Friday, January 6, 2012

Canada Bread Co

I do not own this stock (TSX-CBY). I started to follow this stock some years ago because it was recommended by MPL Communications. You can see some of their advice at their site at Advice for Investors.

I had not really thought of this stock as a dividend paying stock as they had not changed their dividends since 1991. However, mid 2011, dividends suddenly spiked some 233%. Yes, that is right; they were increased by 233%. However dividends remain low with a dividend yield of just 1.8% and Dividend Payout Ratios at 16.5% of earnings and around 10% of Cash Flow. This is a consumer staple stock. These stocks tend to have low dividends, but it is hardly a dividend paying stock if it takes 20 years to raise their dividends. Another problem with this stock is that it owned, almost 90% by Maple Leaf Foods.

In November of 2011, The Investment Reporter, an MPL Communications newsletter, said this stock was a good buy for long term gains and dividends. This stock is down over the past 5 years, as are a lot of stocks. However, over the past 10 years ending in 2011, the total return on this stock is up 8.24% per year, with the dividend portion of this return at .9% per year.

As far as growth goes, the 10 year figures are all better than the 5 year ones. Revenue per shares is up 7.4% and 13.5% per year over the past 5 and 10 years. Earnings per Share are up 11.6% per year over the past 10 years, but are down 4% per year over the past 5 years.

Cash Flow is up in the same manner as the Revenue per shares. Book Value is up 8% and 11% per year over the past 5 and 10 years. However, Book Value has decreased by 15% between the end of 2010 and the third quarter of 2011, mainly due to new IFRS accounting rules.

What about the current stock price? The 5 year median high and low Price/Earnings ratios are 13.33 and 20.91. The current stock price of $43.01 looks low considering it has a P/E Ratio of just 12.47. The low and median difference between the Graham Price and the stock price is the stock price being 9.8% lower and 13% higher. So with a Graham Price of $45.13 the stock price at 4.7% lower looks good also.

I get a 10 year median Price/Book Value Ratio of 2.01. The current one at 1.66 is 82% of the 10 year median price and points to a good current stock price. This is in spite of the fact that the Book Value has gone down 15% because of the new accounting rules. No need to look at relative dividend yield, as yield is relatively high due to the recent big increase.

There is no insider trading over the past year. Maple Leaf Foods own 90% of the shares. Insiders all seem to hold a few thousand shares each. There are also some 5 institutions that hold 2% of the outstanding shares. There has been no buying or selling by these institutions over the past 3 months.

Not surprisingly, I can only find one analyst that follows this stock. The analyst’s recommendation is a Buy. A 12 months stock price of $54 is given. An analyst commented on this stock in October 2011, saying it was a buy because it is a stable business in uncertain times. He also suggested by Maple Leaf could possible take over the rest of the shares they do not own. However, this has been mentioned over the past few years and nothing has occurred.

There is a fairly recent blog entry on this stock at Canadian Dividend Stock. See blog.

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.

1 comment:

  1. I was all ears until I saw Maple Leaf......