ontario article.

One analyst thought that you should only buy this stock if you have a long term horizon on the stock. Another analyst said it is a great opportunity if you are looking growth over the next 1 to 3 years. Another problem the company has is that it must find a new CEO.

There was a sell off this stock because of problems the company was having. I think that these problems will be overcome and that SNC will continue to be a growth company. (Growth companies have higher P/E ratios and higher P/B Ratios.) I am probably not the only one to think this way as one site indicated that the short selling activity on this stock is low.

See dividend watchdog’s take of the dividends on this stock at his site.

My SNC stock is all currently all in my Pension account. On a long term basis, I am selling stock and moving money to my Trading account. SNC is still a stock I want for the long term. Today, I bought just 100 shares of this stock for my Trading Account. I do not have much spare cash at this point. I put money together from my Line of Credit, my ING account and cash in my trading account.

My long term goal is to move these shares from my Pension account to my Trading account. I do not need money current in my Pension account, so I can sell what I have there at a better price (hopefully). I know that the stock was lower just recently, but $39.46 is still a good price.

Now this is not your normal dividend paying stock. The dividend yield is usually quite low, but so are the Dividend Payout Ratios. This stock is a dividend paying growth stock. The growth in dividends has been great at over 20% over the past 5 and 10 years. I like a mix of low, median and high dividend payers, and a mix of low, median and high dividend growers. This stock fits nicely into what I want.

Please note that this year, the increase was only 4.8% and analysts do not expect any more for 2013. I expect dividend increases will again pick up when the company overcomes their current problems.

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. 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.

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