Monday, October 29, 2018

Molson Coors Canada

Sound bite for Twitter and StockTwits is: Dividend Growth Consumer. It seems rather cheap, but brewing is a mature business. Liquidity Ratio is low and this will make the company vulnerable in hard times. 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.

When I was updating my spreadsheet, I noticed I could not find out who is the current chairman. They say that Geoffrey E. Molson stopped being Chairman in May 2017 and that is all I can find. He is listed as Chairman still in 2017 annual report. This stock also reports in US$ and dividends are paid in US$.

For the Canadian Holders of Molson Coors Canada Inc (TSX-TPX.B), Dividend yields are moderate (2% and 3% ranges). The current yield is 2.74%, with 5, 10 and historical median yields are 2.09%, 2.20% and 2.11%.

For Canadians dividends growth is moderate (8% to 14% ranges) recently but this has to do with the exchange rates. In US$ the dividend growth has stalled and it is currently low. The company stopped raising dividends in 2015. However, analysts think that there might be some increase late this year or in 2019. See charts below for the dividend growth for TSX-TPX.B and NYSE-TAP

They can clearly afford their dividends as the Dividend Payout Ratio for 2017 is 25% with 5 year coverage at 31%. The DPR for Cash Flow for 2017 is 19% with 5 year coverage at 25%. The DPR for Cash Flow excluding WC for 2017 is 17% with 5 year coverage at 22%. This is in US$.

The Long Term Debt/Market Cap Ratio for 2017 is 0.57 and the currently one is 0.74. These are fine. The Liquidity Ratio is low at just 0.64. This means that the current assets cannot cover current liabilities. If we added in cash flow after dividends it is 1.08. If we also add in the current portion of long term debt it is only 1.37. This is still lower as I would prefer the Liquidity Ratio be 1.50 or higher. Low Liquidity Ratios makes a company vulnerable in bad times.

The Debt Ratio is good at 1.80. I prefer this ratio to be 1.50 or higher also. Leverage and Debt/Equity Ratios for 2017 are 2.29 and 1.27 respectively, with 5 year median ratios at 1.76 and 0.76. These ratios have been higher the last two years, but they are fairly typical for this sort of company.

The Total Return per year is show below for years of 5 to 21 for CDN$ stock TSX-TPX.B. 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.

Shareholders have done well with this stock over the years.

Years Div. Gth Tot Ret Cap Gain Div.
5 9.99% 22.92% 19.77% 3.15%
10 12.52% 9.51% 7.47% 2.05%
15 9.49% 7.65% 5.26% 2.39%
20 7.33% 13.23% 9.88% 3.35%
21 6.97% 12.15% 9.09% 3.06%


This next chart is for US$ stock of NYSE-TAP for the years of 5 to 23. I have more data on the dividends than on the stock price. The US shareholders have also done well over the years.

Years Div. Gth Tot Ret Cap Gain Div.
5 5.08% 16.69% 13.91% 2.78%
10 9.87% 8.37% 6.23% 2.14%
15 9.68% 8.76% 6.79% 1.96%
20 9.34% 10.31% 8.24% 2.07%
25-23 7.81% 13.03% 10.43% 2.61%
27 7.22%


The 5 year low, median, and high median Price/Earnings per Share Ratios are 12.49, 15.40 and 18.21 in CDN$. The corresponding 10 year median ratios are 12.30, 14.76 and 17.22. The corresponding historical median ratios 12.30, 15.25 and 18.21. The current P/E Ratio is 12.57 CND$ based on the stock price of $78.40 CDN$ and 2018 EPS of $6.24 CDN$. This stock price testing suggests that the stock price is relatively reasonable and below the median.

I get a Graham Price of $103.30 CDN$. The 10 year low, median, and high median Price/Graham Price Ratios are 0.82, 0.92 and 1.04. The current P/GP Ratio is 0.74 CDN$ based on a stock price of $78.40 CDN$. 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 1.23 CDN$. The current P/B Ratio is 0.99 based on Book Value of $17,796M CDN$, Book Value per Share of $78.99 CDN$ and a stock price of $78.40 CDN$. The current P/B Ratio is 19% below the 10 year ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.

I get an historical median dividend yield of 2.11% CDN$. The current dividend yield is 2.74% CDN$ based on a stock price of $78.40 CDN$, dividends of $2.15 CDN$. The current dividend yield is some 30% higher than the historical yield. This stock price testing suggests that the stock price is relatively cheap.

The 10 year median Price/Sales (Revenue) Ratio is 2.52 CDN$. The current P/S Ratio is 1.20 CDN$ based on a stock price of $78.40 CDN$, Revenue estimate for 2018 of $14,758M and Revenue per Share of $65.51. The current P/S Ratio is some 53% below 10 year ratio. This stock price testing suggests that the stock price is relatively cheap.

I did all my stock testing using CDN$. Using US$ you would get similar results. However, if you take the NYSE-TAP stock price using the exchange rate there is often a discrepancy between the NYSE-TAP stock price and the TSX-TPX.B stock price. For example, the current NYSE-TAP price is $56.68 US$ but the TSX=TPX-B stock price is $78.40 CDN$. The current exchange rate is 1.3108 and using this exchange rate times the $56.68 US$ is only $74.30 CDN$.

It would appear from my stock price testing that the stock price is cheap to reasonable and below the median.

When I look at analysts’ recommendations for NYSE-TAP I find Strong Buy (3), Buy (4), Hold (8) and Sell (1). The consensus is a buy. The 12 month US$ stock price is $73.36. This implies a total return of $32%, with 29.43% from capital gains and 2.89% from dividends.

Olly Wehring on Just Drinks talks about Molson Coors doing a cannabis joint venture. Beth Newhart on Beverage Daily talks about the company constructing a modern brewing site in Canada. Jason Phillips on Motley Fool thinks these shares are underpriced. See what analysts think about this stock on Stock Chase. there is only one entry for TPX.B and the analysts is wondering why the stock are 40% off since last year. There are more analysts entry for NYSE-TAP on Stock Chase. Analysts seem to feel that Brewing are struggling with declining consumption in a mature industry.

Molson Coors Canada Inc is a brewer that produces and sells beer and other malt beverages. The company offers its products across the world under various brands which include Coors Light, Staropramen, Carling, Miller Lite, Keystone, and Creemore Springs. Its web site is here Molson Coors Canada.

The last stock I wrote about was about was Pason Systems Inc. (TSX-PSI, OTC-PSYTF) ... learn more. The next stock I will write about will be Brookfield Asset Management Inc. (TSX-BAM.A, NYSE-BAM) ... learn more on Wednesday, October 31, 2018 around 5 pm. Tomorrow on my other blog I will write about Money Show 2018 – Paul Philip.... learn more on Tuesday, October 30, 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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