I own this stock of Metro Inc (TSX-MRU, OTC-MTRAF). I was following this stock before I bought it because it was on Mike Higgs' Canadian Dividend Growth stock list and on the other dividend lists that I was following. I have owned this stock since 2004 in my Trading account. I have a Total Return of 16.84% per with 14.81% per year from capital gains and 2.03% from dividends. My original yield at purchase as 1.87%. My current yield on my purchase price is 15.28%.
When I was updating my spreadsheet, I noticed I calculated a what if question. This was if you had 25 years ago in 1992 bought 1275 share at $1007.25, those shares at the end of December 2020 would have been worth $72,420 and you would have received $8,500.34 in dividends. This is why you buy dividend growth stock for the long term.
The dividend yields are low with dividend growth moderate. The current dividend yield is low (below 1%) and 1.58%. The 5, 10 and historical dividend yields are also low at 1.53%, 1.55% and 1.45%. They have paid dividends for the past 25 years and have raised the dividend every year for the past 25 years. The dividend growth is often good (15% and higher) but sometimes it is moderate (8% to 15% ranges). See chart below. The dividends increased by 14% per year for the past 5 years. The last dividend increase was in 2020 and it was for 12.5%. Dividend increases have varied over the past 25 years.
The Dividend Payout Ratios (DPR) are good. The DPR for EPS for 2020 is 28% with 5 year coverage at 20%. The DPR for CFPS is 13% with 5 year coverage at 15%. The DPR for Free Cash Flow is 24% with 5 year coverage at 35%. None of the sites I looked at agreed on FCF, but they were not that far apart.
Debt Ratios are fine. The Long Term Debt/Market Cap Ratio for 2020 is 0.16. It is good and low. The Liquidity Ratio is low at 1.34, but if you add in Cash Flow after Dividends it is healthy at 1.91. The Debt Ratio is good at 1.85. The Leverage and Debt/Equity Ratios are fine at 2.18 and 1.18.
The Total Return per year is shown below for years of 5 to 30 to the end of 2020. 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.|
The 5 year low, median, and high median Price/Earnings per Share Ratios are 15.03, 17.52 and 20.01. The corresponding 10 year ratios are 12.13, 14.39 and 16.45. The corresponding historical ratios are 10.01, 11.81 and 14.58. The current P/E Ratio is 16.96 based on a stock price of $56.80 and EPS Estimate for 2021 of $3.35. This stock price testing suggests that the stock price is relatively expensive.
If you look at P/E Ratios compared to Total Returns for the 5, 10, 15, 20, and 25 year periods, I find the following. For example, total return over the past 15 years is 13.70% per year, the starting P/E Ratio (the one from 15 years ago) was 15.89. From this point of view, a P/E Ratio is 17.13 might be on the high side. However, the P/E Ratios have been rising for some time.
|Year||Tot Return||Start P/E|
I get a Graham Price of 42.96. The 10 year low, median, and high median Price/Graham Price Ratios are 1.02, 1.20 and 1.38. The current P/GP Ratio is 1.32 based on a stock price of $56.80. 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 2.15. The current P/B Ratio is 2.32 based on a stock price of $56.80, Book Value of $6,142M and Book Value per Share of $24.49. The current ratio is 8% 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 12.16. The current P/CF Ratio is 13.62 based on Cash Flow per Share estimate of $4.17, Cash Flow of $930.8M and a stock price of $56.80. The current ratio is 12% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get an historical median dividend yield of 1.46%. The current dividend yield is 1.58% based on dividends of $0.90 and a stock price of $56.80. The current dividend yield is 8.5% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 10 year median dividend yield of 1.55%. The current dividend yield is 1.58% based on dividends of $0.90 and a stock price of $56.80. The current dividend yield is 2.5% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable and below the median.
The 10 year median Price/Sales (Revenue) Ratio is 0.68. The current P/S Ratio is 0.79 based on Revenue estimate for 2021 of $18,134M, Revenue per Share of $72.31 and a stock price of $57.38. The current ratio is 17% above the 10 year median P/S Ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
Results of stock price testing is that the stock price is probably reasonable. The dividend yield tests show the stock price as reasonable and below the median, but this is not confirmed by the P/S Ratio test which shows the stock price as reasonable but above the median. The rest of the testing shows that the stock price is reasonable but above the median except for the P/E Ratio test which shows the stock price as expensive.
Is it a good company at a reasonable price? This is a dividend growth stock and that is why I like it. The DPR and Debt Ratios are also fine on this stock. The price might be on the high side of reasonable, but it is still within a reasonable range.
When I look at analysts’ recommendations, I find Strong Buy (1), Buy (2), Hold (8) and Underperform (1). The consensus would be a Hold. The 12 month stock price is $62.58. This implies a total return of 10.63% with 9.06% from capital gains and 1.57% from dividends.
The last couple of entries on Stock Chase says to wait before buying. Christopher Liew on Motley Fool says the shares of this company are rising as people are buying recession-resistant proof investments. A writer on Simply Wall Street likes this stock from a dividend perspective. A writer on Simply Wall Street is getting uncomfortable with the increasing P/E Ratio of this company. The Blogger Dividend Earner reviewed this stock in June of 2020.
Metro is one of the largest grocery retailers in Canada and, following its 2018 acquisition of the Jean Coutu Group, also boasts a meaningful drugstore footprint. Noteworthy grocery banners include Metro, Metro Plus, Super C, and Food Basics, while its pharmacies primarily operate under the Jean Coutu and Brunet trademarks. Its web site is here Metro Inc.
The last stock I wrote about was about was Element Fleet Management Corp (TSX-EFN, OTC-ELEEF) ... learn more. The next stock I will write about will be Bank of Montreal (TSX-BMO, NYSE-BMO) ... learn more on January 04, 2021 around 5 pm.
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