SNC-Lavalin Group Inc

On my other blog I am today writing about Buy and Hold and Dividends...continue...

I own this stock of SNC-Lavalin Group Inc. (TSX-SNC, OTC-SNCAF). I first bought this stock in 1989. I sold some of this stock in 2008 as it had grown so much that I felt that I had too much of my portfolio in this one stock. I had considered selling more of this stock in 2012 because it has a low dividend and I needed more dividends in my Locked-in RRPS. I did still want this stock, so I bought a bit of this stock in 2012 for my Trading Account. In the end I sold another low dividend paying stock of my Locked-in RRSP instead of this one.

On my original purchase of stock in 1989 I have making a dividend yield of 27%. This is after some 15 years. Mostly the dividend increases on this stock have been great and up to 2011 the dividend increases were at 23% and 24% per year over the previous 5 and 10 years.

Over the last two years I have seen some of the lowest dividend increases for this company. Increases were only 4.8% and 4.5% in 2012 and 2013. Most other years dividend increases were 20% plus. The 5 and 10 years dividend increase to 2012 is lower at 18% and 21% per year and I suspect that the 5 and 10 years dividend increases to 2013 will be lower still.

I do not see this changing anytime soon as the Dividend Payout Ratios are currently higher than historical norms for this stock. Historically, the DPR for earnings was in the mid 20% range (although some individual years were higher) and for cash flow was below 20%. The DPR for 2013 is expected to be around 40% for earnings and 27% for cash flow.

The outstanding shares have increased by 0% and 0.4% per year over the past 5 and 10 years. Shares have increased due to stock options and declined due to share buy backs. The Revenues are up 3.8% and 9% per year over the past 5 and 10 years. The Revenue per Share is up by 3.7% and 8.9% per year over the past 5 and 10 years.

Earnings per Share is up by 15% and 4.5% per year over the past 5 and 10 years. (If you look at 5 year running average, the increase over the past 10 years is 18% per year. This is because exactly 10 years ago, the EPS was relatively high for that year.)

Cash Flow per Share is up by 40% and 15% per year over the past 5 and 10 years. (If you look at the 5 year running average, CFPS is only up 27% over the past 10 years. This is because exactly 10 years ago the CFPS was unusually low.)

Usually the Return on Equity is quite good on this stock with the 5 year median ROE at 25.1% and last year's ROE at 20.6%. The current ROE is still quite good at 14.9%, but not up to what this stock had been producing in the past. On the other hand, the ROE for comprehensive income is better for 2012 than the ROE on net income coming in at 15.1%. (Last year, 2011 the ROE on net income was 20.6%, but the ROE on comprehensive income was lower at 17.6%.) It is preferable to have the ROE on net income and comprehensive income close.

The debt ratios have always been rather low on this stock with the Liquidity Ratio at 0.96 for 2012 and the current one at 0.90. If you add in cash flow after dividends, the Liquidity Ratio for 2012 becomes 1.05 and the current one comes in at 0.99. When the Liquidity Ratio is less than 1.00, it means that current assets cannot cover current liabilities. An interesting feature of this stock is the amount of cash it has. Currently, the cash works out to some $6.27 for each share.

The Debt Ratios have also been rather low on this stock, with the Debt Ratio at 1.28 for 2012 and 1.27 currently. The Leverage and Debt/Equity Ratios have always been a bit high on this stock. The current ones are at 4.73 and 3.73, respectively. The 5 year median Ratios are 4.83 and 3.56, respectively.

It is interesting that revenue still went up in 2012, but both earnings and cash flow is down. I think that the stock is recovering, but it is a slow process. It will be a while before this stock is again a dividend growth stock. The company is making money. We are also in difficult economy times. I do think it will recover, maybe not to its former glory, but it should still do well. Currently, I am holding on to my shares. See my spreadsheet at snc.htm.

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-Lavalin.

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 or StockTwits.