Exco Technologies Ltd.

On my other blog I am today writing about possible cheap dividend stocks continue...

I do not own this stock of Exco Technologies Ltd. (TSX-XTC, OTC- EXCOF). This is a stock given as a recommendation by Keystone at the Toronto Money Show of 2012. I decided to check into it as it is a small tech company that is paying dividends. Also, I decided to review this stock because Keystone has recommended some very good stocks in the past.

This company started to pay dividends about 10 years ago in 2003. I would call it a dividend growth company as dividends have grown at 21% and 13% per year over the past 5 and 10 years. They started out with a low dividend (less than 1%) and now the dividend is around 2.4%. The 5 year median dividend yield is 3.2%. This suggests that the dividend growth into the future may not be as good as dividend growth in the past.

The Dividend Payout Ratio is good with the 5 year DPR for earnings at 29% and the 5 year DPR for cash flow at 18%. The DRP rates have fluctuated, but the DPRs for 2013 is similar to the 5 year DPR with the DPR for EPS at 30% and the DPR for cash flow at 22%.

The total return over the past 5 years is very good, but not so much over the past 10 years. The thing is 5 years ago the stock dropped a lot because of the 2000 bear market. The stock has made some capital gains, but not a lot over the years. The 5 and 10 year total return to date is 36.81% and 2.27% per year. The dividend portion of these total returns is 3.69% and 1.21% per year over the past 5 and 10 years. The capital gains portion of these total returns is 33.12% and 1.06% per year over the past 5 and 10 years.

There has been only a very minor change in outstanding shares over the past 5 and 10 years. Shares have increased due to stock options and have decreased due to buy backs. There has not been much in the way of growth in revenue and cash flow over the past 5 and 10 years, especially if you look at 5 year running averages. Earnings have grown fairly well, especially over the past 5 years, because 5 years ago, the company had negative earnings.

Revenue has grown by 4.05% and 0% over the past 5 and 10 years. Revenue has grown over the past 5 years as it was low 5 years ago. If you look at 5 year running averages, revenue is down about 1% per year over the past 5 years and up around 1% per year over the past 10 years.

For EPS, I do not have growth over the past 5 years as 5 years ago earnings were negative. Over the past 3 years EPS has grown at 32% per year. EPS has grown at 3.5% per year over the past 10 years. If you look at 5 year running averages, EPS has grown at 45% over the past 5 years and is down 2% per year over the past 10 years.

Cash Flow per Share has grown at 15% per year over the past 5 years and 0% over the past 10 years. If you look at 5 year running averages, CFPS has grown at 0% per year over the past 5 years and is down 2.8% per year over the past 10 years.

One problem is shown by the Operational Profit Margin (CF/Revenue) Ratio. You want this ratio to be stable or growing. It has been fluctuating, but it is down by 15% over the past 10 years. It is going in the wrong direction.

The Return on Equity has been good over the past 3 years and has been above 10%. The ROE for 2013 is 14.3%. It is expected to be 15.4% in 2014. The ROE on comprehensive income is generally better than the ROE on net income. The ROE on comprehensive income is 16.5%.

The debt ratios are all very good on this stock. The Liquidity Ratio is very high at 4.16. The Debt Ratio is 6.30. Leverage and Debt/Equity Ratios are 1.19 and 0.19. The company has little debt. This gives them the ability to survive a lot of hard times.

Analysts expect that this company will do very well in 2014. The first quarterly report for 2014 (dated December 31, 2013 as the annual reporting date is September 30 each year) seemed to be ok, but not great. Revenue, EPS and CFPS for 2013 were the highest ever reached before for this company. However, cash flow and net income were down slightly from 2012 where the highest level was reached.

This stock has great debt ratios. Analysts expect good growth over next two years. See my spreadsheet at xtc.htm.

This is the first of two parts. The second part will be posted on Tuesday, February 11, 2014 and will be available here.

Exco is a global designer, developer and manufacturer of dies, moulds, equipment, components and assemblies to the die-cast, extrusion and automotive industries. The Die Casting and Extrusion Technology groups operations are based in Canada, U.S., Mexico and Colombia and primarily serve automotive and industrial markets throughout the world. The Automotive Solutions Group has facilities are located in Canada, U.S., Mexico and Morocco and supply the North American, European and Asian markets. Its web site is here Exco.

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.