Stella-Jones Inc.

Sound bite for Twitter and StockTwits is: Dividend Growth Industrial. There is a lot to like in this stock. The dividend growth is good. It has a very strong balance sheet. The company has been growing strongly over the past 10 years. See my spreadsheet on Stella-Jones Inc.

I do not own this stock of Stella-Jones Inc. (TSX-SJ, OTC- STLJF). I started a spreadsheet on this stock in mid-2009 because of a favorable report I read on this stock. It was considered to be a dividend growth stock and I am always on the lookout for dividend growth stocks.

Dividend yield is low and the dividend growth is high. When I buy dividend growth stock, I like to get ones with different combinations of dividend yield and dividend growth. I do not buy stocks with a dividend yield less than 1%, but there are certainly times when the dividend yield on this stock is above 1%. The current dividend yield is 0.61%. The dividend growth is at 25.5% and 30.2% per year over the past 5 and 10 years.

The company can afford the dividends. The Dividend Payout Ratio for EPS was 18.7% in 2014 and its 5 year median is 14.9%. The DPR for CFPS was 10.6% in 2014 and its 5 year median is 8.81%.

If you had held this stock for 5, 10 or 15 years and paid a median price for the stock, your dividends would have covered 14.9%, 57.9% and 240% of the original cost of your stock. If you had held this stock for 5, 10 or 15 years and you paid a median price for the stock; you would be earning 4.4%, 12.8% or 49.7% on the original stock cost. The above are good reasons to buy companies that quickly grow dividends.

Shareholders have done well on this stock. The 5 and 10 year total return to date is at 45.61% and 32.07% per year. The portion of this total return attributable to dividends is at 1.19% and 1.02% per year. The portion of this total return attributable to capital gain is at 44.42% and 31.05% per year. The stock price was fairly flat until 10 years ago and then it took off when a minor dip in 2009.

Outstanding shares have grown at 6.3% and 5.4% per year over the past 5 and 10 years. Shares have grown because of Share Issues, Stock Options and ESPP. If I were a shareholder per share growth is what I would be interested in. Revenue, earnings and cash flow has all shown good grown over the past 5 and 10 years.

Revenue has grown at 24.9% and 24.5% per year over the past 5 and 10 years. Revenue per Share has grown at 17.5% and 19.1% per year over the past 5 and 10 years. Analysts expect revenue to grow at 24.9% in 2015 and 14.4% in 2016. 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 has grown at 19.4%.

EPS has grown at 20.4% and 25% per year over the past 5 and 10 years. Analysts expect EPS to grow at 34% in 2015 and 22% in 2016. If you compare the 12 month period to the end of 2014 and the 12 month period to the end of the third quarter, EPS has grown at 27%.

Cash Flow has grown at 34.7% and 34.5% per year over the past 5 and 10 years. CFPS has grown at 26.7% and 24.7% per year over the past 5 and 10 years. Analysts expect CFPS to grow at 27% in 2015. However, if you compare the 12 month period to the end of 2014 and the 12 month period to the end of the third quarter, Cash Flow has declined by 36%. Cash Flow does not currently seem to be going in the right direction.

Return on Equity has not been below 10% in the last 10 years. The ROE for 2014 is 15% and the 5 year median is 15.6%. The ROE on comprehensive income for 2014 is 19.8% and its 5 year median is 17.7%. This would suggest that the earnings are of good quality.

Another thing I like about this stock is the debt ratios which are good. The Liquidity Ratio for 2014 was 8.46 and it has a 5 year median of 5.94. The Debt Ratio for 2014 was 2.16 and its 5 year median is 2.16. Leverage and Debt/Equity Ratios are 1.86 and 0.86, respectively. The 5 year median values are also 1.86 and 0.86.

This is the first of two parts. The second part will be posted on Friday, December 18, 2015 and will be available here. The first part talks about the stock and the second part talks about the stock price.

Stella-Jones Inc. is a leading North American producer and marketer of industrial pressure treated wood products, specializing in the production of railway ties and timbers as well as wood poles supplied to electrical utilities and telecommunications companies. The Company also provides treated consumer lumber products and customized services to lumber retailers and wholesalers for outdoor applications. Other products include marine and foundation pilings, construction timbers, highway guardrail posts and treated wood for bridges. It has sales in Canada and US. Its web site is here Stella-Jones 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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