Linamar Corporation

On my other blog I am today writing about living well...continue...

I do not own this stock Linamar Corporation (TSX-LNR, OTC-LIMAF). This stock is not on any on the Dividend Achievers list, nor was it on Mike Higgs' list. I looked at this stock back in 2000 and it was not a stock I thought fit my investment philosophy. This stock used to be on the Investment Reporter's portfolio stock list as an average risk stock. However, it has been taken off this list. They do not seem to review this stock anymore, either.

If you look at the dividends, they are currently below 1%, but the 5 year median dividend yield is 1.7% and the 10 year median dividend yield is 1.6%. Dividends are increased but this does not occur often. For a low dividend, the dividends increases are very mediocre at 5.9% and 7.2% per year over the past 5 and 10 years.

With the low dividend yield comes a very good Dividend Payout Ratios, with the 5 year median DPR for Earnings per Share at 11.7% and for Cash Flow per Share at 6.2%. The DPRs for 2012 were at 5.9% and 6.2% for EPS and CFPS. The ones for 2013 are expected to be even lower.

The stock price of this company crashed in 2008 and the stock price is up some 58% per year since then. The dividend portion of this increase is at 3% per year. If you look at the 5 years to the end of 2012, you get a different picture with the stock only up 3.9% per year with dividend portion of this increase at1.6% per year.

If you look at this stocks performance over the past 20 years, you will see that it has gone up and down, but has not gotten anywhere over the long term. It hit the current peak it now has in 1998 and was almost there again in 2007. It would seem that the only way to play this stock is to buy at its lows and sell at its highs. It hits lows in recessions.

The Return on Equity has fluctuated in the past but is currently good at 13.3% for 2012 and would probably be around the same for 2013. The ROE on comprehensive income can vary quite a bit from that on net income, but the 5 year median difference is with the ROE on comprehensive income being just 1.8% lower.

The debt ratios have fluctuated in the past with the Liquidity Ratio at times being quite low, but the Debt Ratio has always been fine. The current Liquidity Ratio is quite good at 1.80. The current Debt Ratio is also very good at 1.84. The Leverage and Debt/Equity Ratios are fine (but not low) at 2.18 and 1.18 currently.

The G&M has a September 2013 positive article on this stock. There is another G&M September 2013 article on this stock saying it is liked because of current insider buying.

When I look at the analysts' recommendations, I find Strong Buy, Buy and Hold recommendations. The consensus recommendation is a Buy. The 12 month consensus stock price is $38.60. This implies a total return of 15.39% with 0.95% from dividends and 14.44% from capital gains.

I must admit that a lot of analysts currently really like this stock and think that it is a good current buy. However, I very much disagree. Of, course it is not the fault of the company that investors rockets the price up. Past performance of this stock would suggest that it is a bad time to buy when the stock price shows such exuberance. I also do not think that this is not a buy and hold stock.

My two stock tests that do not use estimates show that the current stock price is relatively too high. The 5 year median dividend yield is 1.69% and the current yield of 0.95% is some 44% lower. The 10 year Price/Book Value per Share Ratio is 1.26 and the current P/B Ratio at 1.81 is some 44% higher. See my spreadsheet at hse.htm.

Linamar Corporation is a diversified global manufacturing company of highly engineered products. It is a world-class designer and diversified manufacturer of precision metallic components and systems for the automotive industry, and mobile industrial markets. Its web site is here Linamar.

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.