Thanks to its ability to establish a dominant position in a niche market, this Canadian stock can offer investors both growth and income.
The company has a predominant role in the so-called “contract economy” supplying skilled workers, services and technology to business and government agencies. It recently renewed contracts worth up to $1 billion, which in turn help support a dividend yielding 3.4%.
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CALIAN GROUP LTD. (Toronto symbol CGY; www.calian.com) has two main divisions: Business and Technology Services (supplying 73% of revenue) provides engineers, health care workers and other skilled professionals on a contract basis; and Systems Engineering (27% of revenue) sells hardware and software for testing and operating satellite and other communication systems.
In October 2017, Calian won contracts for health services valued up to $1 billion. The company successfully renewed contract for the provision of health support services to the Canadian Armed Forces. It also won additional contracts for the provision of health support services to the Royal Canadian Mounted Police and Veterans Affairs Canada.
The Health Care Providers Requirements contract with the Canadian Armed Forces is a renewal of the Health Services Support Contract that Calian has held since 2004. The latest deal has an initial term of four years with a value of $275 million. There’s an option to extend the contract for up to eight additional years, which would increase its value to $875 million.
Additional contracts with similar terms were simultaneously awarded to Calian for the provision of health support services to the RCMP and Veterans Affairs Canada; those agreements have initial four-year terms and values of $19 million and $17 million, respectively. Their full contract value for a 12-year period would be $60 million and $55 million, respectively.
The current contract with the Canadian Armed Forces expires March 31, 2018, and generates about $65 million to $70 million in revenue per year. These new contracts are expected to begin April 1, 2018, and will likely to be renewed at higher levels.
Dividend Stocks: Company holds cash of $3.76 a share, with no debt
In May 2017, Calian paid $9.0 million for International Safety Research Inc. That firm specializes in nuclear safety and emergency preparedness. It should add $8.0 million to Calian’s annual revenue.
In its fiscal fourth quarter, ended September 30, 2017, the company’s revenue rose 5.2%, to $72.3 million from $68.8 million a year earlier. Excluding one-time items, the company earned $4.3 million, or $0.57 a share. That’s up 26.5% from $3.4 million, or $0.45, a year earlier. The improved profits came from the higher revenue, as well as keeping costs in check.
Calian holds cash of $28.6 million, or $3.76 a share, and has no debt. The company pays a quarterly dividend of $0.28 for a high 3.4% yield. Calian raised its dividend five times between 2010 and 2012, but has yet to raise it since then.
The stock trades at 15.9 times the company’s earnings-per-share forecast of $2.02 for fiscal 2018.
Recommendation in TSI Dividend Advisor: Calian Group is a buy.
I appreciate your analyses of the various companies that you review and recommend. It would be helpful if you would also include a buy up to or price range for the recommended buys. Like most investors, I don’t want to overpay for a holding not matter how glowing the review.
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Thanks for your question. When we recommend a stock, that’s the price we recommend buying it at. If you decide to buy the stock at a later date, we suggest checking our latest advice to see if we still see it as a buy. TSI Research.
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I appreciate your analyses of the various companies that you review and recommend. It would be helpful if you would also include a buy up to or price range for the recommended buys. Like most investors, I don’t want to overpay for a holding not matter how glowing the review.
Thanks.
Thanks for your question. When we recommend a stock, that’s the price we recommend buying it at. If you decide to buy the stock at a later date, we suggest checking our latest advice to see if we still see it as a buy. TSI Research.