Tuesday, September 1, 2015

Jean Coutu Group Inc.

Sound bite for Twitter and StockTwits is: Dividend Growth Consumer Staple. This is a consumer stock so it has some volatility. Dividends are low but growth is good. With the current dividend and growth rate you should be getting a dividend around 6% in 10 years' time. See my spreadsheet at pjc.htm.

I do not own this stock of Jean Coutu Group Inc. (TSX-PJC.A, OTC-JCOUF), but I used to. I bought this stock first in 2000 for my RRSP account. In 2004, I bought some of this stock for my trading account. In 2007, I sold this stock in my RRSP account because I wanted money to invest in Saputo which I liked better at that time. Also, in 2007, I was looking to buy a condo and so was looking to raise some money for a mortgage. This company was not doing that well at the moment, so I sold the stock in my Trading Account.

This company is currently reporting in CDN$. It reported in US$ for a short time between 2005 and 2007 inclusive. All my values will be in CDN$ terms. The company's annual report is dated near the end of February each year.

This is a dividend growth company. The dividends are low to moderate and the dividend increases are moderate. The current dividend yield is 1.91%. The 5 year median dividend yield is 2.27% and the historical median dividend yield is 0.73%. Dividend yield was quite low, generally below 1% until 2008. Personally, I do not buy stocks with a dividend under 1%. It takes too long to get a decent yield on your original purchase price. I would buy a low yield stock once the dividend popped up over 1%.

The 5 and 10 year dividend growth is at 13.8% and 12.8% per year over the past 5 and 10 years. Dividends have gone up over the years, but not consistently. There have been years of large dividend increases and other years with no dividend increase at all.

The Dividend Payout Ratios are good. The 5 year median DPR for EPS is 30.5% and the CFPS is 28.6%. The DPR for the financial year ending in February 2015 was 34.5% for EPS and $29.1% for CFPS. Similar results are expected in the future.

This company has had problems at different times in the past, but it is a consumer stock. The stock has done well over the past 5 years. The total return over the past 5 and 10 years is at 20.23% and 5.88% per year. The portion of this total return from dividend is at 3.39% and 1.76% per year. The portion of this total return from capital gain is at 16.84% and 4.12% per year.

The outstanding shares have decreased by 4.6% and 3.3% per year over the past 5 and 10 years. This makes growth in revenue, cash flow and earnings more important than growth in Revenue per Share, CFPS and EPS. Revenue growth is non-existent to low. Earnings growth is moderate to good. Cash Flow growth is non-existent to moderate.

Revenue is down by 1.3% and 13.5% per year over the past 5 and 10 years. Analysts expect low growth in Revenue to continue with growth at less than 1% for the 2016 financial year and then moderate growth.

Earnings (or net income) have grown at 14.2% and 5.3% per year over the past 5 and 10 years. EPS looks much better with growth at 15.4% and 8.5% per year over the past 5 and 10 years. EPS has been declining over the past 2 years. It is expected to growth around 2.6% for the 2016 financial year. If you look at EPS to the end of February 2015 and the end of the first quarter, it is down by 1.7%.

The Return on Equity has been very good lately with ROE for the 2015 financial year at 21.3% and the 5 year median at 35.4%. ROE on Comprehensive Income is similar. The reason for the high ROE is the decline in Book Value (or Equity). BVPS is down by 2.1% per year over the past 10 years. It has been improving lately. (High ROEs are not necessarily a good thing.)

The debt ratios are very good. The Liquidity Ratio is 1.95. The Debt Ratio is 4.25 and Leverage and Debt/Equity Ratios are 1.31 and 0.31 for the 2015 financial year.

This is the first of two parts. The second part will be posted on Wednesday, September 2, 2015 and will be available here. The first part talks about the stock and the second part talks about the stock price.

The Jean Coutu Group is one of the most trusted names in Canadian pharmacy retailing. The Corporation operates a network of 413 franchised stores located in the provinces of Québec, New Brunswick and Ontario under the banners of PJC Jean Coutu, PJC Clinique, PJC Santé and PJC Santé Beauté. Furthermore, the Jean Coutu Group owns Pro Doc Ltd ("Pro Doc"), a Québec-based subsidiary and manufacturer of generic drugs. Controlling shareholder is Jean Coutu. Its web site is here Jean Coutu Group.

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.

No comments:

Post a Comment