Tuesday, June 5, 2012

Automodular Corp

I own this stock (TSX-AM). This stock was recommended by Keystone as a good Small Cap stock with dividends in 2011. Until recently this stock was going up. However, it has fallen quite steeply lately, especially this May.

This is good and bad. I could buy a couple of hundred shares with the dividends in my TFSA account because of the lower price. I have lost some 25% on my original purchase. But the dividend yield is current at 14.5%. The dividend is high mostly because they just raised it some 20%. With the increase in dividends, the payout ratio is around 40% of earnings.

Dividends on this company have been erratic. They pay them when they can, so they have both increased and decreased or cancelled dividends in the past. They have also given out special dividends.

Total returns over the past 5 and 10 years have not been great. This company was hurt by the 2000 bear market and was just recovering when it was hit by the 2008 bear market. Total returns over the past 5 years were 7.9% per year with dividend income at 8.2% per year. (There would be a small capital loss.) 10 year total returns are a negative 2.3% per year with dividend income at 4.9% per year.

The company paid no dividends between 2004 and 2008. They restarted them for a couple of quarters in 2008 and then cancelled them. Dividends were restarted again for 2011.

This company has done better over the past 5 years than it has over the past 10 years. They used to have only one customer which was Ford's Oakville Assembly Plant. In September 2011 they picked up another customer of Vestas Nacelles A/S. Vestas Nacelles A/S is a subsidiary of the publicly traded Danish company Vestas Wind Systems A/S, a global leader in the wind industry. See G&M article.

Revenues per share were flat over the past 10 years. It is up a healthy 8.7% per year over the past 5 years. Total revenues are up 6.8% and 4.3% per year over the past 5 and 10 years. Earnings per share are up 54% and 7% per year over the past 5 and 10 years. Cash Flow per share is up 11.4% and 3.3% per year over the past 5 and 10 years.

Book Value is flat over the past 5 years and is down 5% per year over the past 10 years. Book Value took a big hit in 2008 and is making a recovery.

The Return on Equity for 2011 is great at 36.8%. The 5 year median ROE is much lower at just 7.1%. However, the ROE on net income is confirmed by the ROE of comprehensive income. ROE on comprehensive income is 36.6% for 2011.

One of the solid things about this stock is the debt ratios. The current Liquidity Ratio is a great 3.34. The current Debt Ratio is even higher at 4.30. It also has great Leverage and Debt/Equity Ratios at 1.30 and 0.30. This is what you call a strong balance sheet. Companies with strong balance sheets can survive punishing recessions. The stock price is current at $1.69 and they have $.70 in cash for each share outstanding.

I still like this company. I recently purchased some more of it with dividends that were in my TFSA.

Automodular Corporation is a supplier of sub-assembly, sequencing and transportation services to the automotive industry - Ford's Oakville Assembly Plant and the renewable energy industry with Vestas Nacelles A/S. Its web site is here Automodular. See my spreadsheet at am.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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