Canada Bread Co. 2

On my other blog I am today writing about the different types of dividend stock...continue...

I do not own this stock of Canada Bread Co. (TSX-CBY, OTC-CBDLF) but I used to. I held it in the past from 1999 to 2000, but I sold as I thought it was going nowhere. One thing that has occurred since I owned this stock is that it merged with Maple Leaf's baking division and now Maple Leaf owns 90% of Canada Bread. It also recently upped their dividend to 4%. It is a stock MPL Communications occasionally talks about.

When I look at the insider trading reporting, I find no insider buying and no insider selling. Generally insiders own some shares in the company, but not much. There are no options outstanding. What insiders do have is shares and options in Maple Leaf Foods Inc. For example the CEO of this company has $6.3m in shares in Maple Leaf and almost $22M in options in Maple Leaf. (As mentioned on Friday, Maple Leaf Foods own 90% of this company.)

There some institutional holder in this stock. However, this is little. Some 4 institutions own some 1.8% of the outstanding shares. Over the past 3 months they have decreased their ownership by 7%.

The 5 year low, median and high median Price/Earnings Ratios are 15.76, 20.47 and 23.44. The current P/E ratio of 16.26 is based on a stock price of $49.75 and 2012 earnings $3.06. This relatively low P/E ratio suggests that the current stock price is relatively low.

I get a Graham Price of $42.64. The 10 year low, median and high median Price/Graham Price Ratios are 0.99, 125 and 1.28. The current ratio of 1.17 is towards the low end and this low Ratio suggests that the stock price is reasonable to low.

I get a 10 year Price/Book Value per share Ratio of 2.00. The current P/B Ratio is 1.88 and this is at 94% of the 10 year median ratio. This low P/B Ratios suggests that the stock price is reasonable.

The Dividend Yield test would not be a good one here because of the recent high dividend increases. The 5 year median Dividend yield is just 0.49 and the current yield is more than 700% higher at 4.02%.

It would appear from all the above that the current stock price is relatively speaking reasonable to low.

As far as I can see there is only one analyst following this stock and the recommendation for this stock is a Hold. The 12 months stock price is $53.00. This implies a 10.55% total return with 4.02% from dividends and 6.53% from capital gains. I cannot find out why. Barchart gives a favorable technical opinion on this stock.

One problem with this company is lack of liquidity in share trading. This is because of Maple Leaf Foods large ownership. A number of analyst remarked about this company being in a stable business. One thought that the dividend is likely to grow in the future.

There is an interesting ad for Dempster's bread (one of Canada Bread's brands) talked about at the Financial Post. They also have an interesting article about consumers wanting to go gluten free and how this might affect earnings for Maple Leaf Foods and this company.

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. 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 or StockTwits.