Is it a good company at a reasonable price? Stock price seems expensive. This stock has been preforming better lately. I do wonder if they have really fixed their supply system. When shelves are empty of an item, it can be a week before the item is back. I notice with Metro that items seem to be restocked the next day. However, I do like shopping at Loblaws better than Metro, even though I own Metro stock.
I do not own this stock of Loblaw Companies Ltd (TSX-L, OTC-LBLCF). I have followed this stock for some time. I got the stock from Mike Higgs' list of dividend growth companies. 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 was updating my spreadsheet, I noticed that this company is providing Adjusted Earnings per Share (AEPS) data. However, this data has been inconsistent over the years. Sometimes they provided Diluted AEPS (recent) and sometimes Basic AEPS and sometimes neither.
If you look at my spreadsheet, I can see that from around 2016, the EPS started to rise for this company. Over the past 5 years, EPS is up by just over 18%. The Revenue per Share is not up so strong at just 6.6% per year over the past 5 years. It is interesting that the Adjusted Earnings per Share (AESP) is up by only 6.7% per year over the past 5 years.
This stock has done well lately. If you compared the chart of total return of the end of 2020 to the one below to 2021, you can see that the Total Return for years 5 and 10 are much better. Below the total return for the last 5 and 10 years are 1.01% and 6.61%. For chart ending in 2021, the total return for last 5 and 10 years is 9.39% and 12.55%.
| 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% |
If you had invested in this company in December 2011, $1000.48 you would have bought 26 shares at $38.48 per share. In December 2021, after 10 years you would have received $284.31 in dividends. The stock would be worth $2,694.64. Your total return would have been $2,978.95.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $38.48 | $1,000.48 | 26 | 10 | $284.31 | $2,694.64 | $2,978.95 |
The dividend yields are low with dividend growth low. The current dividend yield is low (below 2%) at 1.39%. The dividend growth is low (below 8%) at 6.33% per year. The 5, 10 and historical dividend yields are also low at 1.82%, 1.84% and 1.39%. Dividend growth is low (below 8%) at 6% per year over the past 5 years.
The Dividend Payout Ratios (DPR) are fine. The DPR for EPS for 2021 is 26% with 5 year coverage at 36%. The DPR for Adjusted Earnings per Share (AEPS) is 25% with 5 year coverage at 27%. The DPR for CFPS is 8% with 5 year coverage at 9%. The DPR for Free Cash Flow (FCF) is 16% with 5 year coverage at 18%. (However, site have very different values for FCF.)
Debt Ratios are fine. The Long Term Debt/Market Cap Ratio is 0.30 and is good. The Liquidity Ratio is 1.37, but if you add in Cash Flow after dividends, it is 1.85. (I like this one to be at 1.50 or higher). The Debt Ratio is a bit low at 1.47 as I prefer this also to be at 1.50 or higher.
The Total Return per year is shown below for years of 5 to 33 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. | check |
|---|---|---|---|---|---|---|
| 2016 | 5 | 6.33% | 9.39% | 7.91% | 1.48% | 9.39% |
| 2011 | 10 | 5.24% | 12.25% | 10.42% | 1.83% | 12.25% |
| 2006 | 15 | 3.46% | 6.59% | 5.15% | 1.44% | 6.59% |
| 2001 | 20 | 6.46% | 5.14% | 3.84% | 1.31% | 5.14% |
| 1996 | 25 | 10.33% | 10.27% | 8.26% | 2.01% | 10.27% |
| 1991 | 30 | 10.01% | 12.44% | 10.12% | 2.33% | 12.44% |
| 1988 | 33 | 9.66% | 14.38% | 11.55% | 2.83% | 14.38% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 19.43, 22.04 and 24.65. The corresponding 10 year ratios are 20.18, 22.78 and 25.39. The corresponding historical ratios are 17.05, 19.42 and 21.60. The current ratio is 21.31 based on a stock price of $116.57 and EPS estimate for 2022 of $5.47. This ratio is between the low and median ratios of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I also have Adjusted Earnings per Share AEPS) data. The 5 year low, median, and high median P/AEPS Ratios are 14.23, 16.07 and 18.05. The corresponding 10 year ratios are 14.48, 16.22 and 18.36. The current P/AEPS Ratio is 18.21 based on AEPS estimate for 2022 of $6.40 and a stock price of $116.57. The current ratio is between the median and high ratios 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 Graham Price of $64.88. 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 1.80 based on a stock price of $116.57. The current ratio is above the high of the 10 year median ratios. 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 2.11. The current P/B Ratio is 3.41 based on a Book Value of $11,407M, Book Value per Share of $34.20 and a stock price of $116.57. The current ratio is 32% 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 8.47. The current P/CF Ratio is 7.93 based on Cash Flow per Share estimate for 2022 of $14.70, Cash Flow of $4,903M and a stock price of $116.57. The current ratio is 6% 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 1.49%. The current dividend yield is 1.39% based on a stock price of $116.57 and Dividends of $1.62. The current ratio is 7% at 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 1.84%. The current dividend yield is 1.39% based on a stock price of $116.57 and Dividends of $1.62. The current ratio is 25% below the 10 median dividend yield. This stock price testing suggests that the stock price is relatively expensive.
The 10 year median Price/Sales (Revenue) Ratio is 0.51. The current P/S Ratio is 0.71 based on Revenue estimate for 2022 of $54,919M, Revenue per Share of $164.66 and a stock price of $116.57. The current ratio is 39% 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 expensive. Both the 10 year median dividend yield test and the P/S Ratio test show this result. Lots of people think that the 10 year test for dividend yield is much better than the historical one. Not all the tests show an expensive result. For example, the P/E Ratio test says the price is reasonable. This is not a bad tests as P/E Ratios are uniform over a long period. The P/CF Ratio test also says the stock price is reasonable.
When I look at analysts’ recommendations, I find Strong buy (4), Buy (3), Hold (3) and Sell (1). The consensus would be a Buy. The 12 month stock price consensus is $125.55. This implies a total return of 9.09% with 7.70% from capital gains and 1.39% from dividends.
Some analysts on Stock Chase think that the stock is too expensive. Stock Chase gives this stock 4 stars out of 5. It is interesting the Loblaw got a C rating from Money Sense until 2021 and then is not on their list of 100 best Canadian Dividend stocks in 2022. Ambrose O'Callaghan on Motley Fool thinks this is a dependable dividend stock for RRSP Accounts. Christopher Liew on Motley Fool likes this stock as a defensive stock. The company reported on a Press Release their fourth quarterly results. The company reported on a Press Release their first quarter 2022 results.
Simply Wall Street has a report on Yahoo Finance. This report reviews this stock. Simply Wall Street has two warnings of earnings are forecast to decline by an average of 5.9% per year for the next 3 years; and the company has a high level of debt.
Loblaw is one of Canada's largest grocery, pharmacy, and general merchandise retailers, operating the most expansive store footprint in Ontario and maintaining sizable presences in provinces like Quebec and British Columbia. The firm's controlling shareholder is George Weston Limited, which owns 52.6% of the equity. Its web site is here Loblaw Companies Ltd.
The last stock I wrote about was about was Ballard Power Systems Inc (TSX-BLDP, NASDAQ-BLDP0 ... learn more. The next stock I will write about will be Stingray Digital Group Inc (TSX-RAY.A, OTC-NONE) ... learn more on Wednesday, August 3, 2022 around 5 pm. Tomorrow on my other blog I will write about Dividend Stocks August 2022 .... learn more on Tuesday, August 2, 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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