Is it a good company at a reasonable price? With dividend stocks for the long term, you can often do better with a low dividend, but nice increases. With this stock you probably have to be careful at the price that you pay because it seems to be cyclical. Five years total return at 8.36% is a lot higher than the 10 years return at 4.78%. It is currently testing as relatively cheap.
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 they had a good year in 2023 and also the first two quarters of 2024. Revenue, earnings, and cash flow have all gone up. Insiders are also buying.
If you had invested in this company in December 2013, for $1,016.37 you would have bought 23 shares at $44.19 per share. In December 2023, after 10 years you would have received $123.28 in dividends. The stock would be worth $1,472.46. Your total return would have been $1,595.74. This would be a total return of 4.78% per year with 3.78% from capital gain and 1.00% from dividends.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $44.19 | $1,016.37 | 23 | 10 | $123.28 | $1,472.46 | $1,595.74 |
The current dividend yield is low with dividend growth moderate. The dividend yield is low (below 2%) at 1.59%. The 5, 10 and historical median dividend yields are also low at 1.07%, 0.78% and 1.20%. The dividend growth is moderate (between 8% and 14% per year) at 12.9% per year over the last 5 years. The last dividend increase was in 2024 and it was for 14%.
The Dividend Payout Ratios (DPR) are good. The DPR for 2023 for Earnings per Share (EPS) is good at 11% with 5 year coverage at 10%. The DPR for 2023 for Adjusted Earnings per Share (AEPS) is good at 10% with 5 year coverage at 10%. The DPR for 2023 for Cash Flow per Share (CFPS) is good at 5% with 5 year coverage at 5%. The DPR for 2023 for Free Cash Flow (FCF) is good at 34% with 5 year coverage at 8%. However, for the sites I looked at, none agree on what the FCF is.
| Item | Cur | 5 Years |
|---|---|---|
| EPS | 10.77% | 9.98% |
| AEPS | 10.02% | 9.50% |
| CFPS | 5.41% | 4.63% |
| FCF | 33.84% | 7.84% |
Debt Ratios are good. The Long Term Debt/Market Cap Ratio for 2023 is good at 0.44 and currently at 0.14. The Liquidity Ratio for 2023 is good at 1.59 and a bit low at 1.32 currently. If you added in Cash Flow after dividends, the ratios are fine at 1.88 and currently at 1.60. The Debt Ratio for 2023 is good at 2.18 and 2.34 currently. The Leverage and Debt/Equity Ratios for 2023 are good at 1.85 and 0.85 and currently at 1.75 and 0.75.
| Type | Year End | Ratio Curr |
|---|---|---|
| Lg Term R | 0.44 | 0.14 |
| Intang/GW | 0.50 | 0.46 |
| Liquidity | 1.59 | 1.32 |
| Liq. + CF | 1.88 | 1.60 |
| Debt Ratio | 2.18 | 2.34 |
| Leverage | 1.85 | 1.75 |
| D/E Ratio | 0.85 | 0.75 |
The Total Return per year is shown below for years of 5 to 35 to the end of 2023. 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. |
|---|---|---|---|---|---|
| 2018 | 5 | 12.89% | 8.36% | 7.16% | 1.20% |
| 2013 | 10 | 10.65% | 4.78% | 3.78% | 1.00% |
| 2008 | 15 | 9.05% | 24.25% | 20.93% | 3.32% |
| 2003 | 20 | 8.90% | 10.31% | 8.94% | 1.37% |
| 1998 | 25 | 7.73% | 4.44% | 3.67% | 0.77% |
| 1993 | 30 | 8.34% | 9.30% | 8.02% | 1.28% |
| 1988 | 35 | 15.05% | 12.75% | 2.30% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 6.96, 9.58 and 12.17. The corresponding 10 year ratios are 6.80, 8.92 and 10.92. The corresponding historical ratios are 8.26, 11.55 and 15.03. The current ratio is 6.73 based on a stock price of $63.90 and EPS estimate for 2024 of $9.50. The current ratio is below the low ratio of the 10 year median ratios. This stock price testing suggests that the stock price is relatively cheap.
I also have Adjusted Earnings per Share (AEPS) data. The 5-year low, median, and high median Price/Earnings per Share Ratios are 6.47, 9.93 and 12.96. The corresponding 10 year ratios are 6.55, 9.03 and 11.30. The current ratio is 6.25 based on a stock price of $63.90 and AEPS estimate for 2024 of $10.22. The current ratio is below the low ratio of the 10 year median ratios. This stock price testing suggests that the stock price is relatively cheap
I get a Graham Price of $131.09. The 10-year low, median, and high median Price/Graham Price Ratios are 0.48, 0.65 and 0.84. The current ratio is 0.49 based on a stock price of $63.90. 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 10-year median Price/Book Value per Share Ratio of 1.06. The current ratio is 0.86 based on a Book Value of $4,602M, Book Value per Share of $74.74 and a stock price of $63.90. The current ratio is 19.5% below the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 10-year median Price/Cash Flow per Share Ratio of 5.59. The current P/CF Ratio is 3.73 based on a stock price of $63.90, Cash Flow per Share estimate for 2024 of 14.68 and Cash Flow of $794M. The current ratio is 39% 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 1.20%. The current dividend yield is 1.56% based on dividends of $1.00 and a stock price of $63.90. The current dividend yield is 30% 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 1.56% based on dividends of $1.00 and a stock price of $63.90. The current dividend yield is 101% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively cheap.
The 10-year median Price/Sales (Revenue) Ratio is 0.59. The current P/S Ratio is 0.36 based on Revenue estimate for 2024 of $10,870M, Revenue per Share of $176.52 and a stock price of $63.90. The current ratio is 38% 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 this. The P/S Ratio test confirms this. The rest of the testing is showing either as cheap or reasonable, but even the reasonable tests are getting close to showing the stock price as cheap.
When I look at analysts’ recommendations, I find Strong Buy (3), Buy (2) and Hold (1). The consensus would be a Strong Buy. The 12 month consensus stock price is $83.17 with a high of $89.00 and low of $74.00. The consensus stock price of $83.17 implies a total return of 31.75% with 30.16% from capital gains and 1.56% from dividends.
In 2024, some analyst on Stock Chase like this stock and some do not. The ones that do not say be careful because the stock is cyclical. Stock Chase gives this stock 4 stars out of 5. Kay Ng on Motley Fool says Linamar is a better buy than Magna. Joey Frenette on Motley Fool says buy this stock while it is cheap. The company put out a press release via Newswire about their fourth quarter of 2023. The company put out a press release via Newswire about their second quarter of 2024.
Simply Wall Street via Yahoo Finance reviews this stock. Simply Wall Street has no warnings out on this stock. Simply Wall Street gives this stock 4 stars out of 5.
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 Wednesday, October 2, 2024 around 5 pm. Tomorrow on my other blog I will write about Dividend Stocks October 2024 learn more on Tuesday, October 1, 2024 around 5 pm.
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