Tuesday, October 9, 2018

Linamar Corporation

Sound bite for Twitter and StockTwits is: Dividend Growth Consumer. If you like this stock, now might be a good time to buy as the stock has fallen a lot this year. If you are building a portfolio for future income you want stocks that have good capital gains, which this stock has. See my spreadsheet on Linamar Corporation.

I do not own this stock of Linamar Corporation (TSX-LNR, OTC-LIMAF). I looked at this stock back in 2000 and it was not a stock I thought would fit my current investment philosophy. The dividend yield is generally lower than 1%. In 2008 I read an article that recommended this company as a dividend stock with good value. This stock used to be on the Investment reporter portfolio stock list as an average risk stock.

When I was updating my spreadsheet, I noticed that his company has been doing very well. There is a lot of green on my spreadsheet.

This is a dividend growth stock, but both the dividends and the dividend growth are generally low. The current dividend yield is 0.83%. The 5, 10 and historical dividend median yields are 0.70%, 1.13% and 1.22%. the dividend growth is generally below 8% as you can see in the chart below. Usually when there are low dividend yields, there is high dividend growth. This is an exception to that rule.

Dividend yields after holding this stock for 5 to 25 years is at 1.44% for 5 years, 4.64% for 10 years, 4.43% for 15 years, 1.82% for 20 years and 12.72% for 25 years. Note here again that the yield was exceptionally low 20 years ago when the stock was at the top of the market. 20 years ago, it would not have been a good time to buy this stock.

There is no question that they can afford their dividends. The Dividend Payout Ratio for EPS for 2017 is 5.8% with 5 year coverage at 6.4%. The DPR for CFPS for 2017 is 3.5% with year coverage at 3.7%.

All debt ratios are fine. Although long term debt has been increasing lately with increases of 129% last year and 98% so far this year, the Long Term Debt/Market Cap Ratio is still good currently at 0.67. The Liquidity Ratio for 2017 is good at 1.91 with 5 year median of 1.72. The Debt Ratio is also quite good for 2017 at 2.14 with 5 year median at 2.14. The Leverage and Debt/Equity Ratios are also good with ratios of 1.88 and 0.88 for 2017 with 5 year median at 1.98 and 0.98.

The Total Return per year is shown below for years of 5 to 23. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See charts below.

The investors that had this stock for 20 years would have paid too much, as the stock was at a high 20 years ago and would not be an appropriate time to buy. This is one of things I talk about. If you pay too much for a stock it can badly affect your long term results.

Years Div. Gth Tot Ret Cap Gain Div.
5 8.45% 26.95% 25.84% 1.11%
10 7.18% 14.60% 13.73% 0.87%
15 7.60% 16.32% 15.10% 1.22%
20 6.61% 5.52% 4.99% 0.54%
23 7.73% 12.22% 11.12% 1.10%

The 5 year low, median, and high median Price/Earnings per Share Ratios are 6.64, 9.50 and 12.55. The corresponding 10 year ratios are 6.55, 9.68 and 12.97. The corresponding historical ratios are 8.53, 11.61 and 15.18. The current P/E Ratio is 6.33 based on current stock price of $58.07 and a 2018 EPS estimate of $9.17. This stock price testing suggests that the stock price is relatively cheap.

I get a Graham Price of $105.27. The 10 year low, median, and high median Price/Graham Price Ratios are 0.57, 0.77 and 1.01. The current P/GP Ratio is 0.55 based on a stock price of $58.07. This stock price testing suggests that the stock price is relatively cheap.

I get a 10 year median Price/Book Value per Share Ratio of 1.41. The current P/B Ratio is 1.08 based on Book Value of $3,510M, Book Value per Share of $53.71 and a stock price of $58.07. The current ratio is some 23% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.

I get an historical median dividend yield of 1.22%. The current dividend yield is 0.83% based on dividends of $0.48 and a stock price of $58.07. The current yield is some 32% below the historical median yield. This stock price testing suggests that the stock price is relatively expensive.

The 10 year median Price/Sales (Revenue) Ratio is 0.57. The current P/S Ratio is 0.49 based on a stock price of $58.07, 2018 Revenue estimate of $7,671M and Revenue per Share of $90.58. The current ratio is some 13% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.

The stock price on this stock has fallen by some 21% this year. This is why lots of my testing is showing that the stock price is relatively cheap. The one test showing that the stock is expensive is the dividend yield test. However, the dividends have gone both up and down on this stock. Plus, they do not raise dividend each year, but increases are very good when they do. The last dividend increase was in 2017 when dividends went up 20%. On the other hand, analysts do not see any further increases in dividends over the next couple of years.

When I look at analysts’ recommendations I find Buy (7) and Hold (2) recommendations. The consensus would be a Buy. The 12 month stock price consensus is $81.21. This implies a total return of 40.68% with 39.855 from capital gains and 0.83% from dividends.

John Irwin on Automotive News Canada says Doug Ford plans to end government funding for automakers and suppliers. Kristine Owram on Financial Post talks about auto stock going higher on Free Trade Agreement with US. John Irwin on Automotive News Canada talks about the problem with the tariffs on steel and aluminum remaining after trade deal is signed. Ambrose O'Callaghan on Motley Fool views this stock positively after the free trade deal. See what analysts are saying about this stock on Stock Chase. The analysts do like this company.

Linamar Corp is a manufacturing company of engineered products powering vehicles, motion, work, and lives. The Company is made up of two operating segments - the Powertrain / Driveline segment and the Industrial segment. Its web site is here Linamar Corporation.

The last stock I wrote about was about was K-Bro Linen Inc. (TSX-KBL, OTC-KBRLF) ... learn more. The next stock I will write about will be Teck Resources Ltd. (TSX-TCK.B, NYSE-TCK) ... learn more on Wednesday, October 10, 2018 around 5 pm. Today on my other blog I will write about Money Show 2018 – Nick Bontis.... learn more on Tuesday, October 9, 2018 around5 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.

No comments:

Post a Comment