Saputo Inc.

I own this stock of Saputo Inc. (TSX-SAP, OTC-SAPIF). This was a stock on Mike Higgs' Canadian Dividend Growth Stock list and on the dividend lists that I followed. When I sold RIM in 2006 I bought some Saputo. I had been following this stock and thought it was a strong Canadian Dividend paying stock.

In 2012, I sold some that I had in my RRSP account because I need more dividend income and dividend yield is low on this stock. In 2013, I need to raise more money in the RRSP account because of yearly withdrawals. I sold the stock with the lowest dividend yield. I still want to hold this stock, but it would be a better stock in a Trading account rather than in my RRSP accounts because of the low dividends. In 2013 and 2014 I bought some of this stock for my TFSA.

The dividend yield is rather low with a 5 year median of 1.76% and a current dividend yield of 1.42%. The 5 and 10 year dividend growth is at 10.8% and 24.2% per year. The last dividend increase was in 2014 and it was for 9.5%. On my 2006 investment, I am making a dividend yield of almost 5%.

It is young fast growing companies that can provide dividend increases in the 20% range. 10 years ago this company was worth around 3B and today it is worth some 13B. The last big dividend increase on this stock was in 2010. The last recession has been hard on a lot of companies. It is a balance sheet recession (i.e. debt problem) and these sorts of recessions tend to have long slow recoveries. So, in other words, I am not surprised by the slowdown in dividend growth.

I have made a return of $18.08% per year on this stock. Of this total return, 16.05% per year is attributable to capital gains and 2.03% per year to dividends. The 5 and 10 year total returns on this stock are at 18.10% and 15.51% per year. The portion of this return attributable to capital gains is at 16.19% and 13.63% per year. The portion of this return attributable to dividends is at 1.87% and 1.91% per year.

The outstanding shares have decreased by 1% per year over the past 5 and 10 years. Shares have increased due to Stock Options and Share Issues. Shares have decreased due to Buy Backs. There has been great growth in Revenue, Earnings and Cash Flow over the past 5 and 10 years.

Revenue has grown at 9.8% and 10% per year over the past 5 and 10 years. Revenue per Share has grown at 11% and 10.7% per year over the past 5 and 10 years. EPS has grown at 15% and 10% per year over the past 5 and 10 years. Cash Flow per Share has grown at 16% and 11% per year over the past 5 and 10 years.

The Return on Equity has been above 10%. The ROE for the 2014 financial year ending in March 2014 is at 18.8%. The 5 year median ROE is 18.9%. The ROE on Comprehensive Income for 2014 is higher at 26.1% and has a 5 year median ROE at 18.6%.

The Debt Ratios are fine. It would be nice if the Liquidity Ratio was a bit higher and the Leverage and Debt/Equity Ratios a bit lower. The Liquidity Ratio for 2014 is at 1.10. If you add in cash flow after dividends it becomes 1.38. A comfortable ratio would be at 1.50. The Debt Ratio at 1.81 is quite good.

Leverage and Debt/Equity Ratios are at 2.24 and 1.24. The 5 year median for these ratios is much better at 1.70 and 0.70.

This has been a very profitable dividend growth stock investment for me. It is interesting that a company that makes and markets cheese can be so profitable. See my spreadsheet at sap.htm.

This is the first of two parts. The second part will be posted on Friday, July 11, 2014 and will be available here. The first part talks about the stock and the second part talks about the stock price.

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. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

See my website for stocks followed and investment notes. Follow me on Twitter or StockTwits.