Recently we reported on Enerflex, which serves the natural gas industry and was spun off as an independent company four years ago (read Enerflex equipped for a rebound when oil and gas recover. Today we look at the company that spun off Enerflex, Toromont Industries. Toromont, a major distributor of industrial equipment, stands to benefit from a recovery in the mining industry. In the meantime, this growth stock continues to profit from customers in the agriculture, construction and power markets. And Toromont recently raised its dividend for the 26th consecutive year.
TOROMONT INDUSTRIES LTD. (Toronto symbol TIH; www.toromont.com) distributes a broad range of industrial equipment, including machinery made by Caterpillar Inc. It also makes refrigeration systems through its CIMCO division.
The company completed the spinoff of Enerflex Ltd. in 2011. Shareholders received shares of both the new Toromont Industries and Enerflex.
In the quarter ended June 30, 2015, Toromont’s revenue rose 16.6%, to $484.5 million from $415.6 million a year earlier. Earnings gained 26.1%, to $36.4 million, or $0.47 a share, from $28.9 million or $0.37.
The company saw stronger demand from customers in construction and agriculture than a year ago, which offset continued weak mining sales. It also cut costs.
Tomorrow—Our Stock Pick of the Month
Tomorrow, Friday, September 18, subscribers to Stock Pickers Digest will get Pat McKeough’s latest Stock Pick of the Month. Our most recent pick was a Canadian firm in the transport business that was once our Aggressive Stock of the Year and has a great hidden asset. Plus readers get updates and recommendations on many more aggressive stocks with continuing growth potential.
Growth stocks: Toromont benefits from strong cash position and low debt
Toromont’s financial position is strong: it holds cash of $33.7 million, or $0.43 a share, and its $181.0 million of debt represents just 6.2% of its market cap.
The company also raised its quarterly dividend by 13.3% with the April 2015 payment, to $0.17 a share from $0.15. The stock now yields 1.9%. Toromont has raised its payout every year for 26 years.
The company’s results will move even higher when an improved global economy fuels demand from mining customers. Meanwhile, it’s benefiting from steady construction and power markets. The stock trades at 19.4 times Toromont’s forecast 2015 earnings of $1.89 a share.
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