ONEX Corp

On my other blog I am today writing about Bubbles ...continue...

I do not own this stock ONEX Corp (TSX-OCX, OTC-ONEXF), but I used. I bought it at the end of 2001 and sold in April of 2008. I made some 5.9% return including dividends. I mistook this stock for a Dividend Paying stock. Sometimes it is a good idea to review the sort of stock that we should not buy.

Why I say I mistook it for a dividend paying stock is because they pay a dividend. However, if you look at the spreadsheet, you will see that there has been no growth. In fact, dividends were the same from 1995 until this year. They are currently paying out some 1% of its cash flow in dividends. The current yield at 0.30% is way below 1%. This yield includes the big dividend rise of 2013. I seriously do not know why they even bother to pay a dividend.

It is really hard to say where they are going with dividends, as they just recently raised dividends by some 36%. However, this is not much to get excited about as dividend yield is just 0.3%. I still do not know why they bother with a dividend.

This stock is sort of like a hedge fund in that it buys or invests in companies to make money. It seemed to be a good idea when I bought it. Unfortunately, this company was a growth company until 2001. I really bought it at the wrong time. It was making some headway by 2008 and then came the second bear market and then it has been recovering ever since.

Total Returns over the past 5 and 10 years is at 3.95% and 10.56% with 0.31% and 0.43% from dividends and 3.66% and 10.10% from capital gains. This is really not a growth stock. However, the stock is up almost 20% this year and 31 % year over year, which is in growth stock territory.

The company only has had good growth in cash flow. If you look at the 5 year running averages over the past 5 and 10 years you get growth at 16% and 13% per year. Revenue growth using 5 year running averages over the past 5 and 10 years gets you growth of 10% and 7% per year.

There is no growth in earnings, but earnings fluctuate a lot. 2011 was a great year for Earnings, but they had a loss in 2012. There is also a loss in the 1st quarter of 2013. An interesting thing about earnings for 2012 is that there is a negative EPS, but there is positive net income for the company. This is because all the profits went to the non-control interest.

The Liquidity Ratios are good, with 5 year median ratio at 1.70. The Debt Ratio is low with a 5 year median at just 1.43 and a current one lower at 1.16. (I would like to see this at 1.50 or above.) The Leverage and Debt/Equity Ratios are very high with current ratios at 29.55 and 25.40, respectively.

When I look at analysts' recommendations, I find Strong Buy, Buy and Hold recommendations. Most of the recommendations are a Hold and the consensus recommendation would be a Hold. The 12 month consensus stock price is $51.10. This implies a 12 month return of 2.77%, with 0.30% from dividends and 2.47% from capital gains.

Proactive Investor site talks positively about Onex Corp. There is an interesting article in Rehub Canada about Carestream Health Inc. raising debt money to give to shareholders, including ONEX Corp.

I would not invest in this company today. It is not a growth company and it is not a dividend paying company, so for me I would not see any point in the investment. See my spreadsheet at ocx.htm.

Onex is one of North America's oldest investment firm committed to acquiring and building high-quality businesses in partnership with talented management teams. Onex manages investment platforms focused on private equity, real estate and credit securities. Gerald Schwartz is a major owner Its web site is here ONEX.

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.