I own this stock of Saputo Inc (TSX-SAP, OTC-SAPIF). This was a stock on Mike Higgs' Canadian Dividend Growth Stock list and on the dividend lists that I followed. I bought this stock first in 2006 for my RRSP account. Because I am now taking money from my RRSP accounts, I have been selling this stock because of the low dividend. I still like this stock so I have been buying it in my TFSA.
When I was updating my spreadsheet, I noticed that the TD report said that the company has a no layoff policy. I like this. Companies have to think long term, not just make money for the shareholders now. This food company is suffering because of the reduced foodservices demand.
The dividend yields are low with dividend growth currently low. The current dividend yield is currently into the moderate range (2% or 4%) at 2.11%. However, the dividends have mostly been in the low range (under 2%) with the 5, 10 and historical yields at 1.52%, 1.59% and 1.59%. The growth in dividends is current low and have been for the past 5 years. The last increase was for 2019 and it was for only 3%. Prior to 5 years ago, increases were higher. See chart below.
The Dividend Payout Ratios (DPR) are fine. The DPR for EPS for 2019 is 47% with 5 year coverage at 35%. The DPR for CFPS for 2019 is 19% with 5 year coverage also at 19%. The DPR for Free Cash Flow 59% with 5 year coverage at 45%. Dividend Coverage Ratio for 2019 is 1.71 with 5 year coverage at 2.23.
Debt Ratios are good. The Long Term Debt/Market Cap Ratio is 0.26. The Liquidity Ratio is 1.63. The Debt Ratio is 1.91. The Leverage and Debt/Equity Ratios are 2.10 and 1.10.
The Total Return per year is shown below for years of 5 to 22 to the end of 2019. 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. |
|---|---|---|---|---|---|
| 2014 | 5 | 5.97% | 4.52% | 2.86% | 1.66% |
| 2009 | 10 | 19.21% | 12.19% | 10.09% | 2.11% |
| 2004 | 15 | 10.55% | 12.55% | 10.44% | 2.12% |
| 1999 | 20 | 16.84% | 13.95% | 11.81% | 2.15% |
| 1997 | 22 | 14.50% | 20.76% | 12.23% | 8.53% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 19.50, 23.32 and 26.37. The current P/E Ratio is 18.70, 21.36 and 23.97. The corresponding historical ratios are 16.80, 18.81 and 21.43. The current P/E Ratio is 23.08 based on a stock price of $32.08 and 2020 EPS estimate of $1.39. This stock price testing suggests that the stock price is relatively reasonable but above the median
I get a Graham Price of $22.41. The 10 year low, median, and high median Price/Graham Price Ratios are 1.59, 1.83 and 2.03. The current P/GP Ratio is 1.43 based on a stock price of $32.08. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 10 year median Price/Book Value per Share Ratio of 3.55. The current P/B Ratio is 2.00 based on a stock price of $32.08, Book Value of $6,559M and Book Value per Share of $16.05. The current ratio is 44% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median Price/Cash Flow per Share Ratio of 16.17. The current P/CF Ratio is 11.14 based on 2020 CFPS estimate of $2.88, Cash Flow of $1,177M and a stock price of $32.08. The current Ratio is 31% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I get an historical median dividend yield of 1.59%. The current dividend yield is 2.12% based on a stock price of $32.08 and Dividends of $0.68. The current yield is 33% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median dividend yield of 1.59%. The current dividend yield is 2.12% based on a stock price of $32.08 and Dividends of $0.68. The current yield is 33% above the 10 year median dividend yield. This stock price testing suggests that the stock price is relatively cheap.
The 10 year median Price/Sales (Revenue) Ratio is 1.21. The current P/S Ratio is 0.87 based on a stock price of $32.08, 2020 Revenue estimate of $15,079M and Revenue per Share of $36.90. The current ratio is 28% below the 10 year ratio. This stock price testing suggests that the stock price is relatively cheap.
Results of stock price testing is that the stock price is relatively cheap. Both the historical and 10 year dividend yield tests say this and it is confirmed by the P/S Ratio test. The P/B Ratio test says the same thing and no estimate are used in the P/B Ratio test. I see nothing wrong with the P/CF Test except this it is based on estimates, but a test on the 12 month cash flow says the same thing.
Th difference with the P/E Ratio is that the EPS is expected to drop this year. However, EPS is quite volatile. The 5 year growth in EPS is a negative 1.07% per year, with the 10 year EPS growth at 4.71% per year. But I also have 5 year running values, and the one comparing 5 year running EPS between EPS now and 6 years ago and the one comparing 5 year running EPS between now and 11 years ago show EPS growing by 7.89% and 10.44% per year. The expected drop in EPS for 2020 also affects the P/GP Ratio testing.
Is it a good company at a reasonable price? I think that the stock price is reasonable if not cheap. I still think that his is a good company and a long term hold. I expect that the current pandemic will adversely affect the company because they sell to the foodservice industry.
When I look at analysts’ recommendations, I find Buy (3), Hold (5) and Sell (1). The consensus would be a Hold. The 12 month stock price is $38.50. This implies a total return of $22.13% with 20.01% from capital gains and 2.12% from dividends.
Most analysts on Stock Chase call it a defensive stock. Victoria Hetherington on Motley Fool says buy this for its passive income. A writer on Simply Wall Street says Saputo current flat earnings and new issue of share at 5% of its market value are negatives. A writer on Simply Wall Street says the high than it peers P/E Ratio shows the market is expecting this company to have better growth than its peers . The blogger Dividend Earner did a write up of this in February 2019. This stock is listed on the blogger site Million Dollar Journey in the list of the of 2020 Best Canadian Dividend Stocks.
Saputo is a dairy processor and cheese producer that operates in Canada, the U.S., Argentina, the United Kingdom, and Australia and sells products in more than 50 countries. It is one of the top three cheese producers in the U.S. (48% of revenue) and one of the largest cheese manufacturers in Canada (30% of revenue). Its web site is here Saputo Inc .
The last stock I wrote about was about was Parkland Fuel Corp (TSX-PKI, OTC-PKIUF) ... learn more. The next stock I will write about will be Empire Company Ltd (TSX-EMP.A, OTC-EMLAF) ... learn more on Thursday, July 2, 2020 around 5 pm. Tomorrow on my other blog I will write about Dividend Stocks July 2020.... learn more on Tuesday, June 30, 2020 around 5 pm..
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