What we're looking for
It's Friday, and the Number Cruncher team feels good on Fridays. So, let's end the week with an upbeat look at consistently profitable Canadian companies over the past few years.
We ran a Capital IQ screen for Toronto Stock Exchange-listed companies that had produced a return on equity of more than 15 per cent for each of the past four fiscal years, with the most recent being the year ended 2010. Return on equity shows how well a company uses investors' funds to generate earnings growth. In other words, it measures a firm's efficiency at creating profits from every dollar of shareholders' equity.
The period we used encompasses the worst of the financial crisis, as well as some of the recovery. So, these are companies that are good at taking care of business, even when times get tough.
What we found
The list is a mix of stocks from a broad range of sectors – energy, retail, technology, transportation and food.
Retailers such as convenience store operator Alimentation Couche-Tard Inc., North West Co. Inc. which owns the Giant Tiger and NorthMart brands, and Le Chateau Inc. figure on the list. North West's dividend yield is 6.4 per cent, while Le Château's is 6.2 per cent.
Not all of these money-spinning companies provide income to investors, though. Case in point: Research In Motion Ltd., the famously debt-free maker of the BlackBerry smart phone, has yet to pay a dividend. It returned 42 per cent on shareholders' equity in the last fiscal year.
Also on the list is a play on China's rapid growth and push to build infrastructure. Boyuan Construction Group Inc., with a market capitalization of $61-million, builds homes and commercial buildings in China.
(By the way, if you were simply looking for the highest return on equity over the past 12 months, the winner is Athabasca Oil Sands Corp., with 124 per cent.)