DH Corporation (DH.TO)

A well managed company. Did a deal in the US to expand as they have pretty well saturated everything they do in Canada. Dividend is safe and grows at a reasonable rate.

Really likes this company. When he saw the $1 billion purchase announced recently, doubling the size of the company, which had revenue of $200-$300 million, he almost fell off his chair. Looking at it further, he decided this is their best entry into the US market. They get more clients, accretive earnings, new products that they can put through their existing clients. It doesn’t look that bad. Thinks the dividend will increase over time.

(A Top Pick August 23/12. Up 33.37%.) Have made such a huge effort over the last 2 years to diversify away from cheques and are focused on the back office for mortgage lending and financial technology that feeds into banking credit in the US. Still thinks there is some upside over the medium term.

(A Top Pick July 17/12. Up 46.06%.) Sold holdings in May when he was a little bit concerned about valuations relative to their growth prospects. Just did a big acquisition of a tech player in the US, 1 of 4 core banking technology systems. Brings the relationship from 1700 banks and institutions up to 6200. Gives them new avenues for growth and reinvigorates the story.

(A Top Pick June 18/12. Up 48.8%.) A cheque company but doing a lot of other different things. Cheque revenue is getting smaller and smaller as they expand into more technology for banks. Moving into the US which will allow them to franchise a little bit more. Not expensive. Good dividend yield. You’re going to see margins tick up because they did an acquisition which brought down margins a little but as the acquisition gets rolled in margins should pick up a little. Still a great story.

(Market Call Minute.) He is concerned about mortgage origination slowing in Canada and some of their business lines being attacked by other technology companies in the US.

Very steady business model. The steadier your business model, the higher you can afford your payout ratio. They are doing some things on the growth front. Good conservative investment.

(A Top Pick May 15/12. Up 46.15%.) 40% of their business comes from the cheque side but they are expanding with other technologies and are moving into the US. Made some acquisitions which has really helped them. Expects there will be good organic growth and margin increases over the next little while.

Chart shows the 1^st up leg advance in late 2011 followed by a 2^nd up leg advance starting in mid-2012, which it is in right now. The move is on and it is not over yet. 5.2% yield.

Substantial revenue from cheques (40%). They do financial technology including credit cards. Nice yield but not paying out much of its cash flow. Room to increase dividend. Made some acquisitions and getting rid of the non-core parts of the acquired company. 5.74% dividend. They can go and buy bolt-on acquisitions. Growth will come from credit cards. It’s growing nicely.

A dying industry because it is cheque writing. They have been successful in migrating into other areas. Only 40% of their revenue comes from printing cheques. 22% is from things like loans servicing and repossession. Another 17% each is the new technology they have been doing in the US. Largest provider of point-of-sale mortgage origination software. Earnings growth has not been great because they have had to spend about $300 million to issue a lot of stocks. You get a 5.9% yield while you wait.

(A Top Pick Jan 23/13. Up 1.4%.) Cheques still make up a decent part of their business. Likes it for its defensive characteristics. Feels the dividend yield is safe. Getting a little more cautious on the name as he has heard they lost some business and he thinks the banks are going to pull off a little bit here, which could hurt them as well. If they lose another major client, he would be close to hitting the Sell button.

Seems to be doing fairly well in most of their business lines right now. Has a fairly large payout in excess of 6% but he thinks it is sustainable for the time being and you could see some more appreciation. He certainly would own it.

(Market Call Minute) Stable. Not just Cheques. Nearly 6% dividend yield. It is too small a company for him to own it.

(A Top Pick Jan 23/13. Up 1.86%.) Still likes. Just announced they were divesting some assets that aren’t related to their financial services. Still a Buy.