Thursday, August 16, 2012

Nordion Inc.

I do not own this stock (TSX-NDN, NYSE-NDZ), but I used to, but when I owned it, it was MDS Inc. (TSX-MDS). I bought this stock in 1996, 1997 and 1998 and sold it off in 2006. So, I had it some 9 years and I made 4.95% per year. I made capital gains of 4.4% per year and dividends of 0.55% per year. I sold because I thought that the company was going nowhere.

The company started its decline in 2005. By 2007 they had cut their dividends. The stock price really did not take a drive until 2008 when it fell over 60%. The dividends were never very much. They had Dividend Payout Ratios of around 10% for earnings and 6% for cash flow. Dividends were low, with median long term dividends at 0.43% per year.

The company restarted dividends in 2011at a good level of 3.94% median yield. However, the Dividend Payout Ratios were around 150%. The DPR are expected to be significantly lower in 2012 at around 71% for earnings.

This stock reports in US$ and uses US GAAP accounting rules. In 2010 they reorganized and changed their name. No matter what currency you look at, they have not done well. Revenues, Earnings, Cash Flow and Book Value are all lower than in the past and they have had no growth in the last 5 or 10 years.

The debt ratios are quite good and have generally been good. The current Liquidity Ratio is 2.44. The 5 year median Liquidity Ratio is 1.98. The current Debt Ratio is 2.69. The 5 year median Debt Ratio is 2.56. The current Leverage and Debt/Equity Ratios are fine at 1.59 and 0.59.

The Return on Equity is low with the one for the financial year ending at 31 October 2011 at 5.9%. The 5 year median ROE is negative. The ROE based on the comprehensive income is a bit better coming in at 6.2%.

Well, the company is recovering. I think I would have liked it better if it started out with dividend payments at Dividend Payout Ratios that were much more reasonable. Although, I guess you could look at it like the company having some faith in their future. However, I am not comfortable with basing dividends on future earnings and cash flow estimates. Estimates have habits of being unreliable. Lots of stuff can happen in the future that you cannot know about today.

Nordion Inc. is a global life sciences company that provides products and services for the development of drugs and diagnosis and treatment of disease. The company is a provider of pharmaceutical contract research, medical isotopes for molecular imaging, radiotherapeutics, and analytical instruments. Its web site is here Nordion. See my spreadsheet at ndn.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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