Lassonde Industries

I do not own this stock (TSX-LAS.A). I started to follow this stock in 2010 because of a favorable report I read on this stock. The dividends are low, with a current dividend yield of just 1.7%. However, they have a fairly good record of dividend increases with dividend growth over the past 5 and 10 years at 15% and 14% per year, respectively.

With such a low dividend yield, you have to hold this stock for at least 10 years to get a decent return on your original investment. In the past, after 10 years you got a return on original investment of between 4% and 8.7%, but with a median return of just 4.28%. After 15 years, the median return on your original investment moves up to 9.45%.

As far as total return is concerned, the 5 and 10 year return is at 14.6% and 16.6% per year respectively. The portion of the total return that would be attributable to dividends is just over 2% per year. This stock would be considered to be a dividend growth stock. It is not on the dividend lists I follow, and this is probably because they cut the dividend in 2007 by 10%. It quickly recovered and the dividend increase in 2008 was 45%. However, investors do not generally like to see dividend cuts.

Since the annual statement is not out on this stock for the year ending in 2011, my other growth figures are to the latest annual statement of December 2010. For this company, the per share values are better than the total values. This is because they have been buying back shares, not a lot, but some most years. The number of shares outstanding has been decreasing by around 1.8% per year.

So revenues are up over the past 5 and 10 years at the rate of 10.6% and 8.5% per year, respectively. Revenue per share is up over the past 5 and 10 years at the rate of 11.5% and 8.7% per year, respectively. The earnings per share are also up nicely over the past 5 and 10 years, with growth at 14% per year over these two periods.

Cash Flow is up by 15% and 10% per year over the past 5 and 10 years. Book Value is up12.5% and 10% per year over the past 5 and 10 years. As you can see, growth in this stock is very good, no matter what you are looking at.

You have two classes of shares for this company. The Category B shares, not sold on the TSX are multiple voting shares. The Category A shares, on the TSX, are subordinate voting shares. As is common with owner controlled companies, the debt ratios are quite good. All the debt ratios are good, but the current ones for the 9 months period ending in September 2011 are not as good as usual.

The current Liquidity Ratio at 2.01 is lower than the 5 year median of 2.05. The Asset/Liability Ratio at 1.55 is lower than the 5 year median of 2.22. Also the current Leverage and Debt/Equity Ratios at 2.82 and 1.82 are higher than the 5 year median of 1.84 and 0.82. The reason is an increase in long term debt to financial a recent acquisition (Clement Papas). See news story at G&M.

The return on equity has always been good on this stock, with a ROE at the end of 2010 of 15.9% and a 5 year median ROE at the end of 2010 of 16.4%. It would appear that the ROE will be in the same neighborhood in 2011. The ROE on comprehensive income is also good with a 5 year median ROE of 16%.

When I look at insider trading, I find minimal insider buying by a director. There is no insider selling. There are 8 institutions that own some 34% of the outstanding stock of this company. Over the past 3 months there have been no sells and no buys by institutions.

When I look at analysts’ recommendations, I find a couple of Buy and one Hold recommendation. The consensus would be a Buy. The analyst with the Hold recommendation just says the company is a long term hold. The ones with Buy recommendations really like the recent US acquisitions. Feel that it has a good clean balance sheet and the current increase in debt is only temporary. This stock is a buy for long term gains and rising income.

I get 5 year median low and high Price/Earnings ratios of 9.66 and 11.88. The current P/E ratio of 10.61 would place the stock price of $68.99 at a reasonable level. I get a Graham Price of $78.68 and the current price is some 12% lower. The median difference between the Graham Price and stock price is the stock price some 7% lower. This also shows a reasonable current stock price.

I get a 10 year median Price/Book Value Ratio of 1.71 and a current one of 1.51. This current one at 88% of the 10 year ratio shows a reasonable to good stock price. The only test not to show a good current price is the dividend yield which at 1.71 is some 10% below the 5 year median dividend yield of 1.95%. The reason for this is that the most recent dividend increase is just 4.3%, one that is lower than usual for this company.

I am not in the market for a consumer staples type stock, but if I was I would certainly consider this stock. It has done well over the years. I will continue to follow this stock.

Lassonde Industries Inc. is a leading manufacturer of pure fruit juices and fruit drinks in Canada, and the largest manufacturer and distributor of apple juice in Eastern Canada. Through its subsidiaries, Lassonde is active in the processing, packaging and marketing of food products such as pure fruit juices, fruit and citrus drinks, the canning of corn on the cob for foreign markets as well as dipping sauces, fondue bouillon, meat marinades, barbecue sauces and baked beans. The Company also markets its know-how in Canada and abroad. Its web site is here Lassonde. See my spreadsheet at las.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.