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 that they had a very big increase in dividends this year of 39% after 3 years of no increases. This is a positive result. A negative is that the Intangible Assets/Market Cap ratio is high. For 2018 it is 1.06 and at present is 1.07. If you add Goodwill with Intangible Assets you get an Intangible Assets/Market Cap Ratio of 1.70. This is not good.
Dividends are paid in US$ and this means for Canadian investors, the dividends will fluctuate with changes in currency exchange rates. The dividend yield for this stock is in the moderate range (2% to 4% ranges). In CDN$, the current dividend yield is 4.00%, with 5, 10 and historical yields at 2.09%, 2.32% and 2.13%.
As you can see from the charts below, the dividend growth in CDN$ is generally higher, especially in the later time periods, than the US$ dividend growth. This has to do with currency exchange rates. Dividend growth is low (under 8%) to Moderate (8% to 14% range).
The Dividend Payout Ratios are good. The DPR for EPS in 2018 in US$ is 32% with 5 year coverage at 31%. The DPR for CFPS for 2018 in US$ is 15% with 5 year coverage at 21%. I did this in US$ as the statement reporting currency is US$.
Debt Ratios are of a mixed quality. I think the Liquidity Raito is far too low. Lately, the long term debt has been going down, but the Long Term Debt/Market Cap Ratio has been going up. This is because the stock price is falling. The ratio for 2018 is 0.70 with a current one of 0.68. The Liquidity Ratio for 2018 is 0.64. This means that current assets cannot cover current liabilities. If you add in Cash Flow after dividends it is still quite low at 1.10. The Debt Ratio is good at 1.84. The Leverage and Debt/Equity Ratios are 2.23 and 1.21. These are fine.
The Total Return per year is shown below for years of 5 to 22 to the end of 2018 in CDN$ for 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 chart below.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2013 | 5 | 10.45% | 8.77% | 5.62% | 3.15% |
| 2008 | 10 | 9.19% | 5.47% | 3.07% | 2.39% |
| 2003 | 15 | 9.38% | 6.48% | 3.50% | 2.97% |
| 1998 | 20 | 7.78% | 11.92% | 7.97% | 3.95% |
| 1996 | 22 | 7.05% | 10.78% | 7.24% | 3.54% |
The Total Return per year is shown below for years of 5 to 25 to the end of 2018 in US$ for TAP.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2013 | 5 | 5.08% | 2.86% | 0.00% | 2.86% |
| 2008 | 10 | 7.99% | 4.46% | 1.79% | 2.67% |
| 2003 | 15 | 9.68% | 7.43% | 4.73% | 2.69% |
| 1998 | 20 | 8.86% | 5.62% | 3.50% | 2.12% |
| 1993 | 25 | 7.81% | 11.44% | 8.25% | 3.19% |
| 1990 | 28 | 6.95% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 12.01, 14.12 and 16.61. The corresponding 10 year ratios are 11.50, 13.90 and 16.42. The corresponding historical ratios are 12.01, 15.11 and 18.21. The current P/E Ratio is 12.87 based on a stock price of $73.07 and 2019 EPS estimate of $5.82 ($4.43 US$). This stock price testing suggests that the stock price is relatively reasonable and below the median. This testing is in CDN$.
I get a Graham Price of $102.86. The 10 year low, median, and high median Price/Graham Price Ratios are 0.75, 0.87 and 1.02. The current P/GP Ratio is 0.73 based on a stock price of $73.07. This stock price testing suggests that the stock price is relatively cheap. This testing is in CDN$.
I get a 10 year median Price/Book Value per Share Ratio of 1.13. The current P/B Ratio is 0.90 based on Book Value of $13,899M, Book Value of $61.56 and a stock price of $55.64. The current ratio is some 20% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap. This testing is in US$. You get a simpler result in CDN$.
I get an historical median dividend yield of 1.88%. The current dividend yield is 4.10% based on dividends of $2.28 and a stock price of $55.64. The current yield is 118% above the historical median yield. This stock price testing suggests that the stock price is relatively cheap. This testing is in US$. You get a simpler result in CDN$.
The 10 year median Price/Sales (Revenue) Ratio is 2.43. The current P/S Ratio is 1.19 based on 2019 Revenue estimate of $10,397M, Revenue per Share of $46.93 and a stock price of $55.64. The current ratio is 51% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap. This testing is in US$. You get a simpler result in CDN$.
Results of stock price testing is that the stock price is that the stock price is cheap to below the median. All my testing is showing the stock price from cheap to below the median. It would seem like a good price. I did some testing using US$ as this stock is mostly a US stock and it reports in US$.
Is it a good company at a reasonable price? It is probably a defensive stock. However, I do worry about the debt level and the beer market is probably a mature market. It is getting into cannabis products but lots of companies are doing this. They are not all going to be successful in this endeavor.
When I look at analysts’ recommendations, I find Strong Buy (5), Buy (3), Hold (7), Underperform (2) and Sell (4). The consensus would be a Hold. The 12 months stock price if $59.00 US$. This implies a total return of $10.14% with 4.10% from dividends and 6.04% from capital gains.
The recommendations are certainly all over the place. It probably depends on how you look at this stock as either a defensive stock or if you are looking for growth. It is probably a defensive stock, but it will not probably not be a growth stock. I am using the current currency exchange rate of 1.3132 US$ to CDN$. There is a difference in prices and yield and this is probably because of low trading value for the CDN stock.
See what analysts are saying on Stock Chase. Analysts seem negative about stock. Andrew Button on Motley Fool says this is a good defensive stock to have in a recession. A writer on Simply Wall Street says information I do not have. He says they had it had an earning in the past year which I cannot find. He also said that there was a dividend cut in the past which I cannot find and I have some 28 years of data. Because dividends are paid in US$, they can fluctuate because of current exchange. Daniel Strauss on Market Insider talks about a drop in stock price because of missed earnings call. Armina Ligaya on CTV News talks about a joint venture with pot producer Hexo Corp.
Molson Coors Brewing Company, as one of the largest global brewers, Molson Coors works to deliver extraordinary brands that delight the world's beer drinkers. From Coors Light, Miller Lite, Carling, Staropramen and Sharp's Doom Bar to Leinenkugel's Summer Shandy, Blue Moon Belgian White, Hop Valley, Creemore Springs Premium Lager and Crispin Cider, Molson Coors offers a beer for every beer lover. Molson Coors operates through Molson Coors Canada, MillerCoors, Molson Coors Europe and Molson Coors International. 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 29, 2019 around 5 pm. Tomorrow on my other blog I will write about Money Show 2019 – Kevin Prins.... learn more on Tuesday, October 29, 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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