Loblaw Companies Ltd 2

On my other blog I am today writing about Australia Investing by Dividend Ninja ...continue...

I do not own this stock Loblaw Companies Ltd (TSX-L, OTC-LBLCF), but I used to. I bought this stock in 1996 because it was doing great. It was on Mike Higgs' dividend growth stocks list. However, I sold in 2007 because of problems it was having with its tech upgrade to its supply system. I made a return of 10.14% per year on this stock, with 8.23% from capital gains and 1.91% from dividends.

When I look at insider trading, I find $4.2M of insider selling and $4.1M of net insider selling. The insider buying is minimal. Insiders not only have options, but option like vehicles called Performance Share Units, Restricted Share Units and Rights - Deferred Share Units.

The CEO has shares worth $13.9M and has options worth $66.6M. The CFO has shares worth $0.3M and has options worth $15.4M. An officer has few shares and has options worth $1.7M. Another officer has shares worth $0.2M and has options worth $19.3M. A director has shares worth $0.8M and a few options. George Weston Limited has shares worth $8.5B and W. Galen Weston has shares worth $179M. This is just to give you an idea on insider share ownership and option values.

The 5 year low, median and high median Price/Earnings per Share Ratios are 13.20, 15.79 and 17.79. The current P/E Ratio at 18.46 suggests that the stock price is a bit high. This P/E is based on a stock price if $47.80 and 2013 earnings of $2.59.

I get a Graham Price of $36.79 for 2013 and the current Price/Graham Price Ratio is 1.30. The 10 year low, median and high median P/GP Ratios are 1.15, 1.36 and 1.52. The current P/GP Ratio of 1.30 suggests that the stock price is reasonable.

I get a 10 year median Price/Book Value per Share of 1.82. The current P/B Ratio is higher at 2.06. However it is only some 12% higher and this suggests the stock price is reasonable.

The 5 year median dividend yield is 2.31% and the current dividend yield is 2.01%, a value some 13% lower. Although for a good price you would want the current dividend yield to be higher than the 5 year dividend yield, the current dividend yield is only 13% lower and suggests that the stock price is reasonable.

When I look at analysts' recommendations, I find Buy, Hold and Underperform recommendations. The vast majority of the recommendations are a Buy and the consensus recommendation would be a buy. The 12 month consensus stock price if $53.10. This implies a total return of 13.1%, with 2.01 from dividends and 11.09% from capital gains.

A couple of things are happening with Loblaw. One is the spin-off of its real estate into a REIT. See a financial post article on this spin-off. The other thing is the bid to buy Shoppers Drug Mart.

The Motley Fool reviews this stock. However, this report basically tells people who own Shoppers what their options are. I have Shoppers (TSX-SC) and I will probably sell. A Globe & Mail article from 2012 says that Loblaw is not expected to benefit from its tech updates until 2014.

The stock price would appear relatively reasonable at this time. The stock of Loblaw may once again be a dividend growth stock. However, a lot is happening and therefore it has higher risk. See my spreadsheet at lob.htm.

This is the second of two parts. The first part was posted on Monday, July 22, 2013 and is available here.

Loblaw Companies Limited, a subsidiary of George Weston Limited, is Canada's largest food retailer and a leading provider of drugstore, general merchandise and financial products and services. Loblaw offers Canada's strongest control (private) label program, including the unique President's Choice, no name and Joe Fresh brands. In addition, the Company makes available to consumers President's Choice financial services and offers the PC point loyalty program. Its web site is here Loblaw.

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.