AirBoss of America Corp. (TSX: BOS, OTC: ABSSF) is one of the largest rubber compounding and specialized rubber product manufacturers in North America. It serves customers in a variety of industries including mining, energy, defense, and auto manufacturing.

The company has performed well over time, but struggled over the past year as key customers in the mining and energy sectors cut costs. Investors took note and knocked the share price down by 50% from its all-time high in August 2015.

Although poor business conditions may continue through the first half of 2017, we believe that the stock’s current valuation, which is well below its historical average and at a substantial discount to its peers, will eventually prove to be an excellent entry point.

Additionally, AirBoss has done a great job of growing its dividend. The payout has risen 12.3% annually over the past five years, though dividend growth has slowed a bit more recently given the difficult operating environment. Nevertheless, future payments are reasonably secure given the firm’s low payout ratio, strong balance sheet, and adequate cash flow.

The stock currently yields 2.3%, which is somewhat below our preferred range, but we expect strong dividend growth beyond 2017. We estimate a fair value of C$17, or US$13.

A full report on AirBoss will appear in the January edition of Canadian Edge.