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I own this stock of Davis & Henderson Corp. (TSX-DH, OTC-DHIFF). This stock has been recommended a number of times by MPL Communications. So I looked into it and bought some. At that time this company was an income trust. Dividend yield was good and they had a history of dividend increases.
This is another dividend growth company. This one has rather high dividends and rather lower increases. The 5 and 10 year dividend growth tells us nothing as this used to be an income trust and when it converted to a corporation, it cut its dividends by almost 35%.
As an income trust it had rather high dividend yield with a median dividend yield of around 9% and a median increase of around 3.3%. Currently the dividend is around 4% and the latest dividend increase, for 2013 was for 3.2%. Although the 5 year median dividend yield is still up around 8.4% I doubt it will go there again. I would expect that the dividends would be in the 4 to 5% range.
They have not yet got the Dividend Payout Ratios under control with the 5 year median DPR for earnings at 119% and the DPR for Cash Flow at 68%. Last year 2013 was not a great year for this company and the DPR for earnings was at 197% and for Cash Flow was at 68%. The DPR for earnings is expected by analysts to be much better in 2014 at below 60%.
I have done very well with this stock as I bought it while it was still an income trust company. My total return is 26.77% per year with 18.85% per year from capital gains and 7.92% per year from dividends (or distributions.)
The 5 and 10 year total return to date is at 19.77% and 9.30% per year. The dividend portion of this return is at 6.75% and 6.07% per year over the past 5 and 10 years. The capital gains portion of this return is at 13.02% and 3.23% per year over the past 5 and 10 years. The thing is that there has not been much increase in the stock price until fairly recently. The stock peaked in 2005 at $23.84 and then wandered around until 2012.
The outstanding shares have increased by 12.9% and 7.9% per year over the past 5 and 10 years. Because of the increasing number of shares, the "per share" become quite important. Revenues have been increasing nicely. Last year was not a good year for earnings or cash flow so they are down. However, for both earnings and cash flow, the 5 year running averages are better than the 5 and 10 year growth figures.
Revenue is up by 17.9% and 12.8% per year over the past 5 and 10 years. Revenue per share is up by 4.4% and 4.6% per year over the past 5 and 10 years.
Earnings are down by 18.4% and 6.6% per year over the past 5 and 10 years. However, if you look at the 5 year running averages for the last 5 and 7 years, the decreases is at 3.6% and 0% per year.
Cash Flow is up by 5.9% and 8.3% per year over the past 5 and 10 years. Cash Flow per Share is down by 6.3% per year over the past 5 years and up by 0% per year over the past 10 years. If you look at 5 year running averages, cash flow per share is up by 2.1% and 3.8% per year over the past 5 and 7 years.
Until 2012, the Return on Equity was above 10%. For 2013 the ROE is low at 3.8% and it has a 5 year median value of 12.7%. The ROE on comprehensive income was somewhat better than that on net income coming in at 6.2%. The 5 year median is also a bit high at 14%.
The Liquidity Ratio for 2013 is just 0.71. It means that the current assets cannot cover the current liabilities. The company relies on cash flow to cover current liabilities. If you include cash flows after dividends, the Liquidity Ratio becomes 1.07. Not great but adequate. The Liquidity Ratios are usually better than the current ones as the 5 year median Liquidity Ratio is 0.88 and the Liquidity Ratio with cash flow after dividends is 1.13.
The Debt Ratio is much better with a value of 2013 of 1.65. The 5 year median Debt Ratio is 2.24. Leverage and Debt/Equity Ratios are currently a little high at 2.54 and 1.54. The 5 year median values are much better at 1.56 and 0.56.
This is a company probably best known for providing cheque stock to banks. They are moving towards providing more technological services to banks and other financial institutions. Technology is always disruptive. They are also expanding into the US market.
I am pleased with my investment in this company and I continue to hold this stock. I think that total returns are going to lower in the future, but I see this company as a solid addition to my portfolio. See my spreadsheet at dh.htm.
This is the first of two parts. The second part will be posted on Thursday, April 17, 2014 and will be available here. The first part talks about the stock and the second part talks about the stock price.
Davis & Henderson is a leading solutions provider to the financial services marketplace. Founded in 1875, the company today provides innovative programs, technology products and technology based business services to customers who offer chequing accounts, credit card accounts and personal, commercial, and other lending and leasing products. Its web site is here Davis & Henderson.
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. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.
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