Shoppers Drug Mart

Today I want to review Shoppers Drug Mart stock (TSX-SC) as I bought 100 shares for my new Tax Free Trading Account. This stock has received a lot of praise since it started to sell stock in 2000 and 2001. This would be considered to be a dividend paying growth stock. It is currently not on any the dividend achiever’s lists yet because it has only been paying dividends since 2005, just 4 years ago.

If it continues to increase it dividends as it has in the last 4 years, it will be put on these lists. The dividend increases to the last annual statement of December 2007 is 26.5%. It increased its dividend for 2008 by 34%. This is a very good start.

In the 5 years, to the last annual statement of December 2007, this stock has basically done quite well. The Revenues have grown some 16% per year, the Earnings per Share (EPS) has grown some 13.7% per year, the closing price of the stock has grown some 17.4% per year, the Cash Flow has increased some 11.6% per year and the book value has increased some 13.4% per year.

Also, the Return on Equity (ROE) at December 2007 and for the 5 years running to December 2007 is 15.9% and 15.1% respectively and this is good. The Asset/Liability ratio is high at 2.09. The Current Asset/Current Liability ratio is a bit low at 1.01.

I see some negatives on this stock. First, the Accrual Ratio is very high at 9.6%, but at least the Operation Cash Flow is greater than the Net Income. On this stock, the closing price for is almost twice the Graham Price at December 2007, but this is typical for a growth stock. Also, the dividend yield started out in 2005 at less than 1%. With a dividend yield so low, this is more a growth stock than a dividend paying one. Tomorrow I will talk about what the analysts say.

Shoppers’ is a licensor of Shoppers Drug Mart in Canada and Pharmaprix in Quebec. The company owns and operates Shoppers Home Health Care stores. It also owns MediSystem Technologies Inc. Its web site is www.shoppersdrugmart.ca. See my spreadsheet at www.spbrunner.com/stocks/sc.htm.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website at www.spbrunner.com/stocks.html for a list of the stocks for which I have put up spreadsheets on my web site.