Monday, September 10, 2012

PFB Corp

On my other blog I am today writing about what to read for novice investors. I think that if you want to learn about investing today I would suggest reading some blogs rather than any particular book. One of the bloggers I follow is "The Dividend Ninja" continue...

I do not own this stock of PFB Corp (TSX-PFB). I have in the past bought the Investment Reporter newsletter. I have not bought it for a number of years now, but I still follow some of the stocks that were in this newsletter when I bought this report and this was one of their stocks. The website of MPL Communications who publish this newsletter is here.

This is a manufacturing company that gives their shareholders dividends and special dividends as they can afford to do so. The dividends have been increased in the past. The one thing that stands out is that there have been no special dividends or dividend increases in the last 5 years. The company had quite a bad year in 2008 and has since been digging its way forward.

The company provides a good dividend. The current dividend is 3.4%. The 5 year median dividend is a bit higher at 3.98% and the 10 year median lower at 2.85%. The 5 and 10 year dividend growth is at 0% and 4.8% per year, respectively.

The Dividend Payout Ratios are fine with the 5 year median for earnings at 51% and for cash flow at 26%. If their earnings continue to improve, the company may again do special dividends or a dividend raise. However, we are in uncertain times and we may be going into another recessions, which would cause problems for this company.

Total return has not been great over the past 5 years. Total return is a negative 6.48% per year. Dividends were at 3.1% per year, with the capital loss at 9.59% per year. The 10 year total return is better with this at 8.88% per year. The dividend portion was 5.2% per year with capital gain at 3.68% per year. Dividends made up 59% of the total return over the past 10 years.

The number of outstanding shares has marginally increased over the past 5 and 10 years at the rate of 0.2% and 1.8% per year, respectively. One problem of shareholders is that this stock is fairly illiquid. Insiders and 10% holders probably own more than 75% of the outstanding stock. However, this might change with the all share deal for PFB to acquire NOVA's Performance Styrenics business.

Revenues have grown over the past 5 and 10 years, but growth is rather slow. The growth was 2.7% and 8.3% per year, respectively. The Revenue per Share growth is lower, as outstanding shares have increased. The growth is at 2.5% and 6.3% per year over past 5 and 10 years.

The earnings sagged after 2008 and have not yet recovered. This is way earnings growth is not there and earnings have declined at the rate of 9.9% and 2.9% per year over the past 5 and 10 years. The story with the cash flow is a bit better, but CFPS is still in declined, with the decline at 7.2% and 0.6% per year over the past 5 and 10 years.

Revenues grew 36% in 2011, so this was a much better year for the company. CFPS did not grown in 2011, but earnings did at a rate of 67%. Also I should point out that this company has not had any year of negative earnings and only one year of negative cash flow over the past 10 years.

The growth in book value per share is modest with the 5 and 10 year growth at 3.2% and 4.1% per year over the past 5 and 10 years.

The Return on Equity has not been great lately. The ROE for the financial year ending in December 2011 was 7.2%. The 5 year median ROE is also 7.2%. The ROE based on comprehensive income is in line with the ROE on net income. The ROE for the end of 2011 on comprehensive income is 7.1% and the 5 year ROE is 7.1% also. (The ROE on comprehensive income confirms the quality of the net income.)

The current Liquidity Ratio is 1.66. The 5 year median Liquidity Ratio is even better at 2.22. The current Debt Ratio is 2.83 and this has a 5 year median ratio even higher at 3.39. The current Leverage and Debt/Equity Ratios are 1.55 and 0.55. The 5 year median values are 1.41 and 0.41. They have taken on some debt lately, but all their debt ratios are quite good. This is common with companies that have large insider ownership.

This is a solid company with a decent dividend. It is risky because it would be a cyclical stock in manufacturer connected to residential and commercial construction. It is also rather illiquid. You might buy it for diversification purposes.

PFB Corporation, through its wholly-owned subsidiaries, is a vertically-integrated manufacturer of proprietary insulating building products that are based on expanded polystyrene (EPS) technology. This expanded polystyrene (EPS) rigid insulation is used in a wide variety of residential and commercial construction projects across North America. It was founded in 1968 as Plasti-Fab Ltd, now a subsidiary of PFB. Directors and officers own 57% of the issued and outstanding common shares as of December 31, 2008. Its web site is here PFB Corp. See my spreadsheet at pfb.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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