Monday, September 10, 2018

High Liner Foods

Sound bite for Twitter and StockTwits is: Dividend growth consumer. All the stock price tests show this stock as relatively cheap. It is at a low point for a good buy if you believe in this company. Recent problems are the acquisition of Rubicon Resources, product recall and US threatening a tariff on seafood. See my spreadsheet on High Liner Foods.

I do not own this stock of High Liner Foods (TSX-HLF, OTC-HLNFF). This is a stock liked by the Investment Reporter and is considered to be of average risk. The MPL Communication’s site is here. Ryan Irvine of Keystone also likes this company.

When I was updating my spreadsheet, I noticed the stock price went very high in the mid 1980’s then dropped with a low point mid 1990’s to 2000. It has dropped last year by 26% and this year by 47%. They did not have a very good second quarter of 2018, but the dropped probably is the threat of a 25% tariff on some seafood going into US. There is also problems with their recent acquisition and a product recall.

The stock price has fallen because of recent problem so the dividend yield is the highest it has ever been. The historical high yield was 4.43% but the current yield is 7.35%. Prior the dividend yield has always been in the low to moderate ranges. The 5,10 and historical dividend yield medians are 2.41%, 2.59% and 2.16%. The historical low is just 0.79%.

I do not think that there is a question about them covering their dividends. The Dividend Payout Ratio for EPS for 2017 is 46% with 5 year coverage at 38%. The DPR for CFPS for 2017 is 29% with 5 year coverage at 16%. The DPR for EPS estimate for 2018 is 59% with 5 year coverage at 42%. From this perspective, the dividends are safe.

They started to pay dividends late in 2003 and started to grow them in 2008. The dividends have grown nicely until 2017 when the increase was only 3.6%. This last increase was late in 2017 and there has been no increase in 2018 so far. However, the 5 and 10 year growth dividend rates are 22% and 19% per year over the past 5 and 10 years.

The Long Term Debt/Market Cap Ratio was acceptable until this year when it is 1.77. However, this is to do with the drop in Stock Price. So currently I am not worried about this. The Liquidity and Debt Ratios have gone up and down in the past. For 2017 the Liquidity Ratio was 1.76 with the 5 year median at 2.27. The Debt Ratio for 2017 was 1.48 with the 5 year median at 1.41. The Debt Ratio is a bit lower than I like as I like both these ratios to be 1.50 or above.

Leverage and Debt/Equity Ratios are a bit higher than I like to see at 3.07 and 2.07. I would prefer them to be under 3 and under 2 respectively. The 5 year medians are higher at 3.26 and 2.26.

The Total Return per year is show below for years of 5 to 33 in CDN$. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See charts below.

As you can see from the chart below, the stock has not done well lately. You can also see the results of the highs it made in the 1980’s with negative 30 years returns and very low 33 year returns. You can see the company’s history at their site. Also, the Contra the Heard guys talk about this stock in 2000.

Years Div. Gth Tot Ret Cap Gain Div.
5 21.89% 1.77% -1.22% 2.99%
10 18.91% 15.28% 11.88% 3.40%
13-15 14.25% 11.46% 8.95% 2.51%
20 7.70% 6.14% 1.55%
25 6.56% 5.38% 1.17%
30 -2.20% -2.84% 0.64%
33 0.72% 0.07% 0.65%

This second chart is in US$. I just do not have stock prices for this company in US$ for more than 11 years. The stock does not trade much on the US market.

Years Div. Gth Tot Ret Cap Gain Div.
5 16.45% -1.31% -6.42% 5.10%
10 16.10% 15.74% 9.32% 6.43%
13 13.88%

The 5 year low, median, and high median Price/Earnings per Share Ratios are 10.52, 14.66 and 20.13. The corresponding 10 year ratios are9.85, 13.90 and 18.18. The historical corresponding ratios are 8.57, 11.38 and 13.59. The current P/E Ratio is 7.99 based on a current stock price of $7.89 CDN$ and 2018 EPS estimate of $0.99 CDN$ ($0.75 US$). This stock price testing suggests that the stock price is relatively cheap.

I get a Graham Price of $15.4 CDN$6. The 10 year low, median, and high median Price/Graham Price Ratios are 0.78, 1.12 and 1.47. The current P/GP Ratio is 0.51 based on a stock price of $7.89 CDN$. This stock price testing suggests that the stock price is relatively cheap.

I get a 10 year median Price/Book Value per Share Ratio of 2.03. The current P/B Ratio is 0.73 based on Book Value of $359M, Book Value per Share at $10.76 and a stock price of $7.89. The current P/B Ratio is some 64% below the 10 year ratio. This stock price testing suggests that the stock price is relatively cheap.

I get an historical median dividend yield of 2.16%. The current dividend yield is 7.35% based on dividends of $0.58 and a stock price of $7.89 CDN$. The current yield is some 240% below the historical one. This stock price testing suggests that the stock price is relatively cheap.

The 10 year median Price/Sales (Revenue) Ratio is 0.40 US$. The current P/S Ratio is 0.17 US$ based on Revenue of $1,085M US$, Revenue per Share at $32.49 US$ and a stock price of $5.68 US$. The current ratio is some 56% below the 10 year ratio. This stock price testing suggests that the stock price is relatively cheap.

When I look at analysts’ recommendations I find Strong Buy (1) and Hold (5). The consensus recommendations would be a Hold. The 12 month target price is $8.77 CDN$ ($6.66 US$). This implies a total return of 18.47% with 11.12% from capital gains and 7.35% from dividends.

In the news section of their site High Liner talks about their recent acquisition. There is an article in the Chronicle Herald about the disappointing second quarter. It also mentions that us might put a 25% tariff on some seafood going into US. Demetris Afxentiou of Motley Fool is not worried about this stock in the long term. Daryl Painter on Simply Wall Street thinks this is a dividend stock worth considering for an income portfolio. James Risdon on Chronicle Herald talks about High Liner’s product recall. See what analysts are saying about this stock on Stock Chase. The latest reviews are negative.

High Liner Foods Inc is engaged in the processing and marketing of prepared and packaged frozen seafood products. The company produces and markets seafood products for the retail, foodservice and club store channels. Its web site is here High Liner Foods.

The last stock I wrote about was about was ATCO Ltd. (TSX-ACO.X, OTC-ACLLF) ... learn more. The next stock I will write about will Smart REIT (TSX-SRU.UN, OTC-CWYUF) ... learn more on Wednesday, September 12, 2018 around 5 pm. Tomorrow on my other blog I will write about Aurora Village.... learn more on Tuesday, September 11, 2018 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.

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. I am on Instagram. Or you can just Google #walktoronto spbrunner8166 to see my pictures.

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