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What Affected CAE’s Dividend Yield?

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Revenue and EPS performance in 2015 and 2016

CAE (CAE) is an international frontrunner in the delivery of training for the civil aviation, defense and security, and healthcare markets. Revenue rose 12% in 2016 compared to 8% in 2015. The civil aviation training solutions, defense, and security and healthcare segments drove the growth in 2015 and 2016. The US, Germany, UAE, and other countries drove the growth in 2015 offset by Canada, the UK, other European countries, and China. Australia recorded flat growth in 2015. While most countries recorded growth in 2016, the UAE, other Asian countries, Australia, and other countries offset this growth.

Gross profit rose 15% in 2016 compared to 7% in 2015 despite higher costs. Operating profit recorded 1% growth in 2016 against 15% growth in 2015, which was due to higher operating expenses. In contrast, EPS rose 12% in 2016 compared to 4% in 2015 offset by higher finance expenses.

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Revenue and EPS performance in 2017 and 1Q18

CAE recorded 8% and 7% revenue growth in 2017 and 1Q18, respectively. Every segment except healthcare drove the 2017 growth. In contrast, all the company’s segments drove growth in 1Q18. Most geographical regions contributed to the 2017 growth, offset by the UK, Germany, China, and other countries. Gross profit rose 17% in 2017 compared to 12% in 1Q18 despite higher costs. Operating profit rose 9% in 2017 compared to 10% in 1Q18 offset by higher operating expenses. These factors translated into 9% EPS growth in 2017 compared to a 4% decline in 1Q18. Finance expenses reported a decrease during these periods.

Dividend yield

The company’s dividend has risen in 2017. The dividend yield slipped to 1.9% as prices have risen 18.2% on a YTD basis. In comparison, the Dow Jones Industrial Average (DJIA-INDEX) (DIA) has a dividend yield of 2.3% and YTD price gains of 15.7%. The S&P 500 (SPX-INDEX) (SPY) has a dividend yield of 2.3% and YTD price gains of 14%. The NASDAQ Composite (COMP-INDEX) (ONEQ) has a YTD price gain of 22.7%. CAE has increased its free cash flow balance over the years.

Let’s discuss two dividend ETFs with exposure to CAE. The PowerShares International Dividend Achievers (PID) offers a 3.6% dividend yield and a PE of 15.1x. The Vanguard International Dividend Appreciation Index Fund (VIGI) offers a 1.7% dividend yield and a PE of 26.8x.

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