Loblaw Companies Ltd.

I do not own this stock of Loblaw Companies Ltd. (TSX-L, OTC- LBLCF), but I used to. I have followed this stock for some time. I got the stock from Mike Higgs' list of dividend growth companies. I owned it from 1996 to 2007. It was originally a great stock. I sold it in 2007 because it was having problems with its tech upgrade to its supply system.

After a very long time of no dividend increases, from 2006 to 2011 inclusive, this company has again become a dividend growth company. In 2012 the dividend increase was 4.8%, in 2013 the increase was 9.1%, but for 2014 the increase has been only at 2.1%.

The low rise in 2014 probably has to do with the low expected EPS for 2014. However, the low EPS for 2014 has mostly to do with right-offs than with actual earnings. EPS for 2014 is expected to be only at $0.82. EPS for 2013 was $2.22 and for 2015 is expected to be $2.99.

The recent change to the dividend policy is probably why investors have made money over the past 5 years, but not the past 10 years. The total returns to date over the past 5 and 10 years is 11.45% gain per year and 1.69% loss per year. The portion of this total return attributable to dividends is at 2.20% and 1.38% per year over the past 5 and 10 years. The portion of this total return attributable to capital gains and losses is at 9.24% per year gain over the past 5 years and 3.07% per year loss over the past 10 years.

There has been no growth in outstanding shares over the past 5 and 10 years. Shares have increased due to Shares Issues, Stock Options and DRIP. Shares have decreased due to Buy Backs. However, note that for 2014 has have increased by 46% due to the takeover of Shoppers.

The growth in last 5 and 10 years has not been great for revenue, earnings or cash flow however, analysts expect better this year and next year. For example revenue per share is up by 0.4% and 2.3% per year over the past 5 and 10 years. Analysts do not expect much in 2014, but expect a growth of over 7% in 2015.

The growth in EPS over the past 5 and 10 years is at 2.2% per year and a negative 3.1%per year. EPS is expected to be low in 2014 mainly because of write-offs and integration of Shoppers. However, in 2014 EPS is expected to be up by 35% over 2012.

The growth in Cash Flow per Share over the past 5 and 10 years is at 2.6% and 2.8% per year. Not much growth is expected in 2014, but CFPS is expected to grow by 26% in 2015.

The Return on Equity has been below 10% 5 of the last 10 years and twice over the past 5 years. The ROE for 2013 is at 9% and the 5 year median ROE is at 10%. The ROE on comprehensive income for 2013 was at 12.2%, but the 5 year median ROE was at 9.8%

Debt ratios are ok. The Liquidity Ratio is a bit low at 1.43, but if you add in cash flow after dividends the ratio is 1.65. The Debt Ratio is good at 1.51 and Leverage and Debt/Equity Ratios are acceptable at 2.96 and 1.96.

I made money on this stock at 10% per year when I held it between 1996 and 2007. Perhaps it is again in a position to make money for its shareholders. The Weston family has a lot invested in this company and so they are probably motivated to have it earn a decent return for shareholders including themselves.

Sound bit for Twitter and StockTwits is: Probably dividend growth company again. See my spreadsheet at lob.htm.

This is the first of two parts. The second part will be posted on Monday, August 18, 2014 and will be available here. The first part talks about the stock and the second part talks about the stock price.

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. 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.