Pason Systems Inc.

On my other blog I am today writing about possible cheap dividend stocks for November 2015 learn more...

Sound bite for Twitter and StockTwits is: Industrial Dividend Growth Stock. The grouping of Industrial covers a lot of territory. This company services the oil and gas industry so it is not a surprise it is having some problems. So far it has been a good dividend growth stock. See my spreadsheet on Pason Systems Inc.

I do not own this stock of Pason Systems Inc. (TSX-PSI, OTC-PSYTF). I read a report on this stock in the Buy and Sell Advisor in September 2013. I had not heard of this dividend growth company before so I decided to investigate it.

The dividend on this stock is moderate and the dividend increases are good. The current dividend yield is 3.53%. This is not quite as high as it has gotten before, but it is close. The 5 year dividend yield is 2.50% and the historical median is 2.17. (Dividends have been paid since 2003.) The dividend growth is good at 20.5% and 26.1% per year over the past 5 and 10 years.

Generally, the Dividend Payout Ratio has been fine although earnings and cash flow can be a bit volatile. The DPR for 2014 for EPS is 45% and for CFPS is 33.7%. The 5 year median DPR for EPS is 68% and for CFPS is 23%. This hides some high DPRs. For example, the DPR for EPS for 2013 was 217% and it is expected to be 850% for 2015.

The outstanding shares have increased by 0.5% and 1% per year over the past 5 and 10 years. The Shares have increased due to Stock Options and have decreased due to Buy Backs. The growth in Revenue is good as is the growth in EPS. However, the reason that the 5 year growth rates are good is that 5 years ago was a tough year for this company. The 5 year running averages over the past 5 years for EPS and Cash Flow are low for EPS and negative for Cash Flow.

Revenue is up by 27.9% and 15.1% per year over the past 5 and 10 years. The Revenue per share is up by 27.3% and 14% per year over the past 5 and 10 years. Analysts do not expect 2015 to be a good year for this company. The company is in the business of servicing the oil and gas industry after all. Analysts expect Revenues to drop by some 42%. If you compare the 12 month period to the end of 2015 and the 12 month period to the end of the second quarter, revenue is down by 14%.

Earnings are up by 11.8% per year over the past 10 years or by 206% in total. I do not have growth for the past 5 years as EPS 5 years ago were negative. However, the total growth over the past 5 years is 2014%. If you look at 5 year running averages, EPS has grown by 5% over the past 5 years.

Analysts expect EPS for 2015 to be down by 94% to just $0.08. If you compare the 12 month period to the end of 2015 and the 12 month period to the end of the second quarter, revenue is down by 30.6%. They expect 2016 to be better, but EPS to be just $0.48 which is still some 64% below 2014 EPS of $1.34.

Cash Flow has grown at 40.2% and 15.2% per year over the past 5 and 10 years. CFPS has grown by 39.6% and 14% per year over the past 5 and 10 years. If you look at 5 year running averages, CFPS is down by 6.6% per year over the past 5 years. Analysts expect Cash Flow to decline by 59% in 2015. If you compare the 12 month period to the end of 2015 and the 12 month period to the end of the second quarter, revenue is down by 8.2%.

The debt ratios have always been good for this company. However, the debt ratios are good for 2014 and extremely good for the second quarter of 2015. The Liquidity Ratio for 2014 is 4.08 and for the second quarter of 2015 it is 9.57. The Debt Ratio for 2015 is 6.59 and for the second quarter of 2015 it is 11.56. For these ratios I like them to be at 1.50 or higher.

The Leverage and Debt/Equity Ratios are 1.18 and 0.18 for 2014 and for the second quarter of 2015 are 1.09 and 0.09.

The Return on Equity has been below 10% once in the past 5 years and twice in the past 10 years. The ROE for 2014 is 23.2% and the 5 year median is 11.4%. The ROE on comprehensive income is 28.3% for 2014 and it has a 10 years median of 10.9%. So the ROE on comprehensive income basically confirms the ROE on Net Income and suggests earnings are of a good quality.

This is the first of two parts. The second part will be posted on Thursday, November 5, 2015 and will be available here. The first part talks about the stock and the second part talks about the stock price.

Pason is the leading global provider of specialized data management systems for drilling rigs. Their solutions, which include data acquisition, well-site reporting, remote communications, and web-based information management, enable collaboration between the rig and the office. Its web site is here Pason Systems Inc.

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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