Metro Inc

The annual report is in on this stock (TSX-MRU.A) that I own. I first bought this stock in 2001 for my RRSP and I bought more in 2004 for my trading account. I sold some in 2009 as it was over 10% of my portfolio and most analysts did not think it was going to do well over the next little while. I have done well with this stock, earning total return of 17.7% per year on the stock I bought in 2004 and earning a total return on the stock of my RRSP of 12.4% per year.

I sold what I held in my RRSP account and bought some TD bank instead. The other thing to note was that TD bank was paying a high dividend at just over 5% compared to less than 1.5% of Metro. However, I should also say that on my investment in 2009, just a couple of years ago, I am earning 3.9% return on my investment. The reason for this is the 23% rise in dividends in 2010. However, on a longer term of 5 years, the dividend has increased some 11% per year.

The 10 year growth in dividends is higher at 16% per year. This is because the dividend increases were very high after they started to pay dividends in 1995 until 2005. Dividend increases have been a lot lower since 2005. The other thing to note about dividends is that their portion of the total return varies from 1.5% over the past 5 years to around 2% over the past 10 years.

They haven’t yet raised the dividends for 2011, but looking at expected earnings and cash flow, their payout ratios for 2011 and 2012 are already at the average for this stock. The average and current payout ratio in regards to earnings is 17.5% (the same for both) and the average and current payout ratio in regards to cash flow is 12% and 11% respectively. You have to wonder if there is room for a significant increase for 2011 or 2012 if they want to keep the same ratios.

The growth figures for this company are generally very good. For example, earnings per share have grown over the past 5 and 10 years at the rate of 13% and 8% per year respectively. The cash flow per share has grown at the rate of 18% and 13% per year, respectively. The conclusion can only be that the company has grown nicely in the past.

The Liquidity ratio on this company tends to be a bit low. It is currently at 1.09 and has a 5 year average of 1.04. The Asset/Liability Ratio is much better at a current ratio of 2.03 and a 5 year average of 1.88. The Leverage Ratio (Asset/Book Value) at a 5 year average of 2.16 is rather average. The Return on Equity for the company is quite good; with a 5 year average ROE of 15%. The ROE for the financial year ending in September 2010 is also good at 16%.

All in all this has been a good investment for me. The reason that it became a large part of my portfolio is because it grow well and not because I purchased too much of this stock. I am pleased with my investment in this stock and I intend to hold on to the stock I currently have.

Metro is a leader in the food and pharmaceutical sectors. It operates a network of close to 600 food stores under the banners Metro, Metro Plus, Super C, A & P, Dominion, Loeb and Food Basics. It has 250 pharmacies under the banners Brunet, Clini Plus, The Pharmacy and Drug Basics. Metro's operations are concentrated in Quebec and Ontario. Its web site is here Metro. See my spreadsheet at mru.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.