Monday, July 22, 2013

Loblaw Companies Ltd

On my other blog I am today writing about my politics ...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. In 2007, it was the second year of no dividend increase.

This stock just might be changing back into a dividend growth stock. For the first time since 2005, the company has raised their dividends in 2012 by 4.8%. They have also raised their dividends in 2013 by 9.1%. Prior to 2005, this company had a good reputation of for increasing dividends. The dividend growth back then was around 17.5% per year.

The Dividend Payout Ratios today are not as good as they were prior to 2005 in regards to earnings. Prior to 2005, the DPR for earnings was below 20%. The DPR for earnings was 37% for 2012. It is expected to be around 36% for 2013. The DPR for Cash Flow was always quite low and it is roughly the same with a 5 year DPR rate of 15% with the DPR for CF the same for 2012. Stock prices are still almost 35% below those reached in 2004.

However, shareholders would seem to be again earning money on this stock with the total return at 6.57% per year over the past 5 years. The dividends would be some 2.28% per year of that return and the capital gains would be some 4.28% of that return. Over the past 10 years, shareholders would probably have just broken even.

The outstanding shares have increased marginally (less than 1% per year) over the past 5 and 10 years. They have increased due to DRIP and stock options and decreased due to buy backs. Mostly over the past 5 and 10 years there has been growth in revenue, earnings and cash flow. Some growth is better than others.

The Revenue has increased by 1.5% and 3.2% per year over the past 5 and 10 years. Revenue per Share has increased by 1% and 3% per year over the past 5 and 10 years. Earnings per Share is up by 13.7% over the past 5 years, but down by 1.5% per year over the past 10 years. However, earnings are rather volatile and using the 5 year running averages, I get EPS growth of 4% and 3% per year over the past 5 and 10 years.

The Cash Flow per Share has grown by 5% and 3% per year over the past 5 and 10 years. Book Value per Share has grown at the rate of 2.4% and 4.3% per year over the past 5 and 10 years.

Return on Equity has most years been good with a 5 year median of 10.5%. The ROE for the financial year ending in 2012 was 10.1%. The ROE on comprehensive income is close behind, but below 10% at 9.8% for 2012 and for the 5 year median.

The balance sheet is ok, but not that strong. The Liquidity Ratio is current at 1.27. If you add in expected cash flow less dividends you get to a decent 1.58. The Debt Ratios are fine, with a current one at 1.60. The Leverage and Debt/Equity Ratios are also fine and currently at 2.67 and 1.67.

It certainly is a good sign that the company feels confident enough to raise the dividends in 2012 and 2013. It seems like there is a turnaround in place for this company. Also most view the purchase of Shopper Drug Mart as a positive. See my spreadsheet at lob.htm.

This is the first of two parts. Second part will be posted on Tuesday, July 23rd, 2013 and will be 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.

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