Today we look at one of Canada’s most innovative stocks. From the time of the Thomson-Reuters merger in 2008, the company has worked to develop and refine its specialized information products, with increasingly strong results. Financial information products account for the majority of Thomson-Reuters’ revenue and promise to be a strong area of growth for the company for years to come. That should also ensure a dependable yield for this dividend stock.
THOMSON REUTERS CORP. (Toronto symbol TRI; www.thomsonreuters.com) sells specialized information products in four main areas: financial (53% of 2014 revenue, 39% of earnings); legal (28%, 39%); tax (11%, 12%); and intellectual property and science (8%, 10%).
The company continues to see rising demand for its financial-information products in the wake of the 2008 financial crisis. It’s also doing a good job of getting traders and portfolio managers to upgrade their older electronic terminals, through which Thomson supplies them with news and financial data, to its new Eikon platform.
In the three months ended June 30, 2015, Thomson’s revenue fell 3.8%, to $3.0 billion from $3.2 billion (all amounts except share price and market cap in U.S. dollars). Without the negative impact of the high U.S. dollar on its overseas operations (40% of the total), revenue rose 2%.
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Growth stocks: Sound balance sheet will let Thomson-Reuters keep developing new products
The company saw sales gains at all of its businesses: financial (up 1%), legal (up 2%), tax (up 6%) and intellectual property (up 1%).
Overall earnings fell 1.2%, to $410 million from $415 million, while per-share profits gained 2.0%, to $0.52 from $0.51, on fewer shares outstanding. Excluding currency rates, the company’s earnings per share jumped 14%.
Thomson’s sound balance sheet will let it keep developing new products, particularly ones it can deliver over the Internet or through mobile devices. As of June 30, 2015, the company held cash of $1.1 billion, or $1.44 a share. Its long-term debt of $7.0 billion is a manageable 21% of its market cap.
The stock has gained 30% in the past year and now trades at 20.5 times Thomson’s likely 2015 earnings of $2.03 a share. That’s still an acceptable multiple in light of its high market share, unique products and improving profit margins. The $1.34 dividend yields 3.2%.
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