Friday, June 14, 2013

Saputo Inc

On my other blog I am today writing about the concept of a Risk Free investments...continue...

I own this stock of Saputo Inc. (TSX-SAP, OTC- SAPIF). I first bought this stock in 2006 and then some more in 2007. However, it was in an RRSP account and since I am taking money out of my RRSPs each year I sold some of this stock in 2012 and 2013. The reason I sold this stock was that it had the lowest dividend yield of stocks in my RRSP Accounts. However, I do like this company and hope to buy some for the trading account at some point.

I have made a total return of 18.11% per year with 5.51% from dividends and 12.60% from capital gains. My dividends look high, but that is because I have sold off a substantial amount of my shares. The total return on this stock over the past 5 and 10 years is at 15.10% and 18.58% per year. The portion attributable to dividends is 1.84% and 2.13%. The portion attributable to capital gains is 13.23% and 16.25% per year. Dividends make of some 12% of the return.

This is a dividend growth stock, but like all stocks the growth in dividends has been slowing. The 5 and 10 year growth in dividends are at 13% and 26% per year, respectively. The last dividend increase was in 2012 and it was for 10.5%.

The Dividend Payout Ratios are good with the 5 year median DPR for earnings at 35% and for cash flow at 24%. The current dividend is just 1.8%. For the stock that I purchased, the dividend yield on my original purchases is at 3.8% and 4.2% after 5 and 6 years. The value of buying dividend growth stocks is the increasing dividends you will receive over time.

The outstanding shares have decreased marginally over the past 5 and 10 years at the rate of 0.9% and 0.5% per year, respectively. Shares have increased due to stock options and share issues and decreased due to share buy backs.

Revenues have grown at the rate of 7.6/% and 8% per year over the past 5 and 10 years. Revenues per Share have grown at the rate of 8.6% and 8.5% per year over the past 5 and 10 years. Earnings have grown at the rate of 11.8% and 11.3% per year over the past 5 and 10 years. Cash Flow per Share has grown at the rate of 11.6% and 10.5% per year over the past 5 and 10 years. This is all good growth.

The Return on Equity is generally quite good under this company with the ROE for the financial year ending in March 2013 at 20.9%. The 5 year median ROE is 18.9%. The ROE for comprehensive income is slightly better for 2013 at 21.3%. The 5 year median ROE for comprehensive income is slightly lower at 18.6%.

The current Liquidity Ratio is just 1.23. If you added back in the current portion of the long term debt you get a more normal Liquidity Ratio for this stock at 1.41. The 5 and 10 year median Liquidity Ratios for this stock is 1.35 and 1.55. The Debt Ratio is 1.80 and this is also lower than normal for this this stock.

The company has gone into debt with their most recent purchase of Morningstar. See the announcement of this purchase here. Generally, companies either use cash on hand, debt or issuance of stock to fund acquisitions. Since interest rates are currently rather low, debt is not a bad way of financing acquisitions.

The current Leverage and Debt/Equity Ratios are higher than normal, but fine at 2.25 and 1.25. The 5 year median Leverage and Debt/Equity Ratios are lower at 1.70 and 0.70. This is also due to the recent debt increase to buy Morningstar.

This is a dividend growth stock and you would buy it for rising dividends and for capital gains. See my spreadsheet at sap.htm.

This is the first of two parts. Second part will be posted on Monday, June 17th and will be here.

Saputo produces, markets, and distributes a wide array of products of the utmost quality, including cheese, fluid milk, yogurt, dairy ingredients and snack-cakes. Saputo is the twelfth largest dairy processor in the world, the largest in Canada, the third largest in Argentina and among the top three cheese producers in the United States. Our products are sold in more than 50 countries under well-known brand names. Its web site is here Saputo.

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.

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