Tuesday, September 27, 2011

Andrew Peller Ltd

We appear to be in a bear market. If you are investing consider large cap dividend paying companies. If they also have low debt ratios this is a plus. The most important thing is not to panic. Selling good stocks in such market changes paper loses into real loses.

I do not currently own this stock (TSX-ADW.A). I owned it as Andres Wines from 1996 to 2000, and made a total return of 5.4% per year. All my return on this stock was dividends. If I had continued to hold it until today I would have made an annual return close to 15%. So my investment would have been fine, but at the time I did not see it going anywhere. Also, dividends were rather flat. Retail investments are always riskier than say utility investments.

The current dividend yield on this stock is 4% and this is a good yield. In the last few years this company has been raising their dividends more than in the past. The 5 and 10 year increase in dividend is at 9% and 4.4% per year, respectively.

Their Dividend Payout Ratio is generally at a good level with the 5 year median for earnings 41% and for cash flow at 36% respectively. However, the payout ratios for earnings exclude 2009, where the company suffered an earnings loss.

The total returns over the past 5 and 10 years are at 4% and 15% per year respectively. The portion of these total returns attributable to dividends is 3.4% and 4.8% per year, respectively. So you would not have made much more than dividend income over the past 5 years, but would have done very well over 10 years. This is a good showing considering we are, maybe, moving out of the recession of 2008.

The worst growth for this company is in book value and revenues. The revenue per share growth over the past 5 and 10 years are 5.5% and 7% per year, respectively. The book value growth over the past 5 and 10 years is at 6% and 5.6% per year respectively. This is rather mediocre growth.

Earnings and cash flow growth is better with earnings growth over the past 5 and 10 years at 12.8% and 11.5%. Growth in cash flow is a bit lower with 5 and 10 year growth at 11% and 8% per year, respectively. Return on Equity is fine at 9.9% at the end of 2010 and with a 5 year median of 9.9%.

The debt ratios are fine, with the current Liquidity Ratio a little low at 1.34 and the current Asset/Liability Ratio much better at 1.77. The current Leverage Ratio is fine at 2.30 and the current Debt/Equity Ratio at 1.30.

Tomorrow, I will discuss what analysts say about this stock and also what my spreadsheet says about its current price.

Andrew Peller Limited (the “Company”) is a leading producer and marketer of quality wines in Canada. With wineries in British Columbia, Ontario and Nova Scotia, the Company markets wines produced from grapes grown in Ontario’s Niagara Peninsula, British Columbia’s Okanagan and Similkameen Valleys and vineyards around the world. They also market craft beer under the Granville Island brand. The Company produces and markets consumer-made wine kit products through Winexpert and Vineco International Products. The Company’s products are sold predominantly in Canada. Class A shares are non-voting. Its web site is here Andrew Peller. See my spreadsheet at adw.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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