Linamar Corporation

Sound bite for Twitter and StockTwits is: Dividend growth with low yield. This company often has a yield below 1% and I would not buy any stock with a dividend yield below 1%. This company has an historical high yield of around 5.4%. It quite often has yields between 1 and 2%. This would be a good buying time or good entry point. See my spreadsheet on 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.

The dividend yield is generally quite low, but the increases are generally good. However, this company has decreased dividends as well as increased them in the past. For example the dividends were decreased by 50% in 2009, but reinstated at the 2008 rate in 2010. So there is some volatility.

The dividend yield currently is 0.57% based on a stock price of $69.81. The 5 year median dividend yield is 1.29% and the historical median dividend yield is 1.24%. Do not forget that a median value for dividend yield is where the dividend yield is mostly likely to be.

Dividend growth is at 27.2% and 9.6% per year over the past 5 and 10 years. The last dividend increase was in 2014 and it was for 25%. Dividend increases are generally very good when they happen, but they do not happened every year. Some analysts expect dividends to go up again this year or in the near future.

If you had paid a relative median price 5, 10, 15 or 20 years ago, dividends paid would have covered your original investment by 9.6%, 20.3%, 27.2% and 72.7%. If you had paid a relative median price 5, 10, 15 or 20 years ago, you would be making 2.18%, 2.86%, 2.93% or 6.58% on your original purchase price.

The Dividend Payout Ratios are low. The DPR for 2014 for EPS was 8.2% and for CFPS was 4.5%. The 5 year median DPR for EPS is 13.9% and for CFPS is 3.2%.

The outstanding shares have not changed much over the years. Outstanding shares are up by 0.12% and down by 0.81% per year over the past 5 and 10 years. Shares have been increased because of Stock Options and decreased by Buy Backs. Growth in revenue, earnings and cash flow has all been good.

Revenue is up by 20% and 8.5% per year over the past 5 and 10 years. Revenue per Share is up by 19.9% and 9.4% per year over the past 5 and 10 years. Analysts expect good growth in revenue in 2015 at around 23%. If you compare the 12 month period to the end of 2014 and the 12 month period to the end of the second quarter of 2015, revenue is up by 11.9%.

Total growth in EPS for the last 5 years is at 771%. I cannot get a per year growth as 5 years ago there was an earnings loss. However, if you look at 5 year running averages, EPS is up by 23.7% per year over the past 5 years. EPS grow at 14.1% per year over the past 10 years. Analysts expect good growth this year at around 32.9%. If you compare the 12 month period to the end of 2014 and the 12 month period to the end of the second quarter of 2015, EPS is up by 19.8%.

Cash Flow has grown by 27.9% and 10.8% per year over the past 5 and 10 years. CFPS has grown by 27.8% and 11.7% per year over the past 5 and 10 years. Analysts expect growth in cash flow at around 11% this year. If you compare the 12 month period to the end of 2014 and the 12 month period to the end of the second quarter of 2015, Cash Flow is up by 9.9%.

The Return on Equity was more than 10% over the past 5 years. It was more than 10% in 8 of the past 10 years. The ROE for 2014 was 19.2% and its 5 year median is 13.3%. ROE on comprehensive income is 20.2% in 2014 and its 5 year median is 14.5%.

The company has a strong balance sheet. The Liquidity Ratio is 1.72 for 2014. The Debt Ratio was 2.31 in 2014. The Leverage and Debt/Equity Ratios were 1.76 and 0.76 in 2014. These are all very good ratios.

This is the first of two parts. The second part will be posted on Monday, October 19, 2015 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 Corporation.

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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