Is it a good company at a reasonable price? I tend to like companies that produce a Total Return of at least 8% per year. This company has not done that. But it is a dividend growth stock.
I do not own this stock of Maple Leaf Foods Inc (TSX-MFI, OTC-MLFNF). I am doing a report on this stock because it was on the Top 100 Canadian Dividend Stocks by Maple Money . It also was on the Top 100 Dividend Stocks Money Sense for 2021 gets a solid C Rating from Money Sense.
When I was updating my spreadsheet, I noticed that if you had invested in this stock 10 years ago, you would have done very well and much better than in a lot of other periods. See Chart on Total Return below. If you invested in this company 10 years ago your total return is $12.58% per year. However, every other period is below 8% per year. For example, an investment 30 years ago, your total return would be 2.99% per year.
Here are some growth statistics for the past 5 and 10 years. Over the past 5 years EPS growth and Cash Flow Growth has done in the wrong direction. Dividends have grown much stronger than Revenue, Earnings or Cash Flow.
| Year | Item | Growth |
|---|---|---|
| 5 | Revenue Growth | 35.69% |
| 5 | EPS Growth | -60.98% |
| 5 | Net Income Growth | -76.71% |
| 5 | Cash Flow Growth | -17.13% |
| 5 | Dividend Growth | 100.00% |
| 5 | Stock Price Growth | 4.05% |
| 10 | Revenue Growth | -8.24% |
| 10 | EPS Growth | 41.38% |
| 10 | Net Income Growth | 17.74% |
| 10 | Cash Flow Growth | 24.49% |
| 10 | Dividend Growth | 350.00% |
| 10 | Stock Price Growth | 170.18% |
If dividends continue to increase at the rate for the past 5 years of 14.87%, as current dividend is a lot higher than in the past. So, in 10 years, your dividend yield would be 13.21%. This would be a 300% increase from the current rate of 3.30%. You would cover some 60.01% of the cost of your stock.
| Div Yd | Years | At IRR | Div Inc | Cost Covered |
|---|---|---|---|---|
| 6.60% | 5 | 14.87% | 100.00% | 22.20% |
| 13.21% | 10 | 14.87% | 300.00% | 60.01% |
| 26.41% | 15 | 14.87% | 700.00% | 135.62% |
If you look at the history of dividend changes from 5, 10 and 15 years ago, the dividend yield started from a much lower rate and after 5, 10 or 15 years, the growth has been lower. If you bought this stock 10 years ago, your dividend yield would now be 6.96%, your starting dividend would have been 1.34% and the dividend would have grown by 420%. You would have covered 35.51% of the cost of your stock.
| Div Yd | Years | Start Div | Div Inc | Cost Covered |
|---|---|---|---|---|
| 2.61% | 5 | 1.23% | 112.21% | 10.87% |
| 6.96% | 10 | 1.34% | 420.43% | 35.51% |
| 5.43% | 15 | 1.08% | 404.24% | 34.49% |
If you had invested in this company in December 2011, for $1,007.19 you would have bought 93 shares at $10.83 per share. In December 2021, after 10 years you would have received $377.58 in dividends. The stock would be worth $2,721.18. Your total return would have been $3,098.76.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $10.83 | $1,007.19 | 93 | 10 | $377.58 | $2,721.18 | $3,098.76 |
The dividend yields are moderate with dividend growth good. The current dividend yield is moderate (2% to 4% ranges) at 3.42%. The 5 year median dividend yield is moderate at 2.03%. The 10 year median and historical median dividend yields are low (below 2%) at 1.46% and 1.45%. The dividend growth has been good (14% or higher) over the past 5 years at 14.9% per year. The last dividend increase occurred in 2022 and was for 11%.
The Dividend Payout Ratios (DPR) are fine. The DPR for EPS for 2021 is 88% with 5 year coverage at 67%. The DPR for Adjusted Earnings per Share (AEPS) for 2021 is 70% with 5 year coverage at 58%. The DPR for Cash Flow per Share (CFPS) for 2021 is 51% with 5 year coverage at 27%. The CFPS for 2021 is too high as I like this at 40% or under, but 5 year coverage is fine. The DPR for Free Cash Flow (FCF) for 2021 is negative. However, there is disagreement on what the FCF is.
Debt Ratios are fine. The Long Term Debt/Market Cap Ratio is good at 0.34. The Liquidity Ratio is low at 1.40 as I like it to be 1.50 or higher, but add in Cash Flow after dividends and it is good at 1.64. The Debt Ratio is good at 1.87. The Leverage and Debt/Equity Ratios are fine at 2.15 and 1.15.
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 | 14.87% | 2.82% | 0.80% | 2.02% |
| 2011 | 10 | 16.23% | 12.58% | 10.45% | 2.13% |
| 2006 | 15 | 10.55% | 7.47% | 5.92% | 1.54% |
| 2001 | 20 | 7.81% | 6.70% | 5.25% | 1.45% |
| 1996 | 25 | 6.20% | 6.14% | 4.71% | 1.43% |
| 1991 | 30 | 2.15% | 2.99% | 1.83% | 1.16% |
| 1990 | 31 | 2.08% | 4.80% | 3.24% | 1.55% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 28.96, 33.79 and 38.61. The corresponding 10 year ratios are 21.07, 26.39 and 31.72. The corresponding historical ratios are 16.99, 19.97 and 25.14. The current P/E Ratio is 142.53 based on a stock price of $24.23 and EPS estimate for 2022 of $0.17. The current P/E Ratio is above the high ratio of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable and below the expensive. The P/E Ratios are quite high.
The problem is that the company is not expected to earn much in EPS next year. For 2023, EPS is much higher at $1.47 and this has a P/E Ratio of 16.48 based on a current stock price of $24.23. This ratio is below the low of the 10 year median ratios. This stock price testing suggests that the stock price is relatively cheap. However, normally a P/E Ratio of 16.48 would be considered reasonable.
I also have Adjusted Earnings per Share (AEPS) data. The 5-year low, median, and high median Price/Earnings per Share Ratios are 21.70, 24.40 and 29.73. The corresponding 10 year ratios are 20.55, 24.62 and 28.38. Here again the P/AEPS Ratios are high. The P/AEPS Ratio for 2022 is expected to be 127.53 based on a AEPS estimate for 2022 of $0.19. This ratio is above the high ratio of the 10 year median ratios. This stock price testing suggests that the stock price is relatively expensive.
However, the AEPS for 2022 is expected to be quite low at $0.19. The AEPS for 2023 is higher at $1.47 and with a stock price of $24.23, will give a P/AEPS of 16.48. This ratio is below the low of the 10 year median ratios. This stock price testing suggests that the stock price is relatively cheap. However, normally a P/AEPS ratio of 16.48 would be considered reasonable.
I get a Graham Price of $7.31 . The 10-year low, median, and high median Price/Graham Price Ratios are 1.14, 1.43 and 1.72. The current ratio is 3.32 because of the very low EPS expected in 2022. However, the Graham Price is better in 2023 at $21.49. The P/GP Ratio for 2023 is 1.13. This is just below the P/GP low of the 10 year median ratio. 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 1.69. The current ratio is 1.73 based on a Book Value of $1,730M, Book Value per Share of 13.97 and a stock price of $24.23. The current ratio is 3% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median.
I also have an estimate for the Book Value per Share for 2022 and it is $13.40. This produced a Book Value of $1,660M, and a ratio of 1.81. This ratio of 1.81 is 7% above the 10 year median ratio of 1.69. 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 9.95. The current P/CF Ratio is 31.47 based on Cash Flow for 2022 of $0.77 and a stock price of $24.23. The current ratio is 216% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
The above Cash Flow for 2022 is quite low and this gave a very high P/CF Ratio. The Cash Flow per Share for 2023 is $3.60 and this would give a Cash Flow of $446M and a P/CF Ratio of 6.73 with a stock price of $24.23. This ratio is 32% below the 10 year median ratio 9.95. This stock price testing suggests that the stock price is relatively cheap.
I get an historical median dividend yield of 1.48%. The current dividend yield is 3.30% based on dividends of $0.80 and a stock price of $24.23. The current dividend yield is 123% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median dividend yield of 1.46%. The current dividend yield is 3.30% based on dividends of $0.80 and a stock price of $24.23. The current dividend yield is 127% above the 10 year median dividend yield. This stock price testing suggests that the stock price is relatively cheap.
The 10-year median Price/Sales (Revenue) Ratio is 0.85. The current P/S Ratio is 0.63 based on Revenue estimate for 2022 of $4,757M, Revenue per Share of $38.40 and a stock price of $24.23. The current ratio is 26% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
Results of stock price testing is that the stock price is probably cheap. The Dividend yield tests say this as does the P/S Ratio test. These are good tests. The problem with other testing has to do with the fact that no one seems to think that the company will make much this year in earnings or cash flow.
When I look at analysts’ recommendations, I find Strong Buy (3), Buy (2) and Hold (1). The consensus would be a Buy. The 12 month stock price is $32.17. This implies a total return of 36.07% with 32.77% from capital gains and 3.30% from dividends based on a stock price of $24.23.
There is not much in analyst’s comments, but on Stock Chase most analysts do like this company. Stock Chase gives this stock 3 stars out of 5. It is on the Money Sense list with a rating of C. Ambrose O'Callaghan on Motley Fool thinks this stock is worth getting for the long haul. Steven Porrello on Motley Fool talks about food stocks including this one. The company put out a Press Release on their fourth quarter of 2021. The company put out a Press Release on their third quarter of 2022. Simply Wall Street via Yahoo Finance talks about who owns this stock. Simply Wall Street has two risk warnings on this stock of debt is not well covered by operating cash flow and dividend of 3.42% is not well covered by earnings or cash flows.
Maple Leaf Foods Inc is a consumer-packaged meats company. It produces prepared meats and meals, fresh pork, and poultry and turkey products. The company also has agribusiness operations. Its web site is here Maple Leaf Foods Inc.
The last stock I wrote about was about was Neighbourly Pharmacy Inc (TSX-NBLY, OTC-none) ... learn more. The next stock I will write about will be KP Tissue Inc (TSX-KPT, OTC-KPTSF) ... learn more on Wednesday, December 28, 2022 around 5 pm. Today on my other blog I will write about Walking .... learn more on Tuesday, December 27, 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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