Molson Coors Canada

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Sound bite for Twitter and StockTwits is: Stock price is reasonable to expensive. The only test that shows that this stock might be priced reasonably is the historical median dividend yield test in US$. The problem for Canadians if they buy into this stock via the TSX is that only 9% of the outstanding shares are traded on the TSX. See my spreadsheet on Molson Coors Canada.

I do not own this stock of Molson Coors Canada (TSX-TPX.B, NYSE-TAP). In 2008 I did a spreadsheet on this stock as it has recently been recommended and generally, beer companies make good money. Labatt's was one of the original companies that I purchased and I did very well with it before it was bought out.

Ever since Molson was bought out in 2005, the dividends have been paid in US$. The problem with dividends paid in US$ is that you never really know how much in dividends you are going to receive in any given year. Currently because of the weak CDN$, dividends are rising for Canadian Shareholders. So, although dividends are rising in US$ each year, it does not mean that they will rise in CDN$ each year.

The dividends have grown in US$ by 10% and 13.7% per year over the past 5 and 10 years. The dividends have grown in CDN$ by 12.3% and 8.24% per year over the past 5 and 10 years. The current dividend yield is 1.86%. So dividends are low and the dividend increases are moderate.

Canadian investors in this stock have done well over the past 5 and 10 years. The Total Return that I get is 20.14% and 13.63% per year. The portion of this return attributable to dividends is 2.17% and 1.83% per year. The portion of this return attributable to capital gains is 17.96% and 11.80% per year. The capital gains I calculated is correct, but I do not have the exact exchange rate used for each dividend, so the dividend portion of this calculation probably would not be exactly correct, but it is probably reasonable.

There are two types of shares, Class A that is voting and Class B that is non-voting. Both classes of shares are sold on the exchanges. On the NYSE you have TAP.A and TAP shares and on the TSX you have TPX.A and TPX.B shares. The common shares to buy on the TSX are the TPX.B shares and they make up just over 9% of the outstanding shares. Outstanding shares have increase by 1% and 7.7% per year over the past 5 and 10 years. The 10 year increase is mainly because of the almost 87% increase in shares for the purchase of Molson.

All growth is in US$ as this company is reporting in US$. Revenue growth is non-existent to moderate. Earnings growth is non-existent to low. Cash Flow growth is low to good.

Revenue is up by 6.5% and down by 0.4% per year over the past 5 and 10 years. Revenue per share is up by 5.4% and down by 9.3% per year over the past 5 and 10 years. Analysts expect Revenue to decline around 13% in 2015.

EPS is down by 6.5% and up by 0.6% per year over the past 5 and 10 years. Analysts expect EPS to grow by 23% in 2015. However, if you compare the 12 month period to the end of 2015 to the 12 month period to the end of the second quarter, EPS is down by 4.2%.

Cash Flow is up by 3.5% and 9.9% per year over the past 5 and 10 years. CFPS is up by 2.5% and 0% per year over the past 5 and 10 years. Analysts expect Cash Flow to decrease this year by 38%.

Return on Equity has been below 10% every year of the past 5 years. The ROE for 2015 is 6.5% and the 5 year median is 6.6%. The comprehensive income is negative in 2015. This is not a good sign and suggests caution.

The debt ratio that I do not like is the Liquidity Ratio and it is 0.68 in 2015. If you add in dividends after cash flow it becomes 1.10. This is still low and under the 1.50 I like.

The 5 year low, median and high median Price/Earnings per Share Ratios are 12.59, 15.40 and 18.21. The corresponding 10 year values are higher at 15.32, 16.94 and 18.55. The historical median P/E Ratio is 12.59 which is closes to the 5 year values. The current P/E Ratio is 25.91 based on a stock price of $115.24 CDN$ and 2015 EPS estimate of $4.45 CDN$. This stock price testing suggests that the stock price is relatively expensive.

I get a Graham Price of $70.13 CDN$. The 10 years low, median and high median Price/Graham Price Ratios are 0.79, 0.87 and 0.98. The current P/GP Ratio is 1.64 based on a stock price of $115.24 CDN$. This stock price testing suggests that the stock price is relatively expensive.

I get a 10 year Price/Book Value per Share Ratio of 1.14. The current P/B Ratio is 2.34 based on BVPS of $49.15 CDN$ and a stock price of $115.24 CDN$. The current P/B Ratio is some 105% higher than the 10 year ratio. This stock price testing suggests that the stock price is relatively expensive.

The 5 year median dividend yield is 2.64%. The current dividend yield is 1.86% based on dividends of $2.15 CDN$ ($1.64 US$) and a stock price of $115.24 CDN$. The historical median dividend yield is 2.32%. These yields are 29% and 20% higher than the current yield. This stock price testing suggests that the stock price is relatively expensive.

A cursory glance at my spreadsheet shows that the only stock price test that is better in US$ is the one for the historical median dividend yield. In US$ the historical median dividend yield is just 1.88% and this is quite close to the current dividend yield of 1.86%. In this test the stock price would be relatively reasonable.

Note that the dividend yield is the same in both currencies as most ratio also. I am also following the US$ from Coors into Molson Coors and the CDN$ from Molson in Molson Coors. The buyout of Molson occurred in 2005, just 10 years ago.

When I look at analysts' recommendations, I find Strong Buy, Buy and Hold recommendations. The 12 months consensus stock price is $104.00 US$. This implies a total return of 19.91% with 1.86% from dividends and 18.05% from capital gains.

This article in the Denver Post talks about third quarter profit for this company despite lagging sales. This article in the Vancouver Sun talks about an iconic Molson brewery in downtown Vancouver closing, but the company will build a plant elsewhere in B. C. This article in the Toronto Star discusses how a merger of Anheuser Busch InBev and SABMiller could benefit Molson Coors.

I will have only one entry for this stock as I must do on some stock because I cover too many stocks to do double entries on all that I follow.

Molson Coors Brewing Company is a leading global brewer delivering extraordinary brands that delight the world's beer drinkers. It brews, markets and sells a portfolio of leading premium brands such as Coors Light, Molson Canadian, Carling, Blue Moon, and Keystone Light across North America, Europe and Asia. It operates in Canada through Molson Coors Canada; in the US through Miller Coors; and in the U.K. and Ireland through Molson Coors UK. Its web site is here Molson Coors Canada .

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.

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