Hammond Power Solutions Inc.

I own this stock of Hammond Power Solutions Inc. (TSX-HPS.A, OTC-HMDPF). I bought this stock as my main purchase for the TFSA in 2013 and 2014. I picked Hammond initially in 2013 as my main buy because it has good growth and reasonable dividend.

The company became a public company in 2001 and they started to pay a dividend in 2009. Over the past 4 years dividends have gone up by 18.9% per year. The company also paid a special dividend in 2013.

If you look at the Dividend Payout Ratio for the last 5 years, it is at 16.7% for EPS and 10.9% for CFPS. However, DPRs are increasing and the ones for 2013 they are 58% for EPS and 37% for CFPS.

Currently, this stock is performing well. I have a total return of 12.05% per year with 9.75% per year from capital gains and2.32% per year from dividends. The 5 and 10 year total return on this stock is at 2.14% and 25.93% per year. The portion of this return attributable to capital gain is a loss of 0.2% per year over the past 5 years and a gain of 23.65% per year over the past 10 years. The portion of this return attributable to dividends is at 2.16% and 2.28% per year over the past 5 and 10 years.

The outstanding shares have not increased over the past 5 and 10 years. Shares have increased due to stock options and decreased due to Buy Backs. The 2013 financial year was not a good one for this company. Revenue growth has been good over the past 5 and 8 years, but Earnings are down over the past 5 years and cash flow is ok, but not great over the past 5 years.

Revenue has increase by 9.4% and 12.6% per year over the past 5 and 8 years using the 5 year running average. Growth over the past 5 years does not look good at just 1.5% but exactly 5 years ago was a very good year. The growth over the past 10 years is at 12.3% per year.

The EPS is down by 2.2% and up by 36.6% per year over the past 5 and 8 years using the 5 year running averages. Exactly 5 years ago was a very good year and EPS growth is down by 23% per year. Over the past 9 years EPS has grown at 16.7% per year. I cannot get a 10 year growth rate as the company had a loss in EPS exactly 10 years ago.

CPFS is up by 4.5% and 21.5% per year over the past 5 and 8 years using the 5 year running average. Here again exactly 5 years ago was a very good year and CFPS is down by 16.3% per year over the past 5 years. CFPS is up by 18.7% per year over the past 10 years.

The Return on Equity has been all over the place. It has been below 10% twice over the past 5 years. The ROE for 2013 is at 5.6%. The ROE on comprehensive income is better at 8.4%.

The debt ratios are good on this stock. The Liquidity Ratio is 1.56. The Debt Ratio is very good at 2.40. The Leverage and Debt/Equity Ratios are also good at 1.71 and 0.71.

The first quarter of 2014 has not been a good one for this company. Revenues, Earnings and Cash Flow are all down from the first quarter of 2013. However, the company seems confident as they have increased the dividends for 2014 by 20%. See my spreadsheet at hse.htm.

This is the first of two parts. The second part will be posted on Friday, June 13, 2014 and will be available here. The first part talks about the stock and the second part talks about the stock price.

Hammond Power Solutions Inc. is the largest manufacturer of dry-type transformers in North America. They engineer and manufacture a wide range of custom transformers that are exported globally in electrical equipment and systems. They support solid industries such as oil and gas, mining, steel, waste and water treatment, and wind power-generation. Its web site is here Hammond Power Solutions.

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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