TOROMONT INDUSTRIES LTD. $31.62 - Toronto symbol TIH

TOROMONT INDUSTRIES LTD. $31.62 (Toronto symbol TIH; TSINetwork Rating: Extra Risk) (416-667- 5511; www.toromont.com; Shares outstanding: 77.9 million; Market cap: $2.4 billion; Dividend yield: 2.2%) distributes a broad range of industrial equipment, including machinery made by Caterpillar Inc. It also makes refrigeration systems through its CIMCO division. In the three months ended September 30, 2015, Toromont’s sales rose 8.2%, to $505.6 million from $467.4 million a year earlier. Earnings per share 11.5%, to $0.58 from $0.52. Toromont saw stronger demand from customers in construction and agriculture than a year ago, which offset continued weak mining sales. It also cut costs. The company’s financial position is strong: it holds cash of $97.4 million, or $1.25 a share, and its $303.7 million of debt represents just 12.7% of its market cap. Toromont raised its quarterly dividend by 13.3% with the April 2015 payment, to $0.17 a share from $0.15. The stock now yields 2.2%. 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 15.4 times Toromont’s forecast 2016 earnings of $2.05 a share. Toromont is a buy.

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Blue chip stocks are big, well-established, dividend-paying corporations with strong business prospects. These are companies that also have sound management that should be able to make the right moves to keep competing successfully in a changing marketplace.

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One of the sweetest and most profitable pleasures of successful investing is to buy high-quality “value stocks” (or stocks that are reasonably priced, if not cheap, in relation to its sales, earnings or assets), then hold on to them as mainstream investors recognize the value and push up the share price.

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