Hello everyone! I hope you guys are enjoying your long weekend so far!
Today, I happened to find this article on Yahoo! Finance regarding Domtar Corp. and Brookfield Renewable Partners LP just raised their dividends by 4.8% last week.
As a result, I figure I would do fundamental analysis on these two companies to see whether they have durable competitive advantage or not.
Let’s do this!
Domtar Corporation (TSE:UFS) is one of the world’s leading providers of fibre-based products in communication papers, specialty and packaging papers and absorbent hygiene products. Pulp and Paper and Personal Care are the company’s two main businesses. The Pulp and Paper business consists of the design, manufacturing, marketing and distribution of communication, specialty and packaging papers, as well as softwood, fluff and hardwood market pulp. On the other hand, the Personal Care business consists of the design, manufacturing, marketing and distribution of absorbent hygiene products.
Here is the company’s financial statement analysis from 2014 to 2017 (click here if you need a refresher on accounting formulas):
Unfortunately, I do not think I would invest in Dormar Corp. as gross profit used in selling, general and administrative expenses are high. In addition, the company did not generate any profit last year. Therefore, I do not think Dormar Corp. has any durable competitive advantage until the company starts to generate profit again in the coming years.
Pursuing this further, Brookfield Renewable Partners (TSE:BEP.UN) owns and operates one of the world’s largest pure-play renewable power platforms. The company’s portfolio currently consists of 841 facilities with over 16,000 megawatts of installed capacity, which are located across North America, South America, Europa, and Asia. Furthermore, Brookfield Renewable Partners is a global leader in hydroelectric power, which comprises approximately eighty percent of its portfolio. The company is also an experienced owner, operator and investor of global wind, solar, distributed generation, and storage facilities.
Here is the company’s financial statement analysis from 2013 to 2016:
Personally, I would not invest in Brookfield Renewable Partners because the company holds more preferred stocks than common stocks. Moreover, Brookfield Renewable Partners’s debt to shareholders’ equity ratio is too high (it means the company is using debt to finance its operation). Therefore, Brookfield Renewable Partners do not have durable competitive advantage.
companies that are hiking dividends do not necessary mean they are financially sound. Often times, these companies may pay huge dividends just to attract shareholders to invest in them.
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