I own this stock of Hammond Power Solutions Inc (TSX-HPS.A, 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.
When I was updating my spreadsheet, I noticed that I have not done well on this stock at all. It hit a high in 2007 and has never recovered to that high. However, it has been better in 2019 and in 2019 and 2020 it raised its dividends after the dividends were flat for 5 years. Usually dividends are increased when management feels good about the future.
The dividend yields are usually moderate with dividend growth either good or flat. The current dividend yield is in the good category (5% to 6% ranges) at 5.65%. However, the dividend yield for this stock has mostly been in the moderate range (2% to 4% ranges). The 5, 10 and historical dividend yields are 3.72%, 3.02% and 3.00%. The dividend growth between 2009 and 2014 was good (15% and over). Dividends were then flat between 2014 and 2018. In 2019 and 2020 there was dividend growth again in the good range. The last dividends increase for 2020 was for 21.4%.
The Dividend Payout Ratios (DPR) are good. The DPR for 2019 is 28% with 5 year coverage at 113%. Next year, the DPR is expected to be 35% with 5 year coverage at 87%. The DPR for CFPS for 2019 was 11% with 5 year coverage at 14%. The DPR for Free Cash Flow for 34% with 5 year coverage at 34%.
Debt Ratios are good. The Long Term Debt/Market Cap Ratio for 2019 is 0.10. They took out debt in 2019 and have not had any long term debt for some time. With the recent fall in the stock price, the ratio is still low at 0.12. The Liquidity Ratio is 1.52 for 2019. The Debt Ratio is 2.04 for 2019. The Leverage and Debt/Equity Ratios for 2019 are 1.96 and 0.96.
The Total Return per year is shown below for years of 5 to 18 to the end of 2019. 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. |
|---|---|---|---|---|---|
| 2014 | 5 | 3.13% | 4.22% | 0.91% | 3.31% |
| 2009 | 10 | 10.84% | 0.83% | -1.79% | 2.62% |
| 2004 | 15 | 17.90% | 13.83% | 4.07% | |
| 2001 | 18 | 16.15% | 13.01% | 3.14% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 9.66, 11.91 and 14.15. The corresponding 10 year ratios are 11.63, 14.07 and 19.13. The corresponding historical ratios are 6.51, 8.91 and 10.24. The current P/E Ratio is 6.21 based on last 12 month EPS of $0.97 and a stock price $6.02. This stock price testing suggests that the stock price is relatively cheap.
I get a Graham Price of $14.28. The 10 year low, median, and high median Price/Graham Price Ratios are 0.60, 0.79 and 0.97. The current P/GP Ratio is 0.42 based on a stock price of $6.02. 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 0.83. The current P/B Ratio is 0.64 based on a Book Value of $110M, Book Value per Share of $9.35 and a stock price of $6.02. The current ratio is 23% below the 10 year ratio. This stock price testing suggests that the stock price is relatively cheap.
I get an historical median dividend yield of 3.00%. The current dividend yield is $5.65% based on dividends of $0.34. The current dividend yield is 88% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median dividend yield of 3.02%. The current dividend yield is $5.65% based on dividends of $0.34. The current dividend yield is 87% above the 10 year median dividend yield. This stock price testing suggests that the stock price is relatively cheap.
The 10 year median Price/Sales (Revenue) Ratio is 0.33. The current P/S Ratio is 0.20 based on a stock price of $6.02, last 12 month Revenue of $363M and Revenue per Share of $30.87. The current ratio is 41% below the 10 year ratio. This stock price testing suggests that the stock price is relatively cheap.
Results of stock price testing is that the stock price is relatively cheap. The dividend yield tests are showing the stock price as relatively cheap and this is confirmed by the P/S Ratio test. In fact, all the stock price tests are showing the same thing and there are no problems with any of the tests.
Is it a good company at a reasonable price? I still like this company and when I have more money in my TFSA account, I will buy more of this stock. The stock price is reasonable and in fact it is cheap.
When I look at analysts’ recommendations, I find no analysts recommendations. There is one analyst target price at $7.30. This implies a total return of 26.91% with 21.26% from capital gains and 5.65% from dividends.
See what analysts are saying on Stock Chase. There are few entries, but the last in May 2019 give it a buy. A writer on Simply Wall Street talks about a 30% return in 2019. See the executive summary on Simply Wall Street. A writer on Simply Wall Street says FCF does not cover dividend, but it depends on how you calculate FCF. The company talks about its first quarterly results on Global Newswire.
Hammond Power Solutions Inc is a Canada-based manufacturer of dry-type magnetics. It is engaged in the design and manufacture of custom electrical engineered magnetics. The firm is also a manufacturer of standard electrical dry-type, cast resin, and liquid-filled transformers. The company operates in various geographical markets including Canada, the United States, Mexico, and India in which it derives majority revenue in the United States and Mexico. Its web site is here Hammond Power Solutions Inc.
The last stock I wrote about was about Kirkland Lake Gold (TSX-KL, NYSE-KL) ... learn more. The next stock I will write about will be Mullen Group Ltd (TSX-MTL, OTC-MLLGF) ... learn more on Friday, May 15, 2020 around 5 pm. Tomorrow on my other blog I will write about Canadian REITs.... learn more on Thursday, May 15, 2020 around 5 pm.
Also, on my book blog I have put a review of the book Crashed by Adam Tooze learn more...
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