I do not own this stock of Empire Company Ltd (TSX-EMP.A, OTC-EMLAF). I have known about this stock for some time before I decided to follow it. This stock has a financial year ending in end of April or first of May each year.
When I was updating my spreadsheet, I noticed that they had another good year. Revenue is up 6%, Earnings are up 21% and Cash Flow excluding Working Capital is up 15%. As a long term buy, shareholders have done well with total returns of 9.13%, 11.63%, 14.01%, 13.13%, 12.17% covering durations of 15 years to 35 years. The total return has slowed recently with the total return at 8.05% and 7.76% for the durations of 10 and 5 years. What I personally look for is total return of 8% over the long term.
The dividend yields are low with dividend growth low. The dividend yield is low (under 2%) at 1.30%. The 5, 10 an historical dividend yields are also low at 1.64%, 1.56% and 1.45%. The dividend increases are low (under 8%). The 5 year dividend growth rate is 4.56% per year. The last dividend increase was for 2021 and it was for 8.3%. This is in the moderate range (8% to 14% ranges).
The Dividend Payout Ratios (DPR) are low and good. The DPR for EPS for 2021 was 19% with 5 year coverage at 31%. The DPR for CFPS is 6%, with 5 year coverage at 9%. The DPR for Free Cash Flow is 10% with 5 year coverage at 15%.
Debt Ratios could be improved. The Long Term Debt/Market Cap Ratio for 2021 is 0.11. This is low and good. The Liquidity Ratio for is 0.92. If you add in cash flow after dividends it is 1.41. I prefer this to be 1.50 or higher. However, the Liquidity Ratio has always been low for this company. The Debt Ratio for 2021 is 1.42. I prefer this also to be 1.50 or higher. The Leverage and Debt/Equity Ratios are 3.47 and 2.44. I prefer these to be below 3.00 and below 2.00.
The Total Return per year is shown below for years of 5 to 36 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. |
|---|---|---|---|---|---|
| 2015 | 5 | 4.56% | 7.76% | 6.21% | 1.55% |
| 2010 | 10 | 6.49% | 8.05% | 6.46% | 1.59% |
| 2005 | 15 | 6.79% | 9.13% | 7.44% | 1.69% |
| 2000 | 20 | 11.50% | 11.63% | 9.64% | 1.98% |
| 1995 | 25 | 11.12% | 14.01% | 11.74% | 2.27% |
| 1990 | 30 | 10.26% | 13.13% | 11.10% | 2.03% |
| 1985 | 35 | 9.91% | 12.17% | 10.34% | 1.83% |
| 1986 | 36 | 9.91% | 15.06% | 12.38% | 2.68% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 15.99, 18.95 and 21.91. The corresponding 10 year ratios are 13.94, 17.32 and 20.70. The corresponding historical ratios are 11.10, 12.60 and 14.20. The current P/E Ratio is 14.75 based on a stock price of $40.12 and EPS estimate for 2022 of $2.72. The current ratio is between the low and median 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a Graham Price of $31.76. The 10 year low, median, and high median Price/Graham Price Ratios are 0.96, 1.16 and 1.36. The current P/GP Ratio is 1.26 based on a stock price of $40.12. The current ratio is between the median and high 10 year median ratios. 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 1.52. The current P/B Ratio is 2.43 based on a stock price of $40.12, Book Value of $4,373M, and Book Value per Share of $16.48. The current ratio is 60% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
I get a 10 year median Price/Cash Flow per Share Ratio of 6.64. The current P/CF Ratio is 6.44 based on a stock price of $40.12, Cash Flow per Share estimate for 2022 of $6.23 and a Cash Flow of $1,653M. The current ratio is 3% below 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 1.44%. The current dividend yield is 1.30% based on dividends of $0.52 and a stock price of $40.12. The current dividend yield is 10% below the historical dividend yield. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get an historical median dividend yield of 1.56%. The current dividend yield is 1.30% based on dividends of $0.52 and a stock price of $40.12. The current dividend yield is 17% below the historical dividend yield. This stock price testing suggests that the stock price is relatively reasonable but above the median.
The 10 year median Price/Sales (Revenue) Ratio is 0.29. The current P/S Ratio is 0.36 based on Revenue estimate for 2022 of $29,536M, Revenue per Share of $111.30 and a stock price of $40.12. The current ratio is 26% 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 on the expensive side. Both the dividend yield tests show the stock price as reasonable, but above the median. However, this is not confirmed by the P/S Ratio test which says the stock price is expensive. The P/B Ratio test also shows the stock price as expensive, although there is a mixed bag of results.
Is it a good company at a reasonable price? The stock price is probably expensive. I think that this is a good dividend growth company. It is not a bad idea to have a grocery company in your portfolio. I personally have Metro.
When I look at analysts’ recommendations, I find Strong Buy (3), Buy (5) and Hold (3). The consensus would be a Buy. The 12 month stock price consensus is $45.20. This implies a total return of 13.96% with 1.30% from dividends and 12.66% from capital gains.
Analysts on Stock Chase have a wait and see attitude towards this company as it has done well in the pandemic but will this continue? Adam Othman on Motley Fool thinks now is the time to stick to established aristocrats who are leaders in their respective industries, like Empire. The executive summary on Simply Wall Street gives this stock 3 stars out of 5 and one risk. It is not so much insider selling, but insiders not taking up their stock options. A writer on Simply Wall Street thinks the fair value for this stock is $31.13 CDN$. The Blogger Dividend Earner talks about this stock on his site.
Empire Co Ltd key businesses are food retailing, investments, and other operations. The food retailing division operates through Empire's subsidiary Sobeys and represents nearly all of the company's income. The company's investment and other operations segment include the investment in Crombie REIT, which is an open-ended Canadian real estate investment trust, as well as the Genstar Development Partnership. Its web site is here Empire Company Ltd.
The last stock I wrote about was about was Saputo Inc (TSX-SAP, OTC-SAPIF) ... learn more. The next stock I will write about will be Premium Brands Holdings Corp (TSX-PBH, OTC-PRBZF) ... learn more on Monday, July 5, 2021 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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