DH Corp

Sound bite for Twitter and StockTwits is: No longer dividend growth stock. However, I do have hope that this company will again become one. See my spreadsheet at dh.htm.

I own this stock of DH 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. This was in 2009 and at that time this company was an income trust. Dividend yield was good and they had a history of dividend increases.

A couple of things I notice right away when I reviewed by spreadsheet. A worry for me has been that the Intangible and Goodwill Assets were higher than the market cap of this stock. For the financial year of 2014 they are backing down again to 86% of market cap. The other thing is that the dividend has not changed since 2012 and most analysts seem to think that this will not change anytime soon.

This stock had a good record of increasing dividends when it was issued as an income trust. The change from Income Trust to a corporation had this company decrease their dividends by 35% in 2011. It may not have been enough as they have struggled to have earnings greater than dividends.

The dividends have only increased once since 2010 and that was in 2012. The dividend yield is quite good at 3.06%. Some analysts think that there might be a modest increase in the dividends in this year or the next but most do not.

The Dividend Payout Ratios for 2014 for EPS is 98% and for CFPS is 37%. The 5 year median DPR for EPS is 107% and for CFPS is 46%. The DPR for EPS is expected to be much better in 2015, but analysts do not think that CFPS will cover the current dividends. This company is also putting out an Adjusted EPS. With the Adjusted EPS the 2014 DPR is 55% and the 5 year median DPR is 78%.

I have done well with this stock. My total return is 27.06% per year with 20.30% per year from capital gains and 6.76% per year from dividends. The total return over the past 5 and 10 years to date is 20.97% and 11.46% per year with 16.11% and 6.08% per year from capital gains and 4.87% and 5.38% per year from dividends.

The Outstanding Shares have increased by 10.2% and 8.6% per year over the past 5 and 10 years. This means for me per share values are the most important ones. Revenue is up moderately. There is no growth in EPS except for the Adjusted EPS the company also puts out. Cash Flow growth is moderate to good.

The Revenue is up by 18.8% and 15.3% per year over the past 5 and 10 years. Revenue per Share is up by 7.8% and 6.1% per year over the past 5 and 10 years. Cash Flow is up by 20% and 15.8% per year over the past 5 and 10 years. CFPS is up by 9.1% and 6.6% per year over the past 5 and 10 years.

EPS is down by 7.9% and 0.9% per year over the past 5 and 10 years. 2013 was not a good year for this company as far as EPS goes. However, EPS was up by 102% in 2015 and is expected to climb in 2015, 2016 and 2017. The Adjusted EPS has only been out for a few years, but the 4 year growth is at 12.1% per year.

Over the past 4 years the Return on Equity was below 10%. Before 2012 it was always above 10%. The ROE for 2014 was 7.6% and its 5 year median is at 9.8%. The ROE on comprehensive income for 2014 was 12.3% and its 5 year median is 12.3%. This suggests that EPS might be better than they appear to be. This is probably why they have an adjusted EPS value.

The Liquidity Ratio has consistently been rather low and they rely on cash flow to cover current liabilities. The 2014 Liquidity Ratio is 0.82. When this ratio is below 1.00, it means that current assets will not cover the current liabilities. However, if you add in cash flow after dividends the ratio rises to 1.13. Not great, but at least current liabilities are covered.

The Debt Ratio has consistently been good and the 2014 ratio is 1.85. Leverage and Debt/Equity Ratios are rather mediocre at 2.18 and 1.18, respectively.

This is the first of two parts. The second part will be posted on Monday, April 27, 2015 and will be available here. The first part talks about the stock and the second part talks about the stock price.

DH Corp 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 DH Corp.

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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