Linamar Corporation

I do not own this stock of Linamar Corporation (TSX-LNR, OTC-LIMAF). I looked at this stock back in 2000 and it was not a stock I thought fit my investment philosophy. In 2008 I read an article that recommended this company as a dividend stock with good value. This stock used to be on the Investment reporter portfolio stock list as an average risk stock. However, it has been taken off this list.

This company raises their dividends infrequently. However, the 5 and 10 year increases are at 5.92% and 7.18% per year, but the current yield is low at just 0.7% and the 5 year median yield is also low, but decent at 1.42%. So this stock has a low yield and moderate increases.

This means that if you bought this stock today, in 15 years you could be making 1.7% on your money or in 20 years be making 2.2% on your money. However, people who bought this stock 5 years ago when it crashed and paid a average price in that year would be earning 4.5% return on their original purchase price.

The Dividend Payout Ratios are very low. The 5 year median DPR for EPS is at 9% and for CFPS at 6.2%. The DPR for 2013 for EPS is at 9% and for CFPS is at 4.4%. The DPRs for 2014 are expected to be roughly the same.

Shareholders have done well over the past 5 and 10 years with total returns at 32.25% and 14.27% per year over these periods. The portion of this return attributable to dividends is at 1.37% and 1.01% per year over these periods. The portion of this return attributable to capital gains is at 30.88% and 13.26% per year over these periods.

Outstanding shares have not really changed over the past 5 or 10 years. Shares are increased for Stock Options and decreased for Buy Backs. There has been good growth in Revenue, Earnings and Cash Flow. It is interesting that in all cases the 5 year running averages growth over the past 5 and 10 years is lower than growth over the past 5 and 10 years. This seems to be because growth in this company is volatile.

The Revenue per Share growth is 9.7% and 10% per year over the past 5 and 10 years. The Revenue per Share growth using 5 year running averages is lower at 6.1% and 8.2% per year.

Earnings per Share growth is at 27.4% and 20% per year over the past 5 and 10 years. However, if you look at EPS growth over the past 5 and 10 years using 5 year running averages the growth is just at 3.4% and 7% per year.

Cash Flow per Share growth is 12% and 11.9% per year over the past 5 and 10 years. CFPS growth over the past 5 and 10 years using 5 year running average is also lower at 5.2% and 7.7% per year.

The debt ratios on this stock are very good. The Liquidity Ratio is at 1.60, the Debt Ratio is at 2.06 and the Leverage and Debt/Equity Ratios at 1.94 and 0.94. This is probably because of insider ownership.

The Return on Equity has been above 10% in 9 of the 10 past years. They had one year of earnings loss in this period. The Return on Equity for 2013 is at 17% with the 5 year median at 11.1%. The ROE on comprehensive income for 2013 was 23.7% and the 5 year median ROE was at 8.1%. Over the past 2 years the ROE on comprehensive income was higher than for net income. This can point to the company's profits being of good quality.

Sound bit for Twitter and StockTwits is: Dividend Growth Stock. However, note that dividends are only raised infrequently. Shareholders have done well with this stock, but as for dividends you can see that it really pays to buy when stock is at a good price. I personally will not buy any stock with a dividend yield under 1%. It just takes too long to get a really decent return on your original investment. See my spreadsheet at lnr.htm.

This is the first of two parts. The second part will be posted on Friday, October 10, 2014 and will be available here. The first part talks about the stock and the second part talks about the stock price.

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. 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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