Sound bite for Hammond Power Solutions Inc for Twitter and StockTwits is: Dividend Growth Industrial. The stock price might be on the expensive side currently. They have raised the dividend in 2019 and 2020 and this is a good sign of the confidence that management has. They can afford their dividends currently. They have good debt ratios. See my spreadsheet on Hammond Power Solutions Inc.
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. 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.
When I was updating my spreadsheet, I noticed I have done better today than last year. At the end of April last year, I had a loss of 0.35% per year. This year I have a gain of 6.75% per year. I had 3.98% per year from capital gain and 2.77% per year from dividends. This stock has good debt ratios.
The dividend yields are moderate with dividend growth low. The dividend yield is currently moderate (2% to 4% ranges) at 3.13%. The 5, 10 and historical dividend yields are also moderate at 3.72%, 3.12% and 3.02%. The dividend growth is low at 7.21% per year over the past 5 years. The last dividend increase was in 2020 and it was for 21.4%. The dividends were flat between 2015 and 2018 inclusive. Over the past 11 years, dividends were raised 7 times.
The Dividend Payout Ratios (DPR) are fine. The DPR for EPS for 2020 is 28% with 5 year coverage at 75.7%. The DPR for EPS reach a height in 2018 of 363% because of an earnings loss and have been declining since. The DPR for CFPS for 2020 is 13% with 5 year coverage at 14%. The DPR for Free Cash Flow for 2020 is 27% with 5 year coverage at 36%.
Debt Ratios are good. The Long Term Debt/Market Cap Ratio is 0.07 and is low and good. The Liquidity Ratio for 2020 is 1.79. The Debt Ratio for 2020 is 2.51. The Leverage and Debt/Equity Ratios for 2020 are 1.66 and 0.66. The debt ratios are good they have mostly always been good.
The Total Return per year is shown below for years of 5 to 19 to the end of 2020. 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. |
|---|---|---|---|---|---|
| 2015 | 5 | 7.21% | 9.59% | 5.86% | 3.72% |
| 2010 | 10 | 10.09% | 0.68% | -1.91% | 2.59% |
| 2005 | 15 | 11.77% | 12.12% | 8.77% | 3.35% |
| 2001 | 19 | 16.09% | 12.86% | 3.23% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 5.76. 7.61 and 9.45. The corresponding 10 year ratios are 10.65, 13.65 and 16.64. The corresponding historical ratios are 6.13, 8.26 and 9.85. The current P/E Ratio is 12.09 based on a stock price of $10.88 and EPS estimate for 2021 of $0.90. The current ratio is between the low and median 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a Graham Price of $14.04. The 10 year low, median, and high median Price/Graham Price Ratios are 0.57, 0.71 and 0.89. The current P/GP Ratio is 0.77 based on a stock price of $10.88. The current ratio is between the median and high 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a 10 year median Price/Book Value per Share Ratio of 0.81. The current P/B Ratio is 1.12 based on a Book Value of $114.8M, Book Value per share of $9.74 and a stock price of $10.88. The current ratio is 37% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive. Also, note that both the 10 year and current P/B Ratios are quite low. Any P/B Ratio below 1.50 is low.
I get a 10 year median Price/Cash Flow per Share Ratio of 5.10. The current P/CF Ratio is 6.80 based on a stock price of $10.88 and Cash Flow for last 12 months of $18.9M, and Cash Flow per Share of $1.60. the current ratio is 33% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
I get an historical median dividend yield of 3.02%. The current dividend yield is 3.13% based on dividends of $0.34 and a stock price of $10.88. The current dividend yield is 3.5% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 10 year median dividend yield of 3.12%. The current dividend yield is 3.13% based on dividends of $0.34 and a stock price of $10.88. The current dividend yield is 0.3% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable and below the median.
The 10 year median Price/Sales (Revenue) Ratio is 0.30. The P/S Ratio is 0.39 based on Revenue estimate for 2021 of $331.6M, Revenue per Share of $28.12 and a stock price of $10.88. The current ratio is 28% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
Results of stock price testing is that the stock price is probably on the expensive side. I know the dividend yield tests are showing the stock price as reasonable, but the P/S Ratio test does not confirm this. The problem is lack of growth in Revenue. There also seems to be a lack of growth in cash flow too. The testing results is a mixed bag as some show the stock price as reasonable and other as expensive.
Is it a good company at a reasonable price? I own this stock and plan to keep it. I must admit it has not been done well lately, but they have been rising their dividends lately and this is a good sign that the company is confident in the future.
When I look at analysts’ recommendations, I find only one recommendation and it is a Buy. The consensus would be a Buy. I can find a target price of $9.50. This implies a total loss of 9.56%, with a capital loss of 12.68% and dividends of 3.13%. The recommendation and the target price do not match up.
The last entries for this stock on Stock Chase is 2019. It would seem that analysts lost interest in this stock and that is not a good sign. The last write up on Motley Fool is 2013, so they have lost interest in this stock too. The executive summary on Simply Wall Street lists two risks, but gives the company 4 stars out of 5. A writer on Simply Wall Street likes the fact that the company can afford their dividends. A write on Simply Wall Street talks about who owns this stock. An Introdo article on Yahoo Finance talks about the company’s first quarterly results of 2021.
Hammond Power Solutions Inc is engaged in designing and manufacturing of custom electrical magnetics, cast resin, custom liquid filled distribution and power transformers and standard electrical transformers, serving the electrical and electronic industries. The company has manufacturing plants in Canada, the United States, Mexico, and India. 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 was Kirkland Lake Gold (TSX-KL, NYSE-KL) ... learn more. The next stock I will write about will Mullen Group Ltd (TSX-MTL, OTC-MLLGF) ... learn more on Tuesday, May 19, 2021 day, around 5 pm. Tomorrow on my other blog I will write about Pipelines to Buy.... learn more on Tuesday, May 18, 2021 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.
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