I do not own this stock of Molson Coors Canada (TSX-TPX.B, NYSE-TAP). In 2008 I did a spreadsheet on this stock as it has recently been recommended and generally, beer companies make good money. Labatt’s was one of the original companies that I purchased and I did very well with it before it was bought out.
When I was updating my spreadsheet, I noticed the reason for the loss in 2020 was because of Special Items which went from a positive value in 2018 to a big negative in 2020. The Special Items was $249.7M in 2018 and in 2021 was a negative 1,740.2M. Special items to the company are items not indicative of their core operations. Recently these have been restructuring charges and impairment losses.
The dividend yields are moderate with dividend growth restarting. The current dividend yield is moderate (2% to 4% range) at 2.94%. The 5 year and historical median dividend yields are low (below 2%) at 1.84% and 1.88%. The 10 year median dividend yield is moderate at 2.32%.
Over the past 30 years of data I have, the dividends were raised 15 times. There was one decrease and that happened in 2020. They only paid one dividend in 2020 and then restarted them at the end of 2021 and paid 2 dividends. They are expected to pay 4 dividends in 2022. Analysts also expect dividend increases in 2022 and 2023.
The Dividend Payout Ratios (DPR) are fine. The DPR for EPS for 2020 cannot be calculated because of an earnings loss. The 5 year coverage for EPS is 42%. Analysts expect the DPR for EPS for 2021 to be around 16% and then raising to 35% in 2022. The DPR for CFPS for 2020 is 6% with 5 year coverage at 16%. The DPR for Free Cash Flow for 2020 is 11% with 5 year coverage at 25%. Sites seem to agree on FCF.
Debt Ratios are fine, but Liquidity Ratio could be improved. The Long Term Debt/Market Cap Ratio for 2020 is 0.71. The Debt Ratio is fine at 1.86. The Leverage and Debt/Equity Ratios are fine at 2.21 and 1.19, respectively.
The Liquidity Ratio is very low at 0.62. This means that current assets cannot cover current liabilities. If you add in cash flow after dividends it is still quite low at 1.02. I prefer this to be 1.50 or higher. If you add back in the current portion of the long term debt, the ratio is still very low at 1.38. You have to be careful of doing this as you must be sure that debt can be rolled over. I must admit this company has always had a very low Liquidity Ratio.
The Total Return per year is shown below for years of 5 to 25 to the end of 2020 in CDN$. 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 | -20.40% | -12.97% | -15.01% | 2.04% |
| 2010 | 10 | -3.87% | 4.61% | 1.34% | 3.27% |
| 2005 | 15 | -0.17% | 5.87% | 2.86% | 3.01% |
| 2000 | 20 | 1.88% | 11.95% | 6.56% | 5.39% |
| 1995 | 25 | 1.50% | 9.85% | 5.58% | 4.27% |
The Total Return per year is shown below for years of 5 to 30 to the end of 2020 in US$. 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 | -19.05% | -11.52% | -13.61% | 2.09% |
| 2010 | 10 | -6.19% | 1.95% | -1.04% | 2.99% |
| 2005 | 15 | -0.77% | 4.00% | 1.12% | 2.87% |
| 2000 | 20 | 2.32% | 2.88% | 0.59% | 2.29% |
| 1995 | 25 | 3.35% | 9.14% | 5.79% | 3.35% |
| 1990 | 30 | 2.79% | 7.96% | 5.07% | 2.89% |
Coors bought out Molson in 2005. This could account for why Canadians have done better than Americans with this stock. However, I am sure that the Total Return will improve in the future.
The 5 year low, median, and high median Price/Earnings per Share Ratios are 10.76, 13.68 and 16.22. The corresponding 10 year ratios are 12.30, 14.76 and 17.41. The corresponding historical ratios are 1.83, 14.12 and 16.61. The current P/E Ratio is 10.86 based on a stock price of $57.50 and EPS estimate for 2021 of $5.29 ($4.24 US$). The current ratio is below low 10 year median ratios. This stock price testing suggests that the stock price is relatively cheap.
I get a Graham Price of $92.37. The 10 year low, median, and high median Price/Graham Price Ratios are 0.84, 0.97 and 1.10. The current P/GP Ratio is 0.62 based on a stock price of $57.50. The current ratio is below the low ratio for the 10 year median ratios. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median Price/Book Value per Share Ratio of 1.13. The current P/B Ratio is 0.81 based on a Book Value of $12,985M, Book Value per Share of $57.40 and a stock price of $46.33. The current P/B Ratio is 29% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap. This testing is in US$ but you will get a similar result in CDN$.
I get a 10 year median Price/Cash Flow per Share Ratio of 8.84. The current ratio is 6.10 based on Cash Flow per Share estimate for 2021 of $7.60, Cash Flow of $1,719M and a stock price of $46.33. The current ratio is 31% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap. This testing is in US$ but you will get a similar result in CDN$.
I get an historical median dividend yield of 1.88%. The current dividend yield is 2.94% based on dividends of $1.36 and a stock price of $46.33. The current dividend is 56% above the historical dividend yield. This stock price testing suggests that the stock price is relatively cheap. This testing is in US$. The results are a bit different in CDN$ because Molson and Coors came together in 2005 and my data goes back to 1990. However, even in CDN$, the stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median dividend yield of 2.35%. The current dividend yield is 2.94% based on dividends of $1.36 and a stock price of $46.33. The current dividend is 26% above the 10 year dividend yield. This stock price testing suggests that the stock price is relatively cheap. This stock price testing suggests that the stock price is relatively cheap. This testing is in US$ but you will get a similar result in CDN$.
The 10 year median Price/Sales (Revenue) Ratio is 2.13. The current P/S Ratio is 1.02 based on Revenue estimate for 2021 of $10,283M, Revenue per Share of $45.46 and a stock price of $43.33. The current ratio is 52% below the 10 year median P/S Ratio. This stock price testing suggests that the stock price is relatively cheap. This testing is in US$ but you will get a similar result in CDN$.
Results of stock price testing is that the stock price is probably cheap. The dividend yield tests show this and it is confirmed by the P/S Ratio test. All the other test show this also.
Is it a good company at a reasonable price? The stock price would appear to be reasonable if not cheap. A lot of companies are having a hard time coming out of the 2008 recession as it was a long slow recovery. It will probably do well for the shareholders in the longer term. You can certainly buy it now with a decent dividend yield that is better than normal.
When I look at analysts’ recommendations, I find Strong Buy (7), Buy (2), Hold (8), Underperform (4) and Sell (1). This is certainly a very wide spread of recommendations and not commonly found. The consensus is a Buy. There is obviously a very wide range of opinions on this stock. The 12 month stock price is $71.15 ($57.00 US$). This implies a total return of 26.695 with 23.73% from capital gains and 2.95% from dividends based on a stock price of $57.50 CDN$.
This stock is not well followed in Stock Chase. This goes for both the Canadian stock and the US stock. Chen Liu on Motley Fool in January 2020 thought that the intrinsic value of this stock was much higher than the stock price. Motley Fool in March 2021 thought that this stock was in a unique position to thrive. The executive summary on Simply Wall Street gives this stock 3 stars out of 5 and lists 2 risks. Bruce Kaser on Money Show says why you should buy this stock. The company on Newswire talks about Coca-Cola Company Expanding Offering to Bring Topo Chico Hard Seltzer to Canada.
Molson Coors Canada is a large global brewer and distributor of beer and other malt beverages. Its breweries are located across the U.S., Canada, and Europe, with the majority of the company's revenue generated in North America. Its web site is here Molson Coors Canada.
The last stock I wrote about was about was Pason Systems Inc (TSX-PSI, OTC-PSYTF) ... learn more. The next stock I will write about will be Brookfield Asset Management Inc (TSX-BAM.A, NYSE-BAM) ... learn more on Monday, October 18, 2021 around 5 pm.
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