Is it a good company at a reasonable price? The price may be still reasonable, but it is on the high side. I think that this is a great dividend growth stock. Personally, I rather have a company that has a lower dividend, but is growing their dividends. I have done well over the long term with this company and I will continue to hold this stock.
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 held it some 2004.
When I was updating my spreadsheet, I noticed although the dividend is low, I have had this stock for some time and current I am making 17% dividend yield on my original investment. If dividend continue to increase at an average of 12.68%, which is the increased per year over the past 5 years, then in 15 years, you could be earning 8.91% or in 20 years 16.18% on your original investment at the current stock price of $67.52. See chart below. This is letting compounding work for you.
| Div Yd | Years | At IRR | Div Inc |
|---|---|---|---|
| 2.70% | 5 | 12.68% | 81.67% |
| 4.90% | 10 | 12.68% | 230.02% |
| 8.91% | 15 | 12.68% | 499.54% |
| 16.18% | 20 | 12.68% | 989.16% |
If in 1992 you had bought 1275 for $1007.25 (approximately $1,000), after 18 years you would have stock worth $85,794.75 and you would have been paid $9,743.47 in Dividends. This is why you buy dividend growth stock.
The dividend yields are low with dividend growth moderate. The current dividend yield is low (below 2%) at 1.48%. The 5, 10 and historical dividend yields are also low at 1.46%, 1.55% and 1.46%. The current dividend growth is moderate (in 8% to 14% ranges) at 12.68% per year over the past 5 years. The last dividend increase was in 2021 and it was for 11%.
The Dividend Payout Ratios (DPR) are fine. The DPR for EPS for 2021 is 29% with 5 year coverage at 21%. The DPR for CFPS for 2021 is 14% with 5 year coverage also at 14%. The DPR for Free Cash Flow is 24% with 5 year coverage at 31%.
Debt Ratios are good. The Long Term Debt/Market Cap Ratio for 2021 is 0.15. This is low and good. The Liquidity Ratio is 1.12 and if you add in Cash Flow after dividends it is 1.66 and fine. The Debt Ratio for 2021 is good at 1.89. The Leverage and Debt/Equity Ratios at 2.12 and 1.12 are good.
The Total Return per year is shown below for years of 5 to 31 to the end of 2021. 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. |
|---|---|---|---|---|---|
| 2016 | 5 | 12.68% | 12.46% | 10.87% | 1.58% |
| 2011 | 10 | 14.97% | 15.77% | 14.10% | 1.67% |
| 2006 | 15 | 13.90% | 13.18% | 11.79% | 1.39% |
| 2001 | 20 | 15.20% | 14.36% | 12.90% | 1.46% |
| 1996 | 25 | 17.23% | 17.61% | 15.74% | 1.87% |
| 1991 | 30 | 19.26% | 20.54% | 18.34% | 2.19% |
| 1990 | 31 | 22.12% | 19.63% | 2.48% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 15.07, 17.58 and 19.59. The corresponding 10 year ratios are 13.21, 16.10 and 18.52. The corresponding historical Ratios are 11.39, 12.05 and 18.40. The current P/E Ratio is 19.29 based on a stock price of $67.32 and EPS estimate for 2022 of $3.49. The current ratio is above the 10 year high median ratio. This stock price testing suggests that the stock price is relatively expensive.
I get a Graham Price of $45.44. The 10 year low, median, and high median Price/Graham Price Ratios are 1.07, 1.30 and 1.50. The current P/GP Ratio is 1.48 based on a stock price of $67.32. The current ratio is between the median and high of the 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 2.20. The current P/B Ratio is 2.56 based on a Book Value of $6,399M, Book Value per Share of $26.29 and a stock price of $67.32. The current ratio is 16% 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 14.38 based on Cash Flow per Share estimate for 2022 of $4.68, Cash Flow of $1,139M and a stock price of $67.32. The current ratio is 18% 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 1.49% based on dividends of $1.00 and a stock price of $67.32. The current dividend yield is 1.7% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I get a 10 year median dividend yield of 1.55%. The current dividend yield is 1.49% based on dividends of $1.00 and a stock price of $67.32. The current dividend yield is 4% below 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 0.74. The current P/S Ratio is 0.89 based on Revenue estimate for 2022 of $18,510M, Revenue per Share of $76.05 and a stock price of $67.32. The current ratio is 19% 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 still reasonable. The P/S Ratio test is showing the stock as above the median and the dividend yield tests are showing the stock price as above and below the median. All the tests, except the P/E Ratio test shows the stock price as reasonable and above or below the median. The P/E Ratio is just over the 10 year median high ratio.
I also look at the total return over a number of years. For P/S Ratio and P/E Ratio, the lower the ratio the cheaper the stock. For yield, the higher the yield, the cheaper the stock. In the chart below you can see that both the P/E Ratio and P/S Ratios are higher today than for good returns in the past. For the dividend yield, some of the past dividend yields are lower and some are higher.
In the following chart the capital gains for the 10 years to December 31, 2021 is 14.10% per year. The beginning yield was at 1.62%, and the P/E Ratio and the P/S Ratio were at 14.48 and 0.40. Does this chart change my opinion of the stock price? Not really.
| # Years | Cap Gain | Beg P/E | Beg P/S | Beg Yield |
|---|---|---|---|---|
| 5 | 10.87% | 16.80 | 0.79 | 1.25% |
| 10 | 14.10% | 14.48 | 0.40 | 1.62% |
| 15 | 11.79% | 17.40 | 0.35 | 1.24% |
| 20 | 12.90% | 15.12 | 0.19 | 1.86% |
| 25 | 15.74% | 10.88 | 0.17 | 1.02% |
| 30 | 18.34% | 12.90 | 0.10 | |
| 31 | 19.63% | |||
| current | 19.29 | 0.89 | 1.49% |
When I look at analysts’ recommendations, I find Strong Buy (1), Buy (2), Hold (7) and Underperform (2). The recommendations seem to be all over the place. The consensus would be a Hold. The 12 months stock price is $66.75. This implies a total return of 0.64% with a capital loss of 0.85% and dividends of 1.49%. So, the analysts expect this stock to go nowhere over the next year.
The most recent entry on Stock Chase is a buy. Adam Othman on Motley Fool still thinks this is a safe growth stock. Ambrose O'Callaghan on Motley Fool thinks this company is a solid defense stock. Simply Wall Street has a report on this stock on Yahoo Finance. The company announces on Cision their linkup with InComm.
Metro Inc is a retailer, franchisor, distributor, and manufacturer, and the company operates or services a network of some 950 food stores under several banners including Metro, Metro Plus, Super C and Food Basics, as well as of some 650 drugstores primarily under the Jean Coutu, Brunet, Metro Pharmacy and Drug Basics banners. Its web site is here Metro Inc.
The last stock I wrote about was about was KP Tissue Inc (TSX-KPT, OTC-KPTSF) ... learn more. The next stock I will write about will be Bank of Montreal (TSX-BMO, NYSE-BMO) ... learn more on Wednesday, January 5, 2022 around 5 pm. Tomorrow on my other blog I will write about Dividend Stocks January 2022 .... learn more on Tuesday, January 4, 2022 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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