Saputo Inc

I first bought this stock (TSX-SAP) in September 2006 and some more in November 2007. This has been a wonderful stock. My total return to date is 14.25% per year. This is a dividend paying stock. However, the dividends are not high and the amount of my return attributable to dividends would be just over 2%. This stock has a great record for increasing dividends with a growth rate for the last 5 years at almost 14%. However, the increase for 2010 was one of lowest increase with it being around 3.6%. The best you can say about this increase is that it is higher than inflation.

When you look at the spreadsheet, there are no trouble spots. Revenue growth over the past 5 and 10 years is 8.6% and 12% per year, respectively. The growth in cash flow over the past 5 and 10 years is 17% and 13.3% per year, respectively. These are important growth figures as it is revenue and cash flow that drive increases in stock value and dividends.

If you had invested in this company at the average stock price, you would have 5 and 10 year total returns of 11.3% and 13.4% per year, respectively. The stock would be generally classified as a dividend paying growth stock. Although the increases are very good for the dividend, after having this investment for 10 years, your dividend yield on your original investment would be only around 6.5%. This is not a bad return, but stocks that have higher yields would do better. The yield on this stock is currently around 2% but this is high as in most years the dividend yield lower. However, the yield has been increasing over the years and this is good.

The other good things to report on this stock are that the Liquidity and Asset/Liability ratios are good. The Liquidity Ratio is 1.51 and the Asset/Liability ratio is even better at 2.66. The stock has a strong balance sheet. The Return on Equity is also good at 18.9% for 2009 and with a 5 year average of 16.1%. Even the Accrual Ratio for 2009 is good as this ratio is a negative at -.86%.

Needless to say, I am very happy with my investment in this stock. However, I will not be buying more in the future as I already have enough of it in my portfolio. I do not like any stock to be a too high a percentage of my portfolio, even the great stocks.

This company is a dairy processor and cheese producer in Canada, USA, Argentina, UK and Europe. It is also the largest snack-cake manufacturer in Canada that accounts for about 3% of its business. Its web site is here Saputo. See my spreadsheet at sap.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 for stocks followed and investment notes. Follow me on twitter.