I do not own this stock of Empire Company Ltd (TSX-EMP.A, OTC-EMLAF). I have known about this stock for some time before I decided to follow it. This stock has a financial year ending in end of April or first of May each year.
When I was updating my spreadsheet, I noticed that the dividend was increased at the rate of 9.1% in 2019. This is a higher rate that it has been for the last few years. This is a sign of optimism on the part of management.
Dividend yield is low (under 2%). The yield seldom rises to the 2% range. The current dividend yield is 1.46%. The 5, 10 and historical median dividend yields are 1.64%, $1.57% and 1.45%. The dividend growth has varied a lot over the more than 30 years I have tracked this stock. You can see from the chart below it was higher in the past. However, the last dividend raise was in 2019 and it was for 9.1%. Generally, higher dividend increases suggest that the management has confidence in the future.
The Dividend Payout Ratios are low and therefore good. The DPR for EPS for 2018 is 31% with 5 year coverage at 36%. The DPR for CFPS for 2018 is 13% with 5 year coverage at 11%.
Debt Ratios are fine, but there is vulnerability with the low Liquidity Ratio. The Long Term Debt/Market Cap Ratio for 2018 is 0.24. The Liquidity Ratio is 0.98. This means that the current assets cannot cover the current liabilities. If you add in Cash Flow after dividends the rate is 1.27. It is still low. The Debt Ratio is good at 1.74. The Leverage and Debt/Equity Ratios are fine at 2.40 and 1.38.
The Total Return per year is shown below for years of 5 to 34 to the end of 2018. 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 chart below.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2013 | 5 | 4.88% | 5.13% | 3.57% | 1.64% |
| 2008 | 10 | 6.55% | 7.54% | 5.90% | 1.56% |
| 2003 | 15 | 8.28% | 9.97% | 8.11% | 1.86% |
| 1998 | 20 | 12.02% | 10.52% | 8.76% | 1.76% |
| 1993 | 25 | 10.87% | 11.44% | 9.70% | 1.74% |
| 1988 | 30 | 9.79% | 10.32% | 8.84% | 1.48% |
| 1984 | 34 | 9.80% | 15.20% | 12.54% | 2.66% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 15.99, 18.95 and 21.91. The corresponding 10 year ratios are 13.94. 17.32 and 20.70. The corresponding historical ratios are 10.54, 12.13 and 13.91. The current P/E Ratio is 15.78 based on a current stock price of $32.83 and 2020 EPS estimate of $2.08. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a Graham Price of $26.30. The 10 year low, median, and high median Price/Graham Price Ratios are 0.88, 1.07 and 1.23. The current P/GP Ratio is 1.25 based on a stock price of $32.83. 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 1.22. The current P/B Ratio is 2.22 based on a Book Value of $4,016M, Book Value per Share of $14.78 and a stock price of $32.83. The current ratio is 82% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
I get an historical median dividend yield of 1.45%. The current dividend yield is 1.46% based on dividends of $0.48 and a stock price of $32.83. The current yield is 2.2% above the historical yield. This stock price testing suggests that the stock price is relatively reasonable around the median.
The 10 year median Price/Sales (Revenue) Ratio is 0.25. The current P/S Ratio is 0.34 based on 2020 Revenue estimate of $26,196M, Revenue per Share of $96.37 and a stock price of $32.83. The current ratio is 35% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
Results of stock price testing is that the stock price is reasonable to expensive Most of the testing is showing that the stock price is relatively expensive. The major exception is the Dividend Yield test. This is generally a good test and it is showing the price as around the median. I know that the P/E Ratio testing is showing the price below the median, but this is seldom a good test.
Is it a good company at a reasonable price? This is certainly a good dividend growth company which is what I like. The reason I would not buy is because I already have grocery company stock of Metro. It is certainly not cheap but it is probably reasonable. They have had some recent problems which has suppressed some of the ratios, like P/S Ratio and P/B Ratio.
When I look at analysts’ recommendations, I find Strong Buy (1), Buy (4) and Hold (4). The consensus would be a Buy. The 12 month stock price is $35.22. This implies a total return of 8.74% with a capital gain of 7.28% and dividends of $1.46%.
See what analysts are saying about this stock on Stock Chase. They think it is a well-run company, but some analysts do not like grocery companies. David Jagielski on Motley Fool likes this company for its consistency. A writer on Simply Wall Street talks about the dividend being sustainable. Aleksandra Sagan on Financial Post talks about the company opening a discount Grocery Store in Western Canada. The Canadian Press via Times Colonist talks about the company’s fourth quarterly results.
Empire Co Ltd key businesses are food retailing, investments, and other operations. The food retailing division operates through Empire's subsidiary Sobeys and represents nearly all of the company's income. Retail banners including Sobeys, Safeway, IGA, Foodland, FreshCo, Thrifty Foods, Lawton's Drug Stores, and multiple retail fuel locations. They have an investment in Crombie REIT. Its web site is here Empire Company Ltd.
The last stock I wrote about was about was Suncor Energy Inc (TSX-SU, NYSE-SU) ... learn more. The next stock I will write about will be Morneau Shepell Inc (TSX-MSI, OTC-MSIXF) ... learn more on July 12, 2019 around 5 pm. Tomorrow on my other blog I will write about Boring Investing.... learn more on Thursday, July 11, 2019 around 5 pm.
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