Is it a good company at a reasonable price? Stock Price is relatively cheap. This stock has generally delivered for its shareholders. If you are interested in having this stock, now is the time to buy when the dividend yield is over 1%.
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 fit my investment philosophy. 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. However, it has now been taken off this list. It is on the Money Saving list of Top 100 Canadian Dividend stocks.
When I was updating my spreadsheet, I noticed that the company cut the dividends briefly in 2020 and then raised them even higher than they had been in 2021. In 2019, dividends were $0.48. After an increase in 2021, they were $0.68 and now they are $0.80. EPS did drop in 2020. The company did a similar thing with dividends in 2009, because in 2009 they had an earnings loss.
If you had invested in this company in December 2011, for $1,008.00 you would have bought 72 shares at $14 per share. In December 2021, after 10 years you would have received $311.04 in dividends. The stock would be worth $5,394.96. Your total return would have been $5,706.00.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $14.00 | $1,008.00 | 72 | 10 | $311.04 | $5,394.96 | $5,706.00 |
The dividend yields are low with dividend growth moderate. The current dividend yield is low (below 2%) at 1.35%. The 5, 10 and historical dividend yields are also low at 0.80%, 0.78% and 1.17%. Currently dividends are growing at a moderate rate (8% to 14% ranges) at 11.2% per year over the past 5 years. Prior to that, going back 26 years, growth was low (below 8%), but just below 8% ranging from 7.1% to 7.9%. The last dividend increase was for 25% and it was made in 2021. Note dividends are not raised every year. I have 26 years of data and annual dividends were increase 10 times and decreased 2 times.
The Dividend Payout Ratios (DPR) are good. The DPR for EPS for 2021 is 11% with 5 year coverage at 7%. The DPR for Adjusted Earnings per Share (AEPS) for 2021 is 10.4% with 5 year coverage at 7.2%. The DPR for Cash Flow per Share (CFPS) for 2021 is 5% with 5 year coverage at 4%. The DPR for Free Cash Flow (FCF) for 2021 is 7% with 5 year coverage at 6%.
Debt Ratios are good. The Debt Ratio for 2021 is 0.16 and this is low and good. The Liquidity Ratio for 2021 is 1.71 and this is high and good. The Debt Ratio for 2021 is 2.65 and this is high and good. The Leverage and Debt/Equity Ratios are low and good at 1.61 and 0.61.
The Total Return per year is shown below for years of 5 to 33 to the end of 2021. 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. |
|---|---|---|---|---|---|
| 2016 | 5 | 11.20% | 6.14% | 5.37% | 0.77% |
| 2011 | 10 | 7.83% | 19.78% | 18.26% | 1.52% |
| 2006 | 15 | 7.19% | 13.05% | 11.89% | 1.16% |
| 2001 | 20 | 7.50% | 10.50% | 9.45% | 1.05% |
| 1996 | 25 | 7.69% | 7.55% | 6.74% | 0.81% |
| 1991 | 30 | 7.94% | 15.68% | 13.63% | 2.05% |
| 1988 | 33 | 16.08% | 14.12% | 1.96% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 5.85, 8.16 and 9.67. The corresponding 10 year ratios are 6.42, 8.93 and 11.44. The corresponding historical ratios are 8.34, 11.60 and 15.56. The current P/E Ratio is 8.04 based on a stock price of $54.11 and EPS estimate for 2022 of $6.73. The current ratio is between the low and median ratios of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I have Adjusted Earnings per Share (AEPS) data. The 5-year low, median, and high median Price/Earnings per Share Ratios are 5.19, 8.13 and 9.64. The corresponding 10 year ratios are 6.42, 8.93 and 11.44. The current P/AEPS Ratio is 8.04 based on a stock price of $54.11. The current ratio is between the low and median ratios of the 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 $104.69. The 10-year low, median, and high median Price/Graham Price Ratios are 0.53, 0.71 and 0.88. The current P/GP Ratio is 0.52 based on a stock price of $54.11. The current ratio is below the low of the 10 year median ratio. 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 1.27. The current P/B Ratio is 0.75 based on a stock price of $54.11, Book Value of $4,602M and Book Value per Share of $72.38. The current P/B Ratio is 41% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I get a 10-year median Price/Cash Flow per Share Ratio of 4.90. the current P/CF Ratio is 6.19 based on Cash Flow estimate for 2022 of $556M, Cash Flow per Share of $8.74 and a stock price of $54.11. The current ratio is 26% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
Analysts seem to give Cash Flow for 2022 at a lower rate than for 2021 and for 2023 and 2024. The spread for 2022 is 498M to 617M. The spread for 2023 is 636M to 799M and for 2024 it is $771M to $834. The Cash Flow for 2021 was $909M. If the Cash Flow for 2022 is the estimate of $617M, then the ratio would be 5.58 and 14% below the 10 year median. For 2023, with a Cash Flow of $727M, the ratio would be 4.73 and 3% below the 10 year median. Both these would suggest a stock price that is relatively reasonable.
I get an historical median dividend yield of 1.17%. The current dividend yield is 1.48% based on dividends of $0.80 and a stock price of $54.11. The current dividend yield is 26% 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 0.78%. The current dividend yield is 1.48% based on dividends of $0.80 and a stock price of $54.11. The current dividend yield is 90% 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 0.62. The current P/S Ratio is 0.44 based on Revenue estimate for 2022 of $7,830M, Revenue per Share of $123.14 and a stock price of $54.11. The current ratio is 29% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
Results of stock price testing is that the stock price is probably cheap. The dividend yield tests say that the stock is cheap and this is confirmed by the P/S Ratio test. Other good tests suggest that the stock price is cheap to reasonable.
When I look at analysts’ recommendations, I find Strong Buy (2), Buy (2) and Hold (2). The consensus would be a Strong Buy. The 12 month stock price consensus is $78.00. This implies a total return of 45.63% with 44.15% from capital gains and 1.48% from dividends based on a stock price of $54.11.
Analysts on Stock Chase are positive about this stock. Stock Chase gives this stock 5 stars out of 5. Money Sense gives this company a B rating. Kay Ng on Motley Fool thinks this company has growth potential. Sneha Nahata on Motley Fool reviews this stock and she thinks it is cheap. The company released a Press Release on Newswire about its fourth quarter of 2021 results. The company released a Press Release on Newswire about its second quarterly results of 2022.
There is a Simply Wall Street report on this company via Yahoo Finance. Simply Wall Street has three warnings signs of earnings have declined by 11.3% per year over past 5 years; profit margins (5.2%) are lower than last year (7.5%); and significant insider selling over the past 3 months. (Actually, what is happening is that officers and directors are not taking options.)
Linamar Corp is a diversified global manufacturing company of highly engineered products. The Company's Industrial segment operates the Skyjack and MacDon brands. It manufactures products for the Aerial Work Platform and Agricultural industries, respectively. Its web site is here Linamar Corporation.
The last stock I wrote about was about was BRP Inc (TSX-DOO, OTC-DOOO) ... learn more. The next stock I will write about will be Teck Resources Ltd (TSX-TECK.B, NYSE-TECK) ... learn more on Monday, October 3, 2022 around 5 pm.
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