Finning International

Finning operates in cyclical industries and countries with some degree of political uncertainty, although with 90 years of experience, it has proven successful at negotiating these issues in recent times.

Finning International is the world’s largest dealer and distributor of Caterpillar heavy-duty machinery and parts, selling and renting them to the mining, construction, petroleum, forestry, and power systems industries. It also provides spare parts and services and buys and sells used equipment. Finning operates in Canada, South America, the UK, and Ireland.

Finning is a conservatively financed company (debt to equity of 0.47), operating in an asset-heavy business. It earns a highly competitive return (17.7% return on equity) despite relatively slim margins. It is well diversified by geography and by business sector and has managed to grow its revenues and earnings through both the Covid pandemic and sharp downturns in the energy and mining businesses, as well as geopolitical concerns in Argentina.

Income Investor

While the dividend yield is not particularly high, it has grown consistently over the last few years. Growth in demand for copper due to the green energy transition should support long-term growth in its South American operations, while increased focus on energy security should support Western Canadian energy operations. Buy for a reasonable and growing yield in a well-managed company with exposure to attractive long term secular trends.

Income Investor

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FTT was first recommended here on November 29, 2024