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 although it used to be an income trust company, since changing to a corporation, they have brought their Dividend Payout Ratios under control and have been giving some good increases lately. The recent dividend increases suggest that the company see good times ahead for their company.
The dividend yields are moderate with dividend growth moderate. The current dividend yield is moderate (2% to 4%) at 2.66%. The 5 and 10 year dividend yields are also moderate at 2.43% and 4.82%. The historical median dividend yield is in the good range (5% to 6% ranges) at 6.65%. This company used to be an income trust and income trust stocks have much higher dividend yields (and payouts) than corporations.
The Dividend Payout Ratios (DPR) are high, but they are coming down. The DPR for 2019 for EPS is 88% with 5 year coverage at 76%. The DPR for CFPS for 2019 is 34% with 5 year coverage at 36%. The DPR for 2019 for Free Cash Flow is 96% with 5 year coverage at 84%. The Dividend Coverage Ratio for 2019 is 1.04 with the 5 year ratio at 1.20.
Debt Ratios are fine. The Long Term Debt/Market Cap Ratio for 2019 is 0.18 with a current one at 0.24. The increase in this ratio is mostly due to an increase in debt in the first quarter of 27%. The Liquidity Ratio is good at 1.72 as is the Debt Ratio at 1.96. The Leverage and Debt/Equity Ratios are fine at 2.74 and 1.40.
The Total Return per year is shown below for years of 5 to 24 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 | 10.40% | 34.20% | 30.08% | 4.12% |
| 2009 | 10 | 4.87% | 25.84% | 20.92% | 4.92% |
| 2004 | 15 | 4.05% | 23.28% | 16.42% | 6.86% |
| 1999 | 20 | 7.90% | 6.12% | 1.78% | |
| 1995 | 24 | 14.36% | 11.99% | 2.37% |
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 23.30, 31.82 and 39.31. The corresponding historical ratios are 13.74, 15.65 and 19.95. The current P/E Ratio is 34.87 based on a stock price of $86.32 and 2020 EPS estimate of $2.31. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a Graham Price of $38.94. The 10 year low, median, and high median Price/Graham Price Ratios are 1.59, 2.06 and 2.46. The current P/GP Ratio is 2.23 based on a stock price of $36.82. 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 2.59. The current P/B Ratio is 2.98 based on a stock price of $36.82, Book Value of $1091M and Book Value per Share of $29.17. The current ratio is 15% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a 10 year median Price/Cash Flow per Share Ratio of 15.97. The Current P/CF Ratio is 15.48 based on a stock price of $36.82, 2020 CFPS estimate of $5.61 and Cash Flow of $209.8M. The current ratio is 3% lower than the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get an historical median dividend yield of 6.65%. The current dividend yield is 2.66% based on dividends of $2.31 and a stock price of $86.32. The current dividend is 60% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively expensive.
I get a 10 year median dividend yield of 4.82%. The current dividend yield is 2.66% based on dividends of $2.31 and a stock price of $86.32. The current dividend is 45% above the 10 year median dividend yield. This stock price testing suggests that the stock price is relatively expensive.
The 10 year median Price/Sales (Revenue) Ratio is 0.52. The current P/S Ratio is 0.86 based on a stock price of $86.32, 2020 Revenue estimate of $3.797M, Revenue per Share of $101.52. The current ratio is 64% 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 probably relatively expensive. The P/S Ratio test is probably the best one and it says the stock price is expensive. Although the P/S Ratio of 0.86 is a good ratio. I know that the dividend yield tests say the same thing, but since this stock used to be an income trust, the median dividend yields have a tendency to be on the high side.
The P/B Ratio tests is generally good because it uses no estimates and it says that the stock price is reasonable but above the median. The P/E Ratio and P/GP Ratio says the same thing and there is nothing wrong with these tests. There is also nothing wrong with the P/CF test that says the stock price is reasonable and below the median and the only test to say so.
Is it a good company at a reasonable price? The stock price is probably no reasonable at this point. This is especially true since we are supposed to be in a bear market. I think that this is a good company and has done well for its shareholders. However, I wonder if now is a good time to buy. I do not think so. However, it was expected that old income trust stocks would have a lower dividend yield caused by declining dividends or increasing stock price or a combination of both. The dividends did decline a bit in 2009, but most of the decline in yield is due to the rise in stock price.
When I look at analysts’ recommendations, I find Buy (3), Hold (3) and Sell (1). The consensus would be a Hold. The 12 months stock price is $88.50. This implies a total return of 4.60% with 1.94% from capital gains and 2.66% from dividends.
Analyst seem to like this stock on Stock Chase. Vineet Kulkarni on Motley Fool thinks this is a good defensive stock and its high P/E Ratio is justified. A writer on Simply Wall Street says that the intrinsic value of this stock is $164.21 and it is selling at $83.75. A writer on Simply Wall Street says this company is paying out too much of its EPS and FCF. The company has announced on Global Newswire their intentions of raising capital to fund future acquisitions..
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 Empire Company Ltd (TSX-EMP.A, OTC-EMLAF) ... learn more. The next stock I will write about will be Suncor Energy Inc (TSX-SU, NYSE-SU) ... learn more on Monday, July 06, 2020 around 5 pm.
Also, on my book blog I have put a review of the book Dangerous Melodies by Jonathan Rosenberg learn more...
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