Despite huge disruptions with the onset of the COVID-19 pandemic in March 2020, this firm maintained its dividend. On pandemic easing, the company lifted that payment by 9.8%.
Investors should also benefit from a rising stock price as stronger demand for its equipment and services spurs it higher.
The stock trades at just 15.2 times the company’s 2022 earnings forecast.
FINNING INTERNATIONAL INC. (Toronto symbol FTT; www.finning.com) sells and services Caterpillar-brand heavy equipment in Western Canada, South America and the U.K.
Its main customers are in the oil and gas, mining, forestry-products and construction industries.
Canada is Finning’s biggest market, accounting for 52% of its net revenue. Its other markets are South America (30%) and the U.K. & Ireland (18%). The servicing of equipment provided 54% of revenue, while the sale of new equipment provided 35%; the balance came from the sale of used equipment, rentals and fuel sales.
The company has agreed to acquire U.K.-based Hydraquip Hose & Hydraulics Ltd. That privately held firm repairs and replaces industrial hoses and related equipment for customers in the oil and gas extraction, mining, construction, and food processing industries.
Finning will pay 65 million British pounds (roughly $108 million Canadian) for Hydraquip. The new operations will add about $43 million to its annual revenue of $7.3 billion.
Using acquisitions to expand adds risk. However, Hydraquip is the second-largest provider of hose replacement and repair services in the U.K. and will immediately add to Finning’s earnings.
Value Stocks: New demand should keep growing revenue and earnings
The company continues to benefit as re-opening of the world’s economies spurs demand for its equipment and maintenance services. Revenue in the three months ended December 31, 2021, rose 14.4%, to $1.77 billion from $1.55 billion a year earlier. Excluding one-time items, per-share earnings jumped 73.7%, to $0.66 from $0.45.
Finning’s improving order backlog also cuts your risk. At the end of the latest quarter, it was $1.9 billion, up 18.8% from just three months earlier.
The company’s balance sheet also remains strong. As of December 31, 2021, it held cash of $502 million, while its long-term debt of $921 million is a low 16% of its market cap.
Investors can expect Finning to earn $2.34 a share in 2022, and the stock trades a moderate 15.2 times that estimate.
Finning last raised your quarterly dividend with the September 2021 payment. Investors now receive $0.225 a share, up 9.8% from $0.205. The new annual rate of $0.90 yields 2.5%.
Your dividend has increased an average of 4.3% annually over the last 5 years. Finning’s TSI Dividend Sustainability Rating is Above Average.
Recommendation in Dividend Advisor: Finning Int’l Inc. is a buy.
Comments
Subscriber
I think it’s about time we look to replacing oil as a main option for businesses to sustain themselves with. There’s got to be something else we can use to keep our machinery running. Some people call it ‘raping the earth’ of it’s resources. Where’s our R&D on this? And where does our responsibility lie?
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I think it’s about time we look to replacing oil as a main option for businesses to sustain themselves with. There’s got to be something else we can use to keep our machinery running. Some people call it ‘raping the earth’ of it’s resources. Where’s our R&D on this? And where does our responsibility lie?
Thanks for the opportunity to vent in this.
Diane Friesen