Wednesday, May 17, 2017

Hammond Power Solutions Inc.

Sound bite for Twitter and StockTwits is: Small cap dividend stock. According to the stock price tests using P/B Ratio and Dividend yield, this stock is relatively cheap. There is also some insider buying going on. I am comfortable holding my shares for the time being. See my spreadsheet on Hammond Power Solutions Inc.

I own this stock of Hammond Power Solutions Inc. (TSX-HPS, OTC-HMDPF). I bought this stock as my main purchase for the TFSA in 2013 and 2014. I picked Hammond initially in 2013 as my main buy because it has good growth and reasonable dividend. Also, I think that it important to try out newer smaller companies for investment purposes. Companies on the TSX are always changing and it is good to get into new industries and new companies. The problem of this, of course, is you do not always know what industries and companies will be long lasting.

My problem is that this stock has not done well since I bought it. I bought it in 2013 and some more in 2014. My total return today is a loss of 3.67% per year with a capital loss of 6.77% and dividends of 3.10%. I have had this stock for a total of 4.3 years. So far, on a long term basis the company has been having lower highs since it peaked in 2007.

This is a small cap stock which started to pay a dividend in 2009. They stopped raising their dividends 2014. The problem is that their earnings hit a peak in 2008 and have been travelling south ever since. The first quarter of 2017 is the first earnings increase. The Dividend Payout Ratio for 2016 was 150% with a 5 year median of 58%. The coverage by cash flow is better. The Dividend Payout Ratio for 2016 was 14.21% with a 5 year median of 15.51%.

The good things are the debt ratios. This company no longer has any long term debt. The Liquidity Ratio for 2016 is 1.48 with a 5 year median of 1.56. The first quarterly report has a Liquidity Ratio of 1.52. The Debt Ratio is 2.43 with a 5 year median of 2.71. The Leverage and Debt/Equity Ratios are 2016 is 1.70 and 0.70 respectively, with 5 year ratios of 1.58 and 0.58 respectively.

The other thing to mention is the amount of cash they have. The cash per share is $2.15. With the current stock price of $6.50 the cash is some 35% of the stock price.

The 5 year low, median and high median Price/Earnings per Share Ratios are 12.62, 16.79 and 20.96. The 10 year values are 10.31, 12.34 and 15.04. The historical ones are 6.93, 9.10 and 10.73. Since no analyst is giving estimates for this stock, I am using for current EPS for the 12 month period ending in April 2017, which is $0.18. This gives a P/E Ratio of 36.11 on a current stock price of $6.50. This would suggest that the stock price is relatively expensive.

I get a Graham Price of $6.54. The 10 year low, median and high median Price/Graham Price Ratios are 0.68, 0.87 and 1.04. The current P/GP Ratio is 0.92 based on a stock price of $6.50. This stock price testing suggests that the stock price is reasonable but above the median.

Now we have the real tests. The 10 year median Price/Book Value per Share Ratio is 1.13. The current P/B Ratio is 0.61 based on BVPS of $10.58 and a stock price of $6.50. The current P/B Ratio is 45% lower than the 10 year median P/B Ratio. This stock price testing suggests that the stock price is relatively cheap.

The historical median dividend yield is 2.08%. The current dividend yield is 3.69% based on dividends of $0.24 and a stock price of $6.50. The current dividend yield is some 77% higher than the historical median dividend yield. This stock price testing suggests that the stock price is relatively cheap.

The company on Market Wired talks about having a very good first quarter in 2017. There is some technical analysts at Davidson Register. The CCI shows it is neither overbought nor oversold. The ADX gives no clear signal of a strong or weak trend. Veer Mallick on Simply Wall Street discusses the low ROE for this company. He says that if ROE increases due to increasing debt it is cautionary signal. However, the company has just reduced its long term debt to zero. See what analysis are saying about this company on Stock Chase. They think it is a buy but they are all years back.

Hammond Power Solutions Inc. is the largest manufacturer of dry-type transformers in North America. They engineer and manufacture a wide range of custom transformers that are exported globally in electrical equipment and systems. They support solid industries such as oil and gas, mining, steel, waste and water treatment, and wind power-generation. Its web site is here Hammond Power Solutions Inc.

The last stock I wrote about was about was Pizza Pizza Royalty Corp (TSX-PZA, OTC-PZRIF)... learn more. The next stock I will write about will be Canadian Utilities Ltd (TSX-CU, OTC-CDUAF)... learn more on Friday, May 19, 2017 around 5 pm. Tomorrow on my other blog I will write about Beta Ratings... learn more on Thursday, May 18, 2017 around 5 pm.

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. I have three blogs. The first talks only about specific stocks and is called Investment Talk. The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter or StockTwits. I am on Instagram. Or you can just Google #walktoronto spbrunner8166 to see my pictures.


  1. Hello. Would love to hear your thoughts on canadian stocks that pay dividends in US dollars (for a rrsp account). Thank you

  2. I have a couple like Thomson Reuters Corp that pay US$ dividends. Problem is you never know exactly what you will get as they are translated in CDN$. However, since I have not much in US$ dividends in my RRSP account, it is not really a problem.