I do not own this stock of Dorel Industries Inc (TSX-DII.B, OTC-DIIBF). This was a stock recommended by Investment Reporter as a conservative investment. I sold the stock in 2006 because I had it for 7 years from 1999 and it was going nowhere. I bought this stock before I stopped working and at that time, I did not mind buying stocks with no dividends. They did start to pay dividends in 2007.
When I was updating my spreadsheet, I noticed that they cut their dividend by 50% in 2019. This is never a good sign. They have taken an impairment loss re goodwill, intangible assets, property, and equipment for 2018 and this is the reason for the big earnings loss. When I looked at this stock in 2018 the Goodwill-Intangible/Market Cap Ratio was 1.11. So, this can not come as a surprise.
With the long term debt, the Long Term Debt/Market Cap Ratio for 2018 seems fine at first at 0.55. However, this was because they just moved most of the long term debt into current portion of long term debt. If you add long term debt and current portion of the long term debt, the ratio is now 1.04. This ratio being high has a lot to do with the drop in the stock price.
The dividend increases have varied a lot over time. However, the dividends were flat between 2014 and 2018, inclusive and then they were cut by 50%. Dividends are paid in US$.
Dividend yields have also varied a lot with a high of 9.7% and a low of 1.3%. The current dividend yield is 8.26% and this is because the stock price has gone down a lot. The 5, 10 and historical dividend yields are 4.59%, 3.36% and 3.00%.
The Dividend Payout Ratios were too high for EPS, but fine for CFPS. In 2017 the DPR for EPS was 143% with 5 year coverage at 250%. I cannot calculate the DPR for EPS for 2018 because of the high earnings loss for 2018. The DPR for EPS is expected to be 75% in 2019. The DPR for CFPS for 2018 is 31% with 5 year coverage at 25%.
Debt Ratios are a vulnerability. The Long Term Debt/Market Cap Ratio is was at 1.04 for 2018. I have included the current portion of the long term debt into this because they have not decreased their long term debt, but merely made it current. The current ratio is 1.92. The increase in the first quarter of 2019 has more to do with declining stock price that debt rise. This is a vulnerability.
Because they made the long term debt a current debt, their Liquidity Ratio fell to 1.06. This is a very low value. If you add in cash flow after dividends, it is still low at 1.13. This is a vulnerability. The Debt Ratio is fine at 1.50, however, it has been falling steadily since 2012 when it was 2.46. This is also a vulnerability because if it keeps on this track this is not good. The Debt Ratio for the first 3 months of 2019 is 1.40.
The Leverage and Debt/Equity Ratios are a little high at 2.98 and 1.98 but not particularly unusual for this sort of company. However, they have been climbing also. In 2012 they were 1.69 and 0.69 respectively and have been climbing ever since.
The Total Return per year is shown below for years of 5 to 26 to the end of 2018 in CDN$. 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 chart below.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2013 | 5 | 5.10% | -9.86% | -15.30% | 5.44% |
| 2008 | 10 | 10.33% | 0.54% | -4.52% | 5.05% |
| 2003 | 15 | 11.51% | -1.15% | -4.55% | 3.41% |
| 1998 | 20 | 1.08% | -1.73% | 2.81% | |
| 1993 | 25 | 7.63% | 4.68% | 2.96% | |
| 1992 | 26 | 7.40% | 4.58% | 2.82% |
The Total Return per year is shown below for years of 5 to 26 to the end of 2018 in US$. 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 chart below.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2013 | 5 | 0.00% | -14.49% | -19.45% | 4.96% |
| 2008 | 10 | 9.15% | -0.27% | -5.69% | 5.43% |
| 2003 | 15 | 8.28% | -1.00% | -4.80% | 3.80% |
| 1998 | 20 | 2.14% | -1.13% | 3.27% | |
| 1993 | 25 | 7.92% | 4.57% | 3.35% | |
| 1992 | 26 | 8.88% | 5.52% | 3.36% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are -0.82, -1.28 and -1.75. The corresponding 10 year ratios are 7.00, 8.77 and 10.41. The corresponding historical ratios are 8.91, 11.32 and 14.52. They are low because of earnings losses. The current P/E Ratio is 9.08 based on a stock price of $9.48 and 2019 EPS estimate of $0.80. This stock price testing suggests that the stock price is relatively reasonable and below the median. This is in CDN$.
I get a Graham Price of $22.83. The 10 year low, median, and high median Price/Graham Price Ratios are 0.69, 0.87 and 0.99. The current P/GP Ratio is 0.42 based on a stock price of $9.48. This stock price testing suggests that the stock price is relatively cheap. This is in CDN$.
I get a 10 year median Price/Book Value per Share Ratio of 0.80. The current P/GP Ratio is 0.43 based on Book Value of $950M, Book Value per Share of $16.94 and a stock price of $7.25. The current ratio is 47% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap. This is in US$.
I get an historical median dividend yield of 3.00%. The current dividend yield is 8.26% based on dividends of $0.78 and a stock price of $9.48. The current yield is 175% above the historical dividend yield. This stock price testing suggests that the stock price is relatively cheap. This is in CDN$.
The 10 year median Price/Sales (Revenue) Ratio is 0.36. The current P/S Ratio is 0.09 based on 2019 Revenue estimate of $2,656M, Revenue per share of $81.88 and a stock price of $7.25. The current ratio is 75% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap. This is in US$.
Results of stock price testing is mostly that the stock price is relatively cheap. Both the P/S Ratio and the P/B Ratio tests are very good tests. The P/E Ratio test is not good as there are lots of earnings losses years.
Is it a good company at a reasonable price? You have to wonder if the company will ever be making money for the shareholders. I held this company from 1999 to 2006 and has a loss of 1.21% with a capital loss of 1.22% and dividends of 0.01%. Dividends have often been very low in the past. It is cheap.
When I look at analysts’ recommendations, I find only a Hold (3) recommendation. The 12 month stock price is $13.53 CDN$ ($10.35 US$). This implies a total return of 50.68% with 42.41% from capital gains and 8.26% from dividends.
See what analysts are saying on Stock Chase. There are few entries and the last two are negative. Christopher Liew on Motley Fool is positive about this stock. A writer on Simply Wall Street says the interest payments for debt is covered 3.07x by earnings and this is fine. Robert Smith on Valliant News says that the Bok to Market value is 2.35. This could indicate that the stock is underpriced. Donna Dao on Mak Daily talks about the increase in shorting of the stock.
Dorel Industries Inc is a Canadian company that sells juvenile products, bicycles, and furniture. The company operates across North America, East and South Asia, Europe, Oceania, Israel, and South America. Its web site is here Dorel Industries Inc.
The last stock I wrote about was about was Obsidian Energy Ltd TSX-OBE, NYSE-OBE) ... learn more. The next stock I will write about will be Pulse Seismic Inc. (TSX-PSD, OTC-PLSDF) ... learn more on Monday, July 29, 2019 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.
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