Saturday, December 03, 2011

Canon (CAJ) 2011 Review

Canon (CAJ)  is one of the world’s leading designers, manufacturers and marketers of office equipment (office, personal and full color copying machines, office and network digital multifunction devices, laser and inkjet printers, scanners), cameras (digital and film cameras, digital video camcorders and camera accessories) and optical products (semiconductor production equipment, broadcasting lenses, medical equipment and electronic components). 

The company has grown profits and dividends at a 10-20% rate over the last ten years earning a 9-15% return on equity. The company suffered from weak demand and competitive pricing pressures in the 2009 slowdown, but management’s ongoing effort to achieve the number one position in each of its core businesses should lead to profit improve as a result of:

(1) rising demand for network digital multifunctional devices as well as its consumer products,

(2) aggressive cost cutting,

(3) expansion into emerging markets,


(1) the persistent rise of the yen negatively impact profits,

(2) the company is still recovering form the supply chain disruptions related to the Japanese tsunami.

Canon is rated A by Value Line, has a solid balance sheet (1% debt), and its stock yields 2.9%.

Statistical Summary

Stock Yield Dividend Growth Rate Payout Ratio # Increases Since 2001
CAJ 2.9% 5% 45% 10
IND 1.3 5 30 NA

Debt/Equity ROE EPS Down Since 2001 Net Margin Value Line Rating
CAJ 1% 11% 3 8% A
IND 18 6 NA 3 NA


Note: CAJ stock made good initial progress off its March 2009 low though it took considerable time for it to surpass the down trend off its June 2007 high (red line) and the November 2008 trading high (green line).

The stock is in a long term trading range (straight blue line is the lower boundary). In early 2011, the stock broke the uptrend off the March 2009 low and re-set to an intermediate term trading range (purple lines). The wiggly blue lines are Bollinger Bands.

The Dividend Growth Portfolio doesn’t own a position in CAJ as a result of a recent trading sale ($42)--not one of my best trading decisions. The stock would be bought back on a trading basis at $37. The lower boundary of its Sell Half Range is $57.