I do not own this stock of Loblaw Companies Ltd. (TSX-L, OTC-LBLCF). I have followed this stock for some time. I got the stock suggestion from Mike Higgs' list of dividend growth companies. 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.
When I was updating my spreadsheet, I noticed that for years 5, 25 and 28 with good total return that the starting P/E Ratio was in the 18.00 to 19.00 ranges. For 15 years with a low total return the starting P/E was 21.85. For year 10 with a moderate total return the starting P/E Ratio was 17.57. For this stock, the starting P/E Ratio does not seem to predict future total returns. See chart below.
Dividend yield is in the low (below 2%) and moderate range (2% to 4%), but most often in the low range. The current dividend yield is 1.83% with the 5, 10 and historical median dividend yields at 1.52%, 2.06% and 1.29%, respectively.
The dividend growth was much higher in the past than it is today, although over the past 5 years the dividends at 4.21% per year is higher than the over the past 10 years with dividends at 3.24% per year. The last dividend increase was higher at 6.8% in 2019. The increase for 2018 was even better at 9.3%. When the yield is low, you want a decent increase each year. An increase more like was given in 2018.
The Dividend Payout Ratios are currently good. The DPR for EPS for 2018 was 59% with 5 year coverage at 54%. The DPR for CFPS is also good at 11% for 2018 and 5 year coverage at 13%. Analysts expect the coverage to be lower in 2019.
Debt Ratios are fine. The Long Term Debt/Market Cap ratio is 0.28 for 2018 and this is good. The Liquidity Ratio is a bit low at 1.34 for 2018, but add in cash flow after dividends and it is 1.57. The Debt Ratio is good at 1.68. The Leverage and Debt/Equity Ratios are a little high but fine at 2.48 and 1.48 respectively.
The Total Return per year is shown below for years of 5 to 28 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 | 4.21% | 9.73% | 7.59% | 2.13% |
| 2008 | 10 | 3.24% | 7.86% | 5.74% | 2.12% |
| 2003 | 15 | 4.46% | 3.18% | -0.58% | 3.76% |
| 1998 | 20 | 9.16% | 2.54% | 1.13% | 1.40% |
| 1993 | 25 | 11.27% | 11.33% | 8.68% | 2.65% |
| 1990 | 28 | 10.53% | 10.98% | 8.56% | 2.42% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 26.28, 28.80 and 31.64. The corresponding 10 year ratios are 17.99, 19.89 and 21.80. The corresponding historical ratios are 17.11, 19.42 and 21.32. The current P/E Ratio is 22.56 based on a stock price of $68.81 and 2019 EPS estimate of $3.05. This stock price testing suggests that the stock price is relatively expensive.
I get a Graham Price of $45.55. The 10 year low, median, and high median Price/Graham Price Ratios are 1.20, 1.33 and 1.46. The current P/GP Ratio is 1.51 based on a stock price of $68.81. 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 1.78. The current ratio is 2.13 based on a Book Value of $11,067M, Book Value per Share of $30.23 and a stock price of $68.81. The current ratio is 28% 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 1.29%. The current dividend yield is 1.83% based on dividends of $1.26 and a stock price of $68.81. The current yield is 42% above the historical yield. This stock price testing suggests that the stock price is relatively cheap.
The 10 year median Price/Sales (Revenue) Ratio is 0.42. The current P/S Ratio is 0.52 based on 2019 Revenue estimate for 2019 of $48,076M, Revenue per Share of $131.32 and a stock price of $68.81. The current ratio is 24% higher than the 10 year ratio. This stock price testing suggests that the stock price is relatively expensive.
Results of stock price testing is that the stock price is probably expensive. This is showing up in the test on P/B Ratio and P/S Ratios. The problem with the historical median dividend yield test is that the dividend has grown by increasing the Dividend Payout Ratio. The DPR started out at 20% or lower and has been growing since 2005 into 30% and 40% ranges and now at 59% in 2018. Usually, when you have a low dividend yield you expect good increases, but increases in line with growth in earnings. Also, with low dividend yields, you would expect the DPR to be 20% or less.
Is it a good company at a reasonable price? The company has made some money for its shareholders over time, but not a great deal. It cannot seem to grow its earnings. Net income is only growing at 3 to 4%, but they have been issuing new shares at the rate of 5.7% and 3.1% per year over the past 5 and 10 years. I do like shopping in Loblaws better than Metro, but they are still having problems with their supply chain system. Product can be out of stock for days and sometimes not for weeks. I do not see that problem in Metro because when they are out of stock on an item, it is usually back in stock the next day.
When I look at analysts’ recommendations, I find Strong Buy (3), Buy (4), Hold (3) and Underperform (1). The consensus would be a buy. The 12 month stock price is $72.36. This implies a total return of 6.99% with 5.16% from capital gains and 1.83% from dividends.
See what analysts are saying on Stock Chase. They like the company but are worried about the competitive market it is in. Demetris Afxentiou on Motley Fool says Loblaws is an intriguing long-term option for investors. A writer on Simply Wall Street talks about ownership of the company. The Private Ownership is George Weston Limited. Jake Edmiston on Financial Post writes an interesting article about Loblaws using algorithms that did not quite work.
Loblaw is Canada's largest food retailer, with over 1,000 grocery stores. Loblaw boasts several leading private-label food brands such as President's Choice and No Name as well as its leading Joe Fresh apparel brand. Loblaw also sells general merchandise and provides drugstore products and financial services. In 2014, Loblaw acquired Shoppers Drug Mart. 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 Stingray Digital Group Inc (TSX-RAY, OTC-NONE) ... learn more on Friday, August 09, 2019 around 5 pm. Tomorrow on my other blog I will write about Something to Buy August 2019.... learn more on Thursday, August 08, 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.
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.
No comments:
Post a Comment