Thursday, May 24, 2012

SNC-Lavalin Group Inc

Dividend Payment Cycles are important so you know when you will get dividends. See comments blog for information on all stocks I follow.

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. This is another dividend growth company.

My above return includes the recent 30% drop in stock price. The G&M has a recent article on “Don’t count SNC-Lavalin out just yet.” See G&M article. The company is missing money and there are questions about their activities in Libya. However, this company is into hundreds of countries and, unfortunately, there are a lot of badly run countries. No wonder they hit a snag. Personally, I am not much worried. I feel the company will right itself.

Dividend yield on this stock is low with a 5 year median of 1.34% and with an even lower 10 year median of 1.09%. However, the growth in dividends is great with 5 and 10 years growth at 23% and 24% per year, respectively. I have had this stock for 14 years and my dividends have grown 1000% and the yield I get on my original investment is 25.9%. This is the value of investing in companies with low dividends and high dividend increases.

However, the recent dividend increase was just 4.8% and this is the lowest increases for as long as I have held this stock. The other low was in 1998 when the increase was 5%. Total return over the past 5 and 10 years is 11.69% and 19.77% per year, respectively. The dividend portion of this total return is 1.59% and 1.9% per year and the capital gain is 10.17% and 18.15% per year, respectively. The portion of the return attributable to dividends is 13% and 8% per year.

Growth on this stock is generally quite good and usually better over the past 10 years than over the past 5 years. Revenues and earnings are the lowest in growth. Revenue per share has grown over the past 5 and 10 years at 7% and 11.9% per year, respectively. EPS has grown at the rate of 4.5% and 30% per year, respectively.

Cash flow per share growth is better at 16.8% and 17.3% per year over the past 5 and 10 years. Book Value per share has been growth at just over 15% per year for both these time periods.

Debt ratios on this company have been ok, but never great and have fluctuated. The current Liquidity Ratio is just 0.98 and the cash flow coverage is ok. The current Debt Ratio is low, but ok at 1.30. The current Leverage and Debt/Equity Ratio are rather typical for this sort of company at 4.38 and 3.37, respectively.

The Return on Equity for 2011 is 20.6% and the 5 year median is 25.1%. The ROE for comprehensive income was lower at 17.6% and the 5 year median is 22.6%. You want both these ROEs at about the same level as the ROE on comprehensive income confirms the quality of the ROE on net income. In this case, all the ROEs are very good, but there is a significant difference between the ones for 2011. On the other hand, the good range for ROE is 10% to 15% and these ROEs are higher.

I am pleased with this stock and intend to continue to hold it. It really has performed the way I have expected it to.

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.


  1. It's sad, SNC has a lot of very good employees.

    Sadly when a company is run by a bunch of idiots, dump the stock.

  2. This will be a nice turnaround story in a few years hopefully.

    On my debt/equity calculation, I like to minus the cash balance from the total debt then divide by equity. SNC seems quite leveraged until you consider the 1.2b in cash.

  3. Yes, I think that SNC will turn around. Interesting variation to the debt/equity calculation.