Monday, December 7, 2015

Finning International Inc.

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

Sound bite for Twitter and StockTwits is: Dividend Growth Industrial. The company is has a good history of dividend payments. Although they are reorganizing the company, I see no hint of any change to their current dividend policy. See my spreadsheet on Finning International Inc.

I do not own this stock of Finning International Inc. (TSX-FTT, OTC-FINGF). When I was in the market to buy an industrial stock in this area in 2007, I look at this stock was well as Toromont Industries (TSX-TIH). At the time I liked Toromont better, so that is what I bought.

The dividends are generally moderate with moderate increases. The 5 year median dividend yield is 2.13% and the historical median dividend yield is 1.64%. The 5 and 10 year dividend growth is at 9.3% and 13.1% per year over the past 5 and 10 years. The most recent dividend increase was modest at just 2.8% in 2015. Currently the dividend yield of 4.04% is at the top end of this stock's range.

I have dividend records on this stock going back to 1988, some 26 years. The dividends have been increasing since 2002 which is a dozen years. Between 1988 and 2002 dividend went down as well as up and were flat for some years. Dividends are paid in Cycle 3 that is in March, June, September and December.

They have done a fine job in adding value to this stock for long term stock holders. If you had bought this stock 5, 10 or 15 years ago, dividends would have covered 13.9%, 27.4% and 99% of the cost of your shares. If you had bought shares 5, 10 or 15 years ago, you would be earning 3.3%, 3.9% or 12.2% on the cost of your original shares. The dividend yield on original cost can vary because the price of the stock has peaks and valleys in different years.

It has been a long slow recover from 2008 for our economy. This company was having problems in covering dividends with earnings and cash flow in 2010 and 2011. However, the Dividend Payout Ratios for 2014 was 37% for EPS and 12.5% for CFPS.

Outstanding shares have not changed much over the past 5 and 10 years. The shares have increased due to Stock Options and Share Issues and have decreased due to Buy Backs. There has not been much growth over the past few years. Analysts do not expect much growth in 2015 and the third quarterly report of 2015 tends to support this.

For example, the Revenue per Share has grown by 7.7% and 5.5% per year over the past 5 and 10 years. However, Revenue per Share growth for 2013 and 2014 was 2% and 2.2% respectively. Analysts expect Revenue to drop by 9.6% in 2015. If you compare the 12 month period to the end of 2014 and the 12 month period to the end of the third quarter, Revenue is down by 6.4%.

The price of this stock is down 28% in 2015 so far. The price is also some 47% lower than the highs of 2014. Shareholders had made good returns to the end of 2014 with 5 and 10 years total returns of 11.5% and 5.8% per year. That has all changed this year with the 5 and 10 year total returns to date at a loss of 5.1% and a gain of 2.4%.

It is interesting that this company has a fair bit of cash on hand. At the end of 2014 cash on hand was equal to 10.4% of the closing share price. At the end of the third quarter of 2015 it is 8.1% of the share price (or $1.47 per share) with a share price being at $18.08. This, in theory, makes the share price even cheap that it is showing on the TSX.

This is the first of two parts. The second part will be posted on Tuesday, December 8, 2015 and will be available here. The first part talks about the stock and the second part talks about the stock price.

This company sells, rents and provides customer support services for Caterpillar equipment and engines. They cover Canada, UK, Argentina, Bolivia, Chile and Uruguay. Its web site is here Finning International 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.

See my website for stocks followed and investment notes. Follow me on Twitter or StockTwits.

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