Metro Inc.

Sound bite for Twitter and StockTwits is: Buy for Dividend Growth. The stock price is relatively reasonable but above the median to relatively expensive. It has been having a great run. The company has been doing a lot of Buy Backs so EPS growth shows better than earnings are actually growing. See my spreadsheet on Metro Inc.

I own this stock of Metro Inc. (TSX-MRU, OTC-MTRAF). I 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. I think that this is a solid dividend growth company and should be considered when looking at Consumer Staple stocks. This stock has an annual reporting date near September 30 each year.

Dividends are low and dividend growth is good. The current dividend is 1.39% based on dividends of $0.56 and a stock price of $40.16. The historical median dividend yield is 1.44% and the 5 year median dividend yield is 1.46%. The dividend growth over the past 5 and 10 years is at 17.3% and 14.5% per year. The last dividend increase was in 2016 and it was for 20%.

They can afford their dividends. The Dividend Payout Ratio for EPS for 2016 is 22.5% and the 5 year coverage is 19.3%. The DPR for CFPS is 13.4% with 5 year coverage at 12%.

I bought this stock 12 years ago for my Trading account. Dividends paid have covered 52.7% of my stock's cost and I am earning 9.51% on my original purchase price.

Since this is a consumer staple stock, it should add stability to your portfolio. You should expect low dividends and moderate to good dividend increase. You would buy for increasing dividends and capital gains.

Since this company has been buying back shares, the outstanding shares have been decreasing at 5% and 3.8% per year over the past 5 and 10 years. To me this means that you should look for growth by looking at Revenue, Earnings and Cash Flow and not at the per share growth values.

For example, Revenue has increased by 2.3% and 1.6% per year over the past 5 and 10 years. Revenue per Share has grown by 7.7% and 5.5% per year over the past 5 and 10 years. Also Net Income has grown by 8.2% and 8.5% per year over the past 5 and 10 years, but EPS is up by 14% and 12.6% per year over the past 5 and 10 years. The thing is that share buy backs can make EPS look better than it actually is.

This stock has been doing very well until this year in the capital gain department. The total return for this stock to the end of December 2016 is 18.95% and 13.51% per year over the past 5 and 10 years. The portion of this total return attributable to capital gains is 17.41% and 12.25% per year over the past 5 and 10 years. The portion of this total return attributable to dividends is 1.54% and 1.26% per year over the past 5 and 10 years.

The stock only appreciated between 2015 and 2016 by 3.7%. The stock appreciation for the previous two years was 43.76% and 24.57% for 2014 and 2015. You wonder if the company can keep up this high growth rate.

The last thing I want to mention is the Liquidity Ratio. This is low and the ratio for 2016 was just 1.12 with a 5 year median of 1.10. If you add in cash flow after dividends, the ratio becomes 1.66 with a 5 year medina of 1.43. The company does depend on cash flow to give adequate cover to their current liabilities.

The 5 year low, median and high median Price/Earnings per Share Ratios are 11.97, 13.28 and 14.58. The corresponding 10 year values are 10.38, 11.64 and 13.47. The corresponding historical values are 9.90, 11.62 and 13.77. The current P/E Ratio is 14.09 based on a stock price of $40.16 and 2017 EPS estimate of $2.85. This stock price testing suggests that the stock price is relatively expensive.

I get a Graham Price of $27.07. The 10 year low, median and high median Price/Graham Price Ratios are 0.88, 0.89 and 1.09. The current P/GP Ratio is 1.48 based on a stock price of $40.16. This stock price testing suggests that the stock price is relatively expensive.

I get a 10 year median Price/Book Value per Share Ratio of 2.06. The current P/B Ratio is 3.51 a value some 70% higher. The current P/B Ratio is based on BVPS of $11.43 and a stock price of $40.16. Problem is that stock price is growing much faster than Book Value. Book Value per Share only grew at 6.18% over the past 5 years. This stock price testing suggests that the stock price is relatively expensive.

The historical dividend yield is 1.44%. The current dividend yield is 1.39% based on dividends of $0.56 and a stock price of $40.16. The current dividend yield is some 3% lower than the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable but above the median.

When I look at analysts' recommendations, I find Strong Buy, Buy, Hold and Underperform recommendations. Most of the recommendations are Buy and Hold. The consensus recommendation would be a Buy. The 12 month stock price consensus is $46.42. This implies a total return of 16.98% with 15.59% from capital gains and 1.39% from dividends.

Staff writers in this Wall Street Confidential Report says the stock has a Williams Percent Range of -62.99 where values can range from 0 to -100. A reading between -80 to -100 may be typically viewed as strong oversold territory. A value between 0 to -20 would represent a strong overbought condition. According to Alexander John Tun of Motley Fool this stock is one of Royal Bank's picks for 2017. See what analysts are saying about this stock on Stock Chase

The last stock I wrote about was about was Magna International Inc. (TSX-MG, NYSE-MGA)... learn more . The next stock I will write about will be Bird Construction Inc. (TSX-BDT, OTC-BIRDF)... learn more on Wednesday, January 04, 2017 around 5 pm. Today on my other blog I will write about Dividend Stocks January 2017... learn more on January 3, 2017 around 5 pm.

Metro is a leader in the food and pharmaceutical sectors. It operates a network of food stores under the banners Metro, Metro Plus, Super C, Adonis and Food Basics. It has 250 pharmacies under the banners Brunet, Clini Plus, Metro Pharmacy and Drug Basics. Its web site is here Metro Inc.

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. I have three blogs. The first talks only about specific stocks and is called Investment Talk. The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter or StockTwits.