Hammond Power Solutions Inc.

On my other blog I am today writing about the next possible bear market and what I do continue...

Sound bite for Twitter and StockTwits is: Small cap with dividend, strong balance sheet. See my spreadsheet at hps.htm.

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.

Dividends were started in 2009 with one dividend per year. In 2012 they paid two dividends per year and 2013 they started to pay 4 dividends per year. They increased the dividend every year expect for this year, 2015. Dividends have increased at the rate of 19.1% per year over the past 5 years.

There was probably no increase in dividends in 2015 because the Dividend Payout Ratio for EPS was 109% in 2014. This ratio is expected to go to 51% in 2015. The Dividend Payout Ratio for CFPS was more reasonable in 2015 at 26%.

The dividend yield has gone from just over 1% in 2009 to 3.48% today. This has happen because of falling stock price and rising dividends. The 5 year median dividend yield is just 1.87%. The last dividend increase occurred at the beginning of 2014 and the increase was for 20%.

The 5 and 10 year total return to date is loss of 5.10% and a gain of 13.84% per year. The capital loss over the past 5 years was 7.67% per year with a dividend return 2.57% per year. The 10 year capital gain was 11.12% per year with dividends return of 2.72% per year.

Outstanding shares have not changed over the past 5 and 10 years. The shares have increased due to stock options and decreased due to Buy Backs. Revenue has had moderate to good growth. EPS has no growth to moderate growth and CFPS has had no growth to moderate growth.

Revenue is up by 4.86% and 11.78% per year over the past 5 and 10 years. Revenue per Share is up by 4.72% and 11.39% per year over the past 5 and 10 years. Analysts expect a modest growth in revenue for 2015. If you look at the 12 month period to the end of December 2014 compared to the 12 month period to the end of the first quarter, Revenue is up by 1.3%.

EPS is down by 23% per year over the past 5 years. EPS is up by 5.4% per year over the past 10 years. Analysts expect a growth in EPS at 114% in 2015. If you look at the 12 month period to the end of December 2014 compared to the 12 month period to the end of the first quarter, EPS is up by 13.6%.

CFPS is up down by 5.8% per year over the past 5 and 10 years. CFPS is up by 8.95 per year over the past 10 years. There are few analysts following this stock and no estimates for cash flows are given.

The Return on Equity is just 2.2% for 2014. The 5 year median is 6.6%. The ROE on comprehensive Income is better at 6.7% with a 5 year median at 8.6%. This suggests that the company might be doing better that it appears to be.

As with other good small cap companies, this company has very good debt ratios. The Liquidity Ratio is 1.72 and it has a 5 year median of 1.75. The Debt Ratio is 2.64 with a 5 year median of 2.74. The Leverage and Debt/Equity Ratios are 1.61 and 0.61 with 5 year medians of 1.58 and 0.58. It has a strong balance sheet. This is a very good thing as it is companies with strong balance sheets that survive the bad times.

This is the first of two parts. The second part will be posted on Tuesday, June 15, 2015 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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