Loblaw Companies Ltd

Sound bite for Twitter and StockTwits is: Dividend growth consumer. I will continue to do most of my shopping at Loblaws, but I will also continue to hold the Metro Inc. stocks rather than getting any Loblaw stock. See my spreadsheet on Loblaw Companies Ltd.

I do not own this stock of Loblaw Companies Ltd. (TSX-L, OTC-LBLCF). 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 and it did not seem that it would be fixed anytime soon.

Let's face it, I do like shopping at Loblaw's stores and I certainly like getting free groceries. However, they have never really fixed their supply chain IT. I go to Metro sometimes and when they run out of stuff, they get more the next day. With Loblaw it can be a week or more. This has been going on a very long time.

Well, at least Loblaw is back to earnings money and they restarted dividend increases in 2012. However, both the dividend yield and dividend increases are quite low. The current dividend yield is 1.59% and the 5 and 10 year growth is at 4.12% and 2.1% per year. The last increase was in 2017 and it was for 3.8%. The Dividend Payout Ratio is 43.5% in 2016 with 5 year coverage of 56%.

Looking at Metro Inc. (TSX-MRU, OTC-MTRAF) I find a dividend yield of 1.62% with dividend growth of 17.3% and 14.5% per year over the past 5 and 10 years. The last increase was in 2017 and it was for 16.1%. The Dividend Payout Ratio is 22.46%% in 2016 with 5 year coverage of 19.3%. I think these facts covers real difference between Metro and Loblaw.

The debt ratios for Loblaw are fine. Return on Equity is rather low with ROE above 10% only once in the past 5 years and twice in the past 10 years. The ROE for 2016 is 7.5% with a 5 year median of 7.5% also. The ROE on comprehensive income is a bit higher with the ROE for 2016 at 7.9% and the 5 year median also at 7.9%. (Bye the way, the ROE for 2016 for Metro was 21.3% with a 5 year median of 19.1%.

The 5 year low, median and high median Price/Earnings per Share Ratios are 26.28, 28.80 and 31.32. The corresponding 10 year values are 15.87, 18.25 and 20.63. The historical ones are 16.84, 19.10 and 21.19. The reason the 5 year values are so high as the EPS dropped in 2015 and P/E Ratio shot up to as high as 516. Yes, that is correct to a value over 500. The current P/E Ratio is 15.44. This is based on a stock price of $68.10 and 2017 EPS of $4.41. This stock price testing suggests that the stock price is relatively cheap.

I get a Graham Price of $56.38. The 10 year low, median and high median Price/Graham Price Ratios are 1.05, 1.18 and 1.33. The current P/GP Ratio is 1.21 based on a stock price of $68.10. This stock price testing suggests that the stock price is relatively reasonable but above the median.

I get a 10 year median Price/Book Value per Share Ratio of 1.74. The current P/B Ratio is 2.13 a values some 22% higher. The current P/B Ratio is based on Book Value of $12,664M, BVPS of $32.04 and a stock price of $68.10. This stock price testing suggests that the stock price is relatively expensive.

I get an historical median dividend yield of 1.21%. The current dividend yield is 1.59% based on a stock price of $68.10 and dividends of $1.08. The current dividend yield is some 31% above the historical median. This stock price testing suggests that the stock price is relatively cheap.

When I look at analysts' recommendations, I find Buy and Hold recommendations. Most are Buy recommendations and the consensus is a Buy recommendation. The 12 month consensus stock price is $79.55. This implies a total return of 18.40% with 16.81% from capital gains and 1.59% from dividends based on a current price of $68.10.

In this BNN article from Arathy S Nair of the Canadian Press Loblaws says it anticipates competition between supermarket chains will be fierce this year as food prices continue to stay low. Stephanie Bedard-Chateauneuf of Motley Fool says this company is not a buy currently. Ryan Goldsman of Motley Fool compares Metro and Loblaw companies. See what analysts are saying about this stock on Stock Chase.

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 Companies Ltd.

The last stock I wrote about was about was Ballard Power Systems Inc. (TSX-BLDP, NASDAQ-BLDP)... learn more. The next stock I will write about will be Newfoundland Capital Corp. (TSX-NCC, OTC-none)... learn more on Friday, August 11, 2017 around 5 pm. Tomorrow on my other blog I will write about Volatility... learn more on Thursday, August 10, 2017 around 5 pm.

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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