I do not own this stock of Premium Brands Holdings Corp (TSX-PBH, OTC-PRBZF). I was looking for another stock to follow and I found this is one of the top stocks in TD Bank's Canadian Equity Fund.
When I was updating my spreadsheet, I noticed that the dividend growth is higher than in the past. The last 4 increases were over 10%. The last increase was in 2019 and it was for 10.5%. You can see from the chart below that dividends have grown higher over the past 5 years at 8.75 per year compared to 4.61% per year over the last 10 years.
Talk about dividends yields and growth. This stock used to be an income trust. As such it started to pay dividends in 2005. However, it became a corporation in 2009. At that time dividends went from monthly to quarterly payments. Dividends were flat until 2003 when modest increases started. Currently the dividend growth is in the moderate range and up from the previous low range.
The recent dividend yields are in the moderate range (2 to 4% ranges). The current dividend yield is 2.29%. The 5, 10 and historical median yields are 2.75, 1.21 and 7.07%. The reason the historical median yield is so high is that the company used to be an income trust.
The Dividend Payout Ratios are currently good. The DPR for EPS for 2018 is 61% with 5 year coverage at 83%. The reason the 5 year coverage is high is because the DPR for EPS was above 100% prior to 2016. The DPR for EPS for this year is expected to be 52% and with 5 year coverage at 67%. The DPR for CFPS is 36% with 5 year coverage at 41%.
Debt Ratios are good, The Long Term Debt/Market Cap Ratio for 2018 is 0.29. The Liquidity Ratio is 1.71 with a 5 year median of 2.00. The Debt Ratio for 2018 is 1.94 with 5 year median at 2.05. Leverage, and Debt/Equity Ratios for 2018 are 2.97 and 1.54 respectively with 5 year ratios at 2.93 ad 1.50, respectively.
The Total Return per year is shown below for years of 5 to 23 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 | 8.75% | 31.19% | 26.99% | 4.20% |
| 2008 | 10 | 4.61% | 32.81% | 25.09% | 7.72% |
| 2003 | 15 | 3.53% | 21.59% | 15.52% | 6.08% |
| 1998 | 20 | 7.65% | 5.81% | 1.84% | |
| 1995 | 23 | 14.07% | 11.60% | 2.47% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 23.86, 32.20 and 40.54. The corresponding 10 year ratios are 22.70, 27.82 and 34.21. The corresponding historical ratios are 12.54, 15.32 and 18.11. The current P/E Ratio is 23.48 based on a stock price of $91.80 and 2019 EPS estimate of $3.91. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a Graham Price of $45.55. The 10 year low, median, and high median Price/Graham Price Ratios are 1.41. 1.85 and 2.21. The current P/GP Ratio is 2.02 based on a stock price of $91.80. 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 2.27. The current P/B Ratio 3.89 based on Book Value per Share of $795M, Book Value per Share of $23.58 and a stock price of $91.80. The current ratio is 71% 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 7.07%. The current dividend yield is 2.29% based on dividends of $2.10 with a stock price if $91.80. The current dividend yield is some 67% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively expensive.
The current yield is also some 17% below the 5 year median yield and 61% below the 10 year median yield. So however, you look at this stock the dividend yield is relatively low against past years. However, this used to be an income trust company and as such would have very high dividend yields. However, this is a consumer staple stock and a lot of consumer staple stocks have yields under 1%. So, the current yield is not really out of line for this type of company.
The 10 year median Price/Sales (Revenue) Ratio is 0.44. The current P/S Ratio is 0.85 based on Revenue estimate for 2019 of $3,632, Revenue per Share of $77.23 and a stock Price of $91.80. The current ratio is some 95% above the 10 year ratios. This stock price testing suggests that the stock price is relatively expensive.
Results of stock price testing is that the stock price is that the stock price is probably expensive. The P/S Ratio test and the P/B Ratio test shows this stock as relatively expensive. We can dismiss the dividend yield test as the stock used to be an income trust. The P/E Ratio of 23.48 is relatively high. A P/B Ratio of 3.89 is a high one.
Is it a good company at a reasonable price? I think this is a great company. I find the debt levels fine and they have no problem paying the dividends. However, I think that although it has come down in price, it is still expensive. On the other hand, it has provided great returns to its shareholders. See the chart above. For the 5 year capital gains return of 26.99% per year, P/E Ratio was 38.42. For the 10 year capital gains return of 25.09% the P/E Ratio was 6.64.
When I look at analysts’ recommendations, I find Strong Buy (2), Buy (6), Hold (2) and Sell (1). The consensus is a Buy, however, seeing a Sell recommendation is very unusual. The 12 month stock price consensus is $92.36. This implies a total return 2.90% with 0.61% from capital gains and 2.29% from dividends. A very low return for a Buy recommendation.
See what analysts are saying on Stock Chase. The stock peaked in April over $120. They must some EPS estimates. Recently CPP has bought a stake in this company. Demetris Afxentiou on Motley Fool thinks the company has a great story. A writer on Simply Wall Street says investors are attracted to the potential growth of this company. A writer on Simply Wall Street via Yahoo Finance says that although the debt is relatively high, cash flow can adequately cover it. Erica Schwartz on Dispatch Tribunal says that Royal Ban has raised the target price to $101.00 from $96.00.
Premium Brands Holdings Corp is engaged in specialty food manufacturing, premium food distribution and wholesale businesses with operations in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec, Nevada, and Washington State. Its web site is here Premium Brands Holdings Corp.
The last stock I wrote about was about was Intact Financial Corp (TSX-IFC, OTC-IFCZF) ... learn more. The next stock I will write about will be Suncor Energy Inc (TSX-SU, NYSE-SU) ... learn more on Monday, July 8, 2019 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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