First off, I know we had requested beta testers for our new screener. And, you likely have expected an e-mail from us by now.
There has been a small delay in the development of it and we’re working out a few bugs prior to sending it to testers. So, just be patient with that, it will be worth the wait!
As for our Dividend Bull List addition….
We’ve added Stella Jones (TSE:SJ) to the Dividend Bull List
We believe that the market has been too harsh on Stella-Jones. It now presents a reasonably strong play from both a value and dividend growth perspective. The company has been on a year-long downtrend in terms of price, and from a discounted cash flow perspective (more on this in the valuation section of the report), if the company can hit its mid-single digit growth guidance, there is a large margin of safety here at current prices.
The company’s exposure to products like railway ties and utility poles that would be in high demand as long as infrastructure continues to expand will help reduce the cyclical nature of the lumber business. In fact, these products make up over 65% of the company’s business. It is not exposed heavily to residential lumber (which is expected to have a harsh drop in demand) as many other lumber stocks here in Canada.
This is precisely why a company like Stella Jones has been able to grow the top line for eighteen consecutive years. The next closest in the lumber industry? Canfor Corp at only two straight years.
The company is one of the only lumber companies in Canada expected to continue growing earnings heading into next year and boasts industry-leading profit margins over the long term. The company is by no means flashy, and we wouldn’t expect any significant, outsized growth here. However, in the environment we’re currently in, grabbing a company with a reasonable margin of safety and strong performance history is one that we feel could be a long-term winner.
It has underperformed other lumber companies here in Canada since the COVID pandemic. However, in our opinion, this was due to the company’s low exposure to the residential construction industry, which could quickly turn from a tailwind into a headwind for many of its competitors.
This is precisely why Stella is one of the only lumber companies in Canada projected to grow earnings in Fiscal 2022.
