Tuesday, September 7, 2010

Canada Bread Co.

I do not currently own this stock (TSX-CBY). It is not on the dividend lists that I follow. I held it for a short period of time from October 1999 to September 2000 because I had read it was a dividend paying growth stock and a great investment. I lost some 30% on my investment. I sold because it doing badly and there was another stock I was interested in buying. Stock prices are relative. Yes, I sold this at a loss, but was able buy another stock for a very good price.

The problems I find with this stock is that it is just masquerading as dividend paying stock and it is almost 90% owned now by Maple Leaf Foods. Why I say it is masquerading as a dividend paying stock? This company last increased it dividend in 1992. I live off my dividends income, so if I stock cannot over the long term increase their dividends at least in line with inflation; I do not consider them to be a true dividend paying stock. I do not insist that stock I own raise their dividends yearly, but I do expect them to be raised over the long term.

I still follow this stock as it is recommended by investment newsletters that I like, but currently I personally would not buy it. This stock has not done well over the last 5 years, but has done much better over the last 10 years. If you look at total returns for the last 5 and 10 years, the returns are 2.6% and 13.9% per year respectively. However, the portion of the total returns due to dividend income is about ½ of 1% for the last 5 years and just under 1% for the last 10 years.

For this stock, the Liquidity Ratio has often been low, but for the 2nd quarter of 2010 it is at a more respectable 1.11. The Asset/Liability Ratio has always been much, much better and is currently 4.15, although the 5 year average is lower at 3.29. Anything over 1.50 is good. The last thing to mention today is that the Return on Equity has a 5 year average at 11%, which is quite good. The current one, for the 2nd quarter is lower at 8.6%.

As I said previous, I am not interested in this stock because it is not a exactly dividend paying one, but I am following it as it is one mentioned by a number of conservative investment newsletters.

Canada Bread is a leading manufacturer and marketer of value-added flour based products, including fresh bread, rolls, bagels and sweet goods, frozen partially baked or par-baked breads and bagels, and specialty pasta and sauces. The Company markets products under a number of leading brand names, including Dempster’s, Olafson’s, POM, Ben’s and Olivieri. Canada Bread has operations in Canada, the United States and the United Kingdom. The Company is 89.8% owned by Maple Leaf Foods Inc. Its web site is here Canada Bread. See my spreadsheet at cby.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.

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