Wednesday, August 7, 2013

High Liner Foods

I do not own this stock of High Liner Foods (TSX-HLF, OTC-HLNFF). This is a stock Investment Reporter has been talking about and is considered to be of average risk. I have been meaning to look at it for a while. Ryan Irvine of Keystone also likes this company. Just recently, in July 2013, a reader of my blog also asked me to take a look at this stock.

Since this company started to pay dividends in 2003, the dividends have grown at 8.59% per year over these 9 years. Dividends have grown at the rate of 16% per year over the past 5 years. After the company started to pay dividends, they were flat for a number of years and they just started increasing them in 2010. The current dividend yield is 2.29%.

Generally speaking the Dividend Payout Ratios are good with the 5 year median DPR for earnings at 28%. The DPR for earnings was very high for 2012 because 2012 was a bad year, but the company had enough confidence in 2013 to raise the dividends by 20%. The DPR for cash flow is also good at 13%.

One complaint is that the company has made their financial reporting unnecessarily complex. Not only have they switch currencies to US$ from CDN$ for the 2012 financial year, they do not make their financial reports on the same day every year. For example in for the 2010 year, their reporting date is January 1, 2011, for 2011 it is December 31, 2011 and for 2012 it is December 29, 2012.

Looking at the history of this company, you can see that the stock is at the same stock price as the company had in 1990. The company used to be called National Sea Products and in the mid 1980's the stock of this company hit around $140.00 per share ($35.00 before 4 to 1split of 1995). The stock fell when fish processing plants in eastern Canada had problems. The stock basically languished for quite some time. Investment Report became interested in it when after the company started to pay dividends. The stock really did not do much until the rise in the stock price in 2010.

It is because of the relatively recent rise in stock price that gives the total return over the past 5 and 10 years such very good returns. The total return over the past 5 and 10 years is at 28.67% and 15.90% per year with 1.95% and 1.48% per year of this return from dividends and 26.72% and 14.42% of this return from capital gains.

Over the past 5 and 10 years the shares have increased by 2.5% and 4.4% per year. Shares have increased due to shares being issued, Debentures being converted to shares and stock options. They have decreased due to share buy backs. Generally speaking, revenues, earnings and cash flow have increased better over the past 5 years than over the past 10 years.

Revenue is up by 28.5% and 11.5% per year over the past 5 and 10 years. Revenue per Share is up by 25.4% and 6.8% per year over the past 5 and 10 years. If you use the 5 year running averages over the past 5 and 10 years, Revenue per Share is up by 11% and 3% per year over the past 5 and 10 years.

If you look at earnings per share growth over the past 5 and 10 years, it is down sharply. However, if you look at 5 year running averages over the past 5 and 10 years you get growth of 20.5% and 6.7% per year. EPS has been quite volatile over the years and there have been a couple of years of losses.

For cash flow per share, growth is at 33% and 14% per year over the past 5 and 10 years. However, if you look at 5 year running averages, the growth is just 16.6% and 5.4% per year over the past 5 and 10 years. The cash flow is also volatile year to year.

As far a Return on Equity goes, 2009 to 2011 inclusive were good years. The most recent year of 2012 was not a good year with ROE at just 1.4%.

The Liquidity Ratio for 2012 is 1.55 and this is a good value. The 5 year median ratio is a bit better at 1.65. The Debt Ratio for 2012 is at 1.32 and this is low. It was also low for 2011. The 5 year median ratio is much better at 1.83. (There was a rise in long term debt in 2011.) The current Leverage and Debt/Equity Ratios are a bit high but ok at 3.26 and 2.26. They are better than they have been for a couple of years.

I wished I could say that this is a gem of a stock, but I cannot. It has a very checkered past. Currently it has a reasonable dividend and has good dividend increases. This gives it the look of a dividend growth stock. But, how long with this continue? It is a consumer stock, so it will be affected by recessions. See my spreadsheet at hlf.htm.

This is the first of two parts. Second part will be posted on Thursday, August 8th, 2013 and will be here.

High Liner Foods is the leading North American processor and marketer of value-added frozen seafood. Their retail branded products are sold throughout the United States, Canada and Mexico and are available in most grocery and club stores. They also sell their branded products to restaurants and institutions and they are the major supplier of private label value-added frozen seafood products to North American food retailers and food service distributors. Its web site is here High Liner.

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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