Jean Coutu Group

I once owned this stock (TSX-PJC.A). I initially bought it in March 2000 and bought some more in August 2004. I sold off my shares in 2007. Most of these shares were sold because I wanted to buy Saputo, which I liked better. The company was also in some difficulty. I made a return of 7.4% per year, including dividends.

This stock used to be well thought of. They trouble is that they purchased stores in the US and lost on this investment big time. The other item that has grown since 2007 is the dividend and this has grown over the last 5 and 10 years by 6% per year and 12% per year respectively. All other figures I follow of Revenue, Earnings, Total Return, Book Value and Cash Flow has declined quite sharply since 2007, so that all the growth figures for the last 5 and 10 years are negative, or close to negative. This is not a happy story.

For all these items, the values should be a lot better for the end of the financial year of 1 March 2010. The items have not recovered completely by any means, but they are recovering. When you look at the Liquidity Ratio and the Asset/Liability Ratio these have not suffered. The Liquidity ratio is ok at 1.31 and the Asset/Liability Ratio is very good at 1.89. The other good thing to mention is the Accrual Ratio and this is negative.

I do not know if I would again purchase this stock. The problem I see is the low dividend yield. Unlike Reitmans, which we talked about yesterday, the long term return of dividends on an original purchase, say 10 years ago is just over 1%. A lot of the problem has to do with the problems they encounter in 2007. However, the dividend yield on this stock has often been under 1% and stock with dividends yields this low tend not to give you good dividend yields on your original purchase money in the long term. Tomorrow, I will talk about what the analysts say on this stock.

The Jean Coutu Group operates a network of 343 franchised drugstores in Canada located in the provinces of Québec, New Brunswick and Ontario (under the banners of PJC Jean Coutu, PJC Clinique and PJC Santé Beauté). The Company also holds a significant interest in Rite Aid Corporation (‘‘Rite Aid’’), one of the United States’ leading drugstore chains with approximately 5,000 drugstores in 31 states and the District of Columbia. Controlling shareholder is Jean Coutu. He has 55%, but has 92.5% voting control. Its web site is www.jeancoutu.com. See my spreadsheet at www.spbrunner.com/stocks/pjc.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. Also, look at other investing notes on my website at www.spbrunner.com/investing.html.