Buy Richelieu for gains and growing dividends

Richelieu Hardware earned substantially more last year. It has raised its dividend sharply. Five acquisitions last year and three so far this year will add to its sales and earnings growth.

Montreal-based manufacturing stock Richelieu Hardware reported solid results in the year to November 30, 2021. It achieved net earnings of $141.8 million, or $2.51 a share. This was up by more than two thirds from net earnings of $81.9 million, or $1.50 a share, the year before. The company’s return on average equity attained a healthy 23.3 per cent. And its net debt-to-equity ratio is a safe 0.2 times.

“Richelieu is a leading North American distributor, importer and manufacturer of specialty hardware and complementary products. Its products are targeted to a . . . customer base of kitchen and bathroom cabinet, storage and closet, home furnishing and office furniture manufacturers, residential and commercial woodworkers, door and window, and hardware retailers including renovation superstores. Richelieu offers . . . a broad mix of high-end products sourced from manufacturers worldwide. Its product selection consists of over 130,000 different items targeted to a base of more than 90,000 customers who are served by . . . 47 distribution centres in Canada, 48 in the United States and two manufacturing plants in Canada . . . Cedan Industries . . . which specializes in . . . manufacturing . . . a wide variety of veneer sheets and edge-banding products and Menuiserie des Pins Ltée which manufactures components for the window and door industry and a broad selection of decorative moldings.” Richelieu’s diversified product offering and customer base adds to its safety.

Richelieu rewards its shareholders

Richelieu is using its prosperity to reward its shareholders. It has raised its yearly dividend to 52 cents a share. This up by a whopping 85.7 per cent from last year’s annual dividend of 28 cents a share. The company also paid a special one-time dividend of 6.67 cents a share last year. Even so, its regular dividend yields a modest 1.94 per cent. Richelieu also buys back its own shares, largely to offset dilution. In fiscal 2021, it spent $13.1 million to buy back 316,374 shares. This overcame the 263,925 shares issued under its share options plan.

Richelieu’s fiscal 2021 sales jumped by nearly 28 per cent, to $1.44 billion. This partly reflected five acquisitions made in North America last year. That added a yearly $80 million to its sales. So far in fiscal 2022, which began December 1, 2021, Richelieu completed three acquisitions in the US. This will add $100 million to its yearly sales.

President Richard Lord said: “These eight acquisitions enable us to strengthen our presence in markets where we were already active, enter new strategic territories, integrate new teams with a solid knowledge of their markets and add over $180 million in sales annually. We also opened three more centers in the United States and expanded several of our [American] centers.”

This year, Richelieu is expected to earn $2.71 a share. That would represent earnings per share growth of eight per cent. Next year, by contrast, one analyst predicts that the company’s earnings per share will drop by 13.7 per cent, to $2.34 a share. He rates Richelieu a hold. We see it as hard to argue against the company’s long-term success.

Richelieu is back on buy for long-term share price gains and modest but growing dividends.

This is an edited version of an article that was originally published for subscribers in the February 4, 2022, issue of The Investment Reporter. You can profit from the award-winning advice subscribers receive regularly in The Investment Reporter.

The Investment Reporter, MPL Communications Inc.
133 Richmond St. W., Toronto, On, M5H 3M8, 1-800-804-8846

Comments are closed.