I do not own this stock of Loblaw Companies Ltd (TSX-L, OTC-LBLCF), but I used to. I owned it from 1996 to 2007. It was originally a great stock. I sold it in 2007 because it was having problems with its tech upgrade to its supply system and it did not seem that it would be fixed anytime soon. When I sold this, I bought Metro and I have been happy with this stock.
When I was updating my spreadsheet, I noticed I sold this stock in 2007. They were having trouble with their tech upgrade to their supply system. The company had stopped raising the dividends. If I had kept my shares would probably had made a total return of 8.98% per year with 6.26% from capital gains and 2.72% from dividends. This is not a bad return. I like stocks that deliver at least 8% per year in Total Return.
The dividend yields are low with dividend growth low. The current dividend yield is low (below 2%) at 1.59%. The 5, 10 and historical median dividend yields are also low at 1.82%, 1.88% and 1.30%. The dividend increases have been low (below 8%) since dividend increases were restarted in 2012. The dividends were increased by 5% per year over the past 5 years. The last dividend increase was in 2020 and it was for 6.35%.
The Dividend Payout Ratios (DPR) are good. The DPR for EPS for 2020 was 42% with 5 year coverage at 41%. The DPR for CFPS for 2020 was 9% with 5 year coverage at 10%. The DPR for Free Cash Flow for 2020 was 14% with 5 year coverage at 18%
Debt Ratios are fine but could be improve. The Long Term Debt/Market Cap Ratio for 2020 is good at 0.30. The Liquidity Ratio is low at 1.32. If you add in Cash Flow after dividends it is better and good at 1.86. The Debt Ratio is a little low at 1.45. I prefer this to be at 1.50 or higher and it usually is. The Leverage and Debt/Equity Ratios are too high at 3.23 and 2.23. 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 32 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 | 5.17% | 1.01% | -0.79% | 1.79% |
| 2010 | 10 | 4.30% | 6.61% | 4.52% | 2.09% |
| 2005 | 15 | 2.85% | 3.45% | 0.72% | 2.72% |
| 2000 | 20 | 5.99% | 2.83% | 1.27% | 1.56% |
| 1995 | 25 | 10.31% | 10.22% | 7.50% | 2.72% |
| 1990 | 30 | 10.17% | 10.62% | 8.07% | 2.55% |
| 1988 | 32 | 9.67% | 13.57% | 10.20% | 3.37% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 20.92, 23.52, and 26.13. The corresponding 10 year ratios are 20.18, 22.78 and 25.39. The corresponding historical ratios are 17.06, 19.44 and 21.85. The current P/E Ratio is 23.57 based on a stock price of $84.14 and EPS estimate for 2021 of $3.57. 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 Graham Price of $50.30. The 10 year low, median, and high median Price/Graham Price Ratios are 1.31, 1.48 and 1.64. The current P/GP Ratio is 1.67 based on a stock price of $84.14. The current ratio is above the high 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
I get a 10 year median Price/Book Value per Share Ratio of 1.95. The current P/B Ratio is 2.67 based on a Book Value of $10,943M, Book Value per Share of $31.50 and a stock price of $84.14. The current ratio is 37% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive. The problem is a declining book value which has declined by 0.27% each year over the past 5 years. A declining book value is never a good sign.
I get a 10 year median Price/Cash Flow per Share Ratio of 8.47. The current P/CF Ratio is 7.01 based on Cash Flow per Share estimate for 2021 of $12.00, Cash Flow of $4,168M and a stock price of $84.14. The current ratio is 17% 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 1.30%. The current dividend yield is 1.59% based on dividends of $1.34 and a stock price of $84.14. The current yield is 22.5% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively cheap.
I get an historical median dividend yield of 1.88%. The current dividend yield is 1.59% based on dividends of $1.34 and a stock price of $84.14. The current yield is 15% below the historical median 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 0.48. The current P/S Ratio is 0.56 based on Revenue estimate for 2021 of $52,126M, Revenue per Share of $150.06 and a stock price of $84.14. The current ratio is 17.6% above the 10 year median 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 but above the median. The 10 year dividend yield test says this and it is confirmed by the P/S Ratio test. The Historical dividend yield test says the stock price is cheap, but a yield is 1.59% is still a very low yield. They are not building their Book Value and this can be a problem.
Is it a good company at a reasonable price? I am happy with my grocery stock replacement of Metro Inc. However, I do like shopping at Loblaws better than at Metro. Loblaws has not be doing well recently for shareholders, although it is up some 34% year to date. If we do the Total Return per year, as is shown below for years of 5 to 32 to date, the 5 year return is better, but long term investors are still suffering. Currently I will stay invested in Metro, but I will still follow Loblaws and I will continue to shop in Loblaws.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2015 | 5 | 5.17% | 5.10% | 3.50% | 1.60% |
| 2010 | 10 | 4.30% | 10.12% | 8.14% | 1.98% |
| 2005 | 15 | 2.85% | 5.28% | 3.70% | 1.58% |
| 2000 | 20 | 5.99% | 4.20% | 2.76% | 1.43% |
| 1995 | 25 | 10.31% | 9.56% | 7.36% | 2.19% |
| 1990 | 30 | 10.17% | 11.90% | 9.36% | 2.55% |
| 1988 | 32 | 9.67% | 10.13% | 8.12% | 2.01% |
When I look at analysts’ recommendations, I find Strong Buy (4), Buy (3), Hold (4), and Underperform (1). The consensus is a Buy, but the spread of recommendations is big. The 12 month stock price consensus is $87.58. This implies a total return of 5.68% with 4.09% from capital gains and 1.59% from dividends. It is a rather low return
Recent analysts’ comments on Stock Chase are positive. Nikhil Kumar on Motley Fool says Loblaws did the right things during the pandemic and this will bear fruit for the company. The executive summary on Simply Wall Street gives this stock 4 stars out of 5 and list one risk. A writer on Simply Wall Street says why this stock should be on your watch list. Andrew Willis on Stock Insight talks about this company and George Weston.
Loblaw is one of Canada's largest grocery, pharmacy, and general merchandise retailers. It operates the most expansive store footprint in Ontario and maintains sizable presences in provinces like Quebec and British Columbia. In addition to its retail operations, Loblaw oversees a financial-services business, which provides credit card services and guaranteed investment certificates, and also operates its PC Optimum loyalty program. Its web site is here Loblaw Companies Ltd .
The last stock I wrote about was about was Ballard Power Systems Inc (TSX-BLDP, NASDAQ-BLDP) ... learn more. The next stock I will write about will be Stingray Digital Group Inc (TSX-RAY.A, OTC-NONE) ... learn more on Tuesday, August 3, 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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