Methanex Corp.

Sound bite for Twitter and StockTwits is: Div growth Industrial. This company's earnings depend on the price of Methanol, which can fluctuate in price. This stock can be a bit volatile. However, it has been able to make money for its shareholders and it pays a decent dividend. See my spreadsheet on Methanex Corp.

I do not own this stock of Methanex Corp. (TSX-MX, NASDAQ-MEOH). I started a spreadsheet in November 2010 as I had read some good reports on the stock at that time. It is also got a solid "C" grade in a 2009 Money Sense review of stocks. Money Sense rated the top 100 Canadian Dividend Paying stocks. Money Sense was looking for stocks that provided generous income at reasonable prices.

This stock pays its dividend in US$ as well as reporting in US$. The problem with this is that dividends tend to be volatile for Canadian investors. You are never quite sure what you will receive in dividends when dividends are paid. Currently, our currency has been declining against the US dollar, so in CDN$ terms we are getting very good growth in dividends currently.

The current dividend yield is the same in US dollars or CDN dollars at 3.13%. However, the growth in dividends is different. In US$, the dividend growth is 8.9% and 13% per year over the past 5 and 10 years. In CDN$ dividend growth is 11.2% and 12.6% per year over the past 5 and 10 years. The dividend is moderate as is the dividend growth.

You can starkly see the effect of currency exchange on the increase in overall dividends from between 2014 and 2015. The US$ gained some 19.3% on the CDN$ between the end of 2014 and the present time. In US$ terms the dividend growth between 2014 and 2015 was 13.2%. In CDN$ terms dividend growth between 2014 and 2015 is at 35.1%. Do not forget that currency exchange can go both ways.

The company can currently afford their dividends. The Dividend Payout Ratios for EPS is 20.9% in 2014 and it has a 5 year median of 23%. The DPR for CFPS is at 17.1% for 2014 and it has a 5 year median of 12.4%.

Even though the share price is down 8.8% so far this year, the company has been making money for its shareholders. The 5 and 10 years total return is 12.51% and 10.76% per year over the past 5 and 10 years. The dividend portion of this return is at 2.55% and 2.44% per year, respectively. The capital gains portion of this return is at 9.97% and 8.33% per year, respectively.

Outstanding Shares are flat over the past 5 years and have decreased by 2.6% per year over the past 10 years. Share have increased due to Stock Options and decreased due to Buy Backs. One other thing to mention is that I think that stock options are rather high. I think when stock options increase the outstanding shares by more than 0.50%, they are high. For this company, stock options have increased the outstanding shares by 1.11%, 1.86 and 0.58% from 2012 to 2014 inclusive.

Revenue growth is moderate to good. EPS is showing as good, but not when looked at using the 5 year running averages. Cash Flow growth is good, but it is a lot lower using 5 year running averages. When there is a big difference between growth over a set period and growth using 5 year running averages, it is because of volatility. When 5 year running averages are much lower than growth, it is because growth is not as good as it may seem. When 5 year running averages are much higher than growth, it is because growth is better than it may seem. For this company, all growth is in US$ as this is the reporting currency.

Revenue growth is 21.9% and 6.5% per year over the past 5 and 10 years. Revenue per Share growth is 21.8% and 9.32% per year. Analysts expect Revenue to decline by around 26.7% in 2015. If you compare the 12 month period to the end of 2014 to the 12 month period to the end of the third quarter, Revenues is down by 23.2%. This would seem to confirm the analysts' estimates.

EPS has grown by 240% and 9% per year over the past 5 and 10 years. However, if you look at 5 year running averages, growth is a negative 1.7% and a positive 11.7% per year. The problem is in the past 5 years where EPS has been low and hit a bottom in 2009, 5 years ago. There also was a negative EPS in 2012. Analysts expect EPS to drop some 50% in 2015. If you compare the 12 month period to the end of 2014 to the 12 month period to the end of the third quarter, EPS is down by 49.5%. This would seem to confirm the analysts' estimates.

Cash Flow has grown by 38.5% and 8.3% per year over the past 5 and 10 years. CFPS has grown by 38.5% and 11.16% per year over the past 5 and 10 years. The problem is again the growth over the past 5 years. If you look at 5 year running average growth for CFPS over the past 5 years, it is 10.6%. This is still a good figure but much lower than the growth of CFPS of 5 years at 38.5%. This is because CFPS hit a low 5 years ago in 2009.

Analysts expect cash flow to decline by 45% in 2015. If you compare the 12 month period to the end of 2014 to the 12 month period to the end of the third quarter, Cash Flow is down by 42%. This would seem to suggest that the analysts' estimates are good.

This company has a strong balance sheet. The Liquidity Ratio for 2014 is 2.06 and it has a 5 year ratio of 2.15. The Debt Ratio is 1.75 and its 5 year ratio is 1.86. The Leverage and Debt/Equity Ratios are a little high, but not unduly high at 2.33 and 1.33 in 2014 with 5 year median values of 2.13 and 1.13, respectively.

The ROE has been below 10% twice in the past 5 years and 3 times in the past 10 years. The ROE for 2014 is 22.15 and its 5 year median is 12.6%. The ROE on comprehensive income for 2014 is 22.4% with a 5 year median of 12.6%. The ROE on comprehensive income suggests that the earnings are of good quality.

This is the first of two parts. The second part will be posted on Wednesday, December 30, 2015 and will be available here. The first part talks about the stock and the second part talks about the stock price.

Methanex is the world's largest supplier of methanol to major international markets in North America, Asia Pacific, Europe and Latin America. Methanol is an important ingredient in many of the essential industrial and consumer products. Head Office is in Vancouver, B. C. Canada. Its web site is here Methanex Corp.

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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