WSP Global Inc.

I own this stock of WSP Global Inc. (TSX-WSP, OTC-WSPOF). In Sept 2011 I rationalized my portfolio. I sold stocks that did not make it into my core and bought stocks that could of the same type. In this case selling Stantec and buying Genivar. In October 2011 I wanted to sell Enerflex because it is not a company I bought but a distribution from Toromont. I bought more Genivar, now called WSP Global.

This stock is another old income trust company that converted to a corporation. They did not decrease their dividends, but kept them level since 2009. Prior to that time dividends were increasing. The current dividend yield is 3.95%. Analysts do not see any dividend increases in the near future.

The Dividend Payout Ratios, especially for EPS are too high. The DPR for EPS in 2013 was 108.7%. Analysts expect this to be around 85% for 2014. The DPR for CFPS in 2013 was 63.4%. Analysts expect this to be around 55% in 2014.

As with other old income trust companies I have bought, I have done well on this stock. I have a total return of 26.53% per year on this stock with 20.42% per year from capital gains and 6.11% per year from dividends. The total return over the past 5 and 9 years is at 12.62% and 23.93% per year. The portion of this total return attributable to capital gains is at 7.55% and 16.30% per year over these periods. The portion of this total return attributable to dividends is at 5.07% and 7.63% per year over these periods.

Outstanding shares have increase by 30% and 25% per year over the past 5 and 7 years. Shares have increased due Share Issues and DRIP. Because shares are increasing so rapidly, the "per Share" values become very important. Revenue, Cash Flow and Earnings have all increased nicely. Revenue per Share has increased ok, but EPS and CFPS over the past 5 years is down.

Revenue has gone up 39% and 52% per year over the past 5 and 7 years. (Note that this company has only been on the stock exchange since 2006.) Revenue per Share is up by 7.2% and 21.3% per year over the past 5 and 7 years.

Net Income has increased by 22% and 41% per year over the past 5 and 7 years. EPS is down by 6.7% over the past 5 years and is up by 13.2% over the past 7 years. However, if you look at 5 year running averages over the past 3 years, EPS is up by 2.5% per year. Since the low in EPS in 2010, EPS has been increasing.

Cash flow is up by 14.4% and 32.6% per year over the past 5 and 7 years. CFPS is down by 11.8% and up by 6.1% per year over the past 5 and 7 years. If you look at the 5 year running average over the past 3 years, CFPS is down by 5.8% per year. CFPS hit bottom in 2012. It increased by 30% in 2013 and is expected to rise by almost 14% in 2014.

The Return on Equity Ratios are not that good. The ROE was only at 10% once since 2006. The ROE was at 7.2 in 2013 and has a 5 year median value of 7.7%. The ROE on comprehensive income was 10.4% in 2013 and this is a good sign. However, the 5 year median ROE on comprehensive income is also at just 7.7%.

The debt ratios are good. The Liquidity Ratio for 2013 is fine at 1.51 in 2013. The Debt Ratio is very good at 2.10 in 2013. The Leverage and Debt/Equity Ratios are good at 1.91 and 0.91 in 2013.

I have done very well with the old income trust companies that I did buy. I just wished I had bought more. This stock has also been good. The stock hit a low in 2012 and has been increasing since then. The stock price is up by 23% so far in 2014. This is a good sign. The stock price often takes off on stocks ahead of what is happening in a company.

I think that this stock will again be a dividend growth stock, but the company is wise to keep the dividends level until they can afford to raise them. I intend to hold on to my shares at this time. See my spreadsheet at wsp.htm.

This is the first of two parts. The second part will be posted on Monday, June 9, 2014 and will be available here. The first part talks about the stock and the second part talks about the stock price.

WSP Global Inc. is an engineering services firm providing private and public-sector clients with a complete range of professional consulting services throughout all project phases, including planning, design, construction and maintenance. Mainly in Ontario and Quebec, but has some international exposure. Its web site is here WSP Global.

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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