Thompson Corp. (TOC)

I wanted to take another break from the demographics theme to talk a little bit about TOC.

"The Thomson Corporation is a leading global provider of integrated information-based solutions to business and professional customers.
Thomson provides value-added information, with software tools and applications that help its customers make better decisions, faster. We serve professionals in the fields of law, tax, accounting, financial services, scientific research and healthcare."

Thompson Corp. is the kind of company I want to own and would fit perfectly into my conservative, dividend growth oriented portfolio. I’ve been watching TOC for a number of years and just haven’t been able to pull the trigger based solely on valuation. As you can see from the below numbers they do still appear expensive from both an earnings and cash flow perspective. However, I believe that their recent acquisition of Reuters could allow the company to capitalize on the synergies between the two companys and really allow them to break out of the sideways trend they’ve been in for the last 2 years. The merger also makes them the largest provider of information to the financial service sector which will really gives the company a global presence.

Other positives of TOC include:
-many steady streams of income from a number of subscription based medical, legal, scientific and financial professions.
-history of increasing dividends.
-positioned for growth as our economy (and economies around the world) are rapidly becoming information based where knowledge and information is required 24/7 and on demand.

Dividend Yield:2.3%
5 year Avg. Dividend Yield: 2.0%
ROE: 9.04%
PE: 26X
Estimated 2007 PE: 25.9X
Estimated 2008 PE: 23.2X
Price/Cash Flow: 16.23

This company has never been cheap however, it currently appears cheap based on it’s historical trading range. I think there is potential here and for the first time in a long time TOC seems to have a catalyst that could push the stock higher in a year or two. Despite the valuations I’m contemplating taking a position in TOC. Any thoughts?