MacDonald, Dettwiler & Associates

On my other blog I am today writing the about recommended Income Trust stocks continue...

Sound bite for Twitter and StockTwits is: Still an interesting tech stock. I will continue to follow this stock as I am hoping it will turn into the sort of company I like to invest in. See my spreadsheet on MacDonald, Dettwiler & Associates.

I do not own this stock of MacDonald, Dettwiler & Associates (TSX-MDA, OTC-MDDWF). I read about this stock in MPL Communication's Advice Hotline dated October 10, 2012. CanTech likes it also. It is a Tech stock with dividends.

This company only started to pay dividends in 2011. They increased the dividend by 30% in 2012, left it flat for two years then increased it by 13.8% in 2015. It is too early to tell if this will be a good dividend growth company or not. The current dividend is low and the dividend increases overall is moderate. The current dividend yield is 2% based on a stock price of $73.86. The dividends have increased by 10.3% per year over the past 4 years.

The 5 year median Dividend Payout Ratios are good. The 5 year DPR for EPS is 45.7% and for CFPS is 18.26%. The DPRs for EPS was quite high in 2014 at 99.2% because 2014 was not a good year. However, the DPR for EPS is expected to be around 31.2% in 2015.

Shareholders have done fine with total return at 10.03% and 8.04% per year over the past 5 and 10 years. The portion of this total return attributable to dividends is at 2.16% and 1.03% per year. The portion of this total return attributable to capital gain is at 7.87% and 7.01% per year. Before this year the total return was better because the stock price has fallen some 22% in 2015.

The outstanding shares have decreased by 2.3% and 0.8% per year over the past 5 and 10 years. Shares have grown due to ESPP and Share Issues. The shares have decreased due to Buy Backs. For Stock Option equivalents, the company buys shares on the open market. Growth over the past 5 and 10 years has been good for Revenue, non-existent for Earnings and good for cash flow.

The 5 and 10 years growth in Revenue is 16% and 10.8% per year. The 5 and 10 year growth in Revenue per share is 18.7% and 11.7% per year. Analysts expect growth for 2015 to be modest at around 3.8%. If you look at the 12 month period to the end of the second quarter to the 12 month period to the end of 2014, Revenue has grown by 1.2%.

EPS has declined by 13.3% and 0.2% per year over the past 5 and 10 years. However, 2014 was not a good year. If you look at EPS using 5 year running averages, growth is 4.6% and 10.8% per year over the past 5 and 10 years. Analysts expect better earnings for 2015 with growth at 262%. If you look at the 12 month period to the end of the second quarter to the 12 month period to the end of 2014, EPS has grown by 42.9%.

Cash Flow has grown at 7.9% and 10.6% per year over the past 5 and 10 years. CFPS has grown at 10.5% and 11.5% per year over the past 5 and 10 years. Analysts seem to expect good growth in cash flow for 2015, but if you look at the 12 month period to the end of the second quarter to the 12 month period to the end of 2014, cash flow has grown modestly.

Return on Equity has been below 10% twice over the past 5 years and three times over the past 10 years. The ROE for 2014 was low at 5.9%. The ROE on comprehensive income was even lower at just 0.3%. However, the 5 year median ROE for Net Income is 13.2%, while the 5 year median ROE for comprehensive income is 26.9%. The year 2014 was not a good year for this company.

Debt ratios have not been very good, especially lately. The Liquidity Ratio for 2014 was 0.79 and even adding in cash flow after dividends, the ratio is only 0.82. They improved with the second quarterly statements to 0.97 and with cash flow after dividends to 1.13. When this ratio is below 1.00, it means that the current assets cannot cover the current liabilities. This can leave a company vulnerable in bad times.

Even the Debt Ratio could be better. The Debt Ratio for 2014 is 1.37. For the second quarter it has improved to 1.43. I would prefer this ratio and the Liquidity ratio to be 1.50 or more. This is to provide a measure of safety. The Leverage and Debt/Equity Ratios are a little high at 3.71 and 2.71 for 2014.

This is the first of two parts. The second part will be posted on Tuesday, September 29, 2015 and will be available here. The first part talks about the stock and the second part talks about the stock price.

MacDonald, Dettwiler & Associates Ltd. is a global communications and information company providing operational solutions to commercial and government organizations worldwide. Its web site is here MacDonald, Dettwiler & Associates.

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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