Friday, January 2, 2015

Metro Inc.

I have started to again review all my stocks and have started basically where I did in January 2014, with this stock of Metro Inc.

I own this stock of Metro Inc. (TSX-MRU, OTC-MTRAF). I first bought this stock first at the end of 2001 because it is a good time to purchase as market is relatively low and Metro was on my hit list. Metro's P/E is relatively low for this stock. I brought more in 2004. By 2009, Metro stock was over 10% of my portfolio because it had grown so strong, so I sold some to reduce the percentage of it in my portfolio.

This is a dividend growth stock with a low dividend and quite good dividend growth. The current dividend yield is 1.3% and the 5 year median dividend yield is 1.6%. The dividends have grown by 16.4% and 13.5% per year over the past 5 and 10 years. The last dividend increase was in 2014 and the increase was 20%.

I have had this stock since 2004 or for 11 years. My original yield on this stock was 1.9%. My dividends have grown 253% or 12.9% per year. Currently I am getting I am getting a yield of 6.8% on my original investment in this stock. So far my dividends have paid for 40% of my original purchase price for this stock.

The Dividend Payout Ratios are quite low. The 5 year median DPRs for EPS is 17.8% and for CFPS is 13.4%. The DPRs for the financial year ending in September 2014 is 22.7% and 18.3%.

This company has been busy buying back shares. The outstanding shares have decreased by 4.8% and 1.3% per year over the past 5 and 10 years. Because of this you should pay more attention to things like Revenue rather than Revenue per Share.

One concern is the lack of revenue growth. Revenue has only grown at 0.7% and 6.8% per year over the past 5 and 10 years. If you look at the 5 year running average it is a bit better but still very low at 2.9% and 8.1% per year over the past 5 and 10 years. Analysts are only expecting revenue to grow by 3.7% and 2% over the next two years. Revenue growth is important because both earnings and cash flow growth ultimately depends on revenue growth.

Net Income has grown at 4.8% and 10% per year over the past 5 and 10 years. The 5 year running average is also better here with growth of 12% and 13.2% per year over the past 5 and 10 years. With decreasing shares the growth in EPS looks better and can give a false sense of growth. EPS is up by 9.7% and 11.4% per year over the past 5 and 10 years. This is significantly better than net income growth.

Also, with cash flow, you should be paying more attention to cash flow growth than CFPS growth. Cash Flow is up by 0.4% and 9.6% per year over the past 5 and 10 years. CFPS is up by 5.5% and 11.2% per year over the past 5 and 10 years.

The Return on Equity is good with 2014 ROE at 16.8% and with a 5 year ROE at 16.8% also. The ROE on comprehensive income is a little lower but close at 16.1% and with a 5 year ROE at 16.1% also.

The Liquidity Ratio is a bit low at just 1.11. If you add in cash flow after dividends it goes to 1.42. Not a great number, but a better one. Debt Ratio at 2.03 and Leverage and Debt/Equity Ratios at 1.97 and 0.97 are good.

Sound bite for Twitter and StockTwits is: Dividend Growth consumer staple. Growth in Revenue has not been great since 2007. However, a lot of companies have had trouble with this last recession. See my spreadsheet at mru.htm.

This is the first of two parts. The second part will be posted on Monday, January 5, 2015 and will be available here. The first part talks about the stock and the second part talks about the stock price.

Metro is a leader in the food and pharmaceutical sectors. It operates a network of close to 600 food stores under the banners Metro, Metro Plus, Super C, A & P, Dominion, Loeb and Food Basics. It has 250 pharmacies under the banners Brunet, Clini Plus, The Pharmacy and Drug Basics. Metro's operations are concentrated in Quebec and Ontario. Its web site is here Metro.

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.

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