Tuesday, July 16, 2013

Jean Coutu Group Inc

I do not own this stock of Jean Coutu Group Inc (TSX-PJC.A, OTC-JCOUF), but I used to. I bought this stock first in 2000 for my RRSP account. In 2004, I bought some for my trading account. It had increasing dividends, a good P/E Ratio and it was a stock I already owned. In 2007, I was looking to buy a condo and so had to raise some money for a mortgage. This company was not doing that well at the moment, so I sold.

I started to follow this stock as it was on Mike Higgs' list of dividend growth stocks. It was also on Investment Reporters stock list. For a company history, see Wikipedia.

For the stock I bought in 2000 and sold in 2007, I made a profit of 11.54% per year. Of my return, 10.41% per year was from capital gains and 1.13% per year was from dividends. For the stock I bought in 2004, I lost 7.92% per year with a capital loss of 8.63% per year and dividends at 0.79% per year.

This company has a very good record for dividend increases, with the 5 and 10 year growth in dividends at 15% and 11% per year, respectively. The dividends have been rather low, but the current one is respectable at 1.8%. However, before 2007, the dividend yield was 1% or less generally.

When I originally bought this stock it was considered to be a dividend growth stock. However, it did have serious problems starting in 2007 and had losses in both the 2008 and 2009 financial years. Generally speaking, shareholders have done better over the past 5 years than over the past 10 years. It would seem that the problems are behind this company.

For example, the total return over the past 5 years is at 7.3% per year, with 5.4% from capital gains and 1.9% from dividends. Over the past 10 years, stockholders have broken even with dividends at 1.2% per year and capital losses at 1.2% per year.

Over the past 5 and 10 years, the shares outstanding have decreased by 2.89% and 0.55% per year. Shares have increased due to stock options and decreased due to buy backs. There are also two classes of shares, with the Class A shares on the TSX being Subordinate Voting shares and Class B shares being multiple voting shares. As far as I can see Jean Coutu owns all the Class B shares.

Revenues are up by 10% per year over the past 5 and down by 3.8% 10 years. Revenue per Share is up by 13.6% per year over the past 5 years, but down by 3.3% per year over the past 10 years. Earnings per Share are up by 24% and 14% per year over the past 5 and 10 years. Cash Flow per Share is up by 16% per year over the past 5 years and even over the past 10 years.

As with a lot of family owned businesses, the debt ratios are very good. The current Liquidity Ratio is 2.06 and the current Debt Ratio is 5.17. The current Leverage and Debt/Equity Ratios are also very good at 1.24 and 0.24.

The Return on Equity was very high for the financial year ending March 2013 at 50%. The ROE on comprehensive income was close and even better at 53%. The 12 month ROE ending in the first quarter of 2014 with a financial date of June is more normal at 21%.

This stock seems to becoming a dividend growth stock again. See my spreadsheet at pjc.htm.

This is the first of two parts. Second part will be posted on Wednesday, July 17th, 2013 and will be here.

The Jean Coutu Group operates a network of 343 franchised drugstores in Canada located in the provinces of Quebec, New Brunswick and Ontario (under the banners of PJC Jean Coutu, PJC Clinique and PJC Santé Beauté). Controlling shareholder is Jean Coutu. He has 55%, but has 92.5% voting control. Its web site is here Jean Coutu.

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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