Is it a good company at a reasonable price? I do like this company and I think that it is a good idea for a portfolio is have at least one food stock. I personally have Metro. It is a defensive stock. The stock price is reasonable. The stock price is showing as cheap with the dividend yield tests. I do like the dividend yield tests because you are dealing with real values, not estimates.
I do not own this stock of Empire Company Ltd (TSX-EMP.A, OTC-EMLAF). I have known about this stock for some time before I decided to follow it. This stock has a financial year ending in end of April or first of May each year. So, I am reviewing the May 2023 year end results.
When I was updating my spreadsheet, I noticed that this company has steady growth and has a Total Return for shareholders at a reasonable rate. See Total Return chart below.
| Year | Item | Tot. Growth | Per Year |
|---|---|---|---|
| 5 | Revenue Growth | 25.87% | 4.71% |
| 5 | AEPS Growth | 118.75% | 16.95% |
| 5 | Net Income Growth | 330.09% | 33.88% |
| 5 | Cash Flow Growth | 114.15% | 16.45% |
| 5 | Dividend Growth | 57.14% | 9.46% |
| 5 | Stock Price Growth | 46.52% | 7.94% |
| 10 | Revenue Growth | 73.05% | 5.64% |
| 10 | AEPS Growth | 55.84% | 4.54% |
| 10 | Net Income Growth | 78.27% | 5.95% |
| 10 | Cash Flow Growth | 140.86% | 9.19% |
| 10 | Dividend Growth | 106.25% | 7.51% |
| 10 | Stock Price Growth | 59.14% | 4.76% |
If you had invested in this company in December 2012, for $1,002.15 you would have bought 51 shares at $19.65 per share. In December 2022, after 10 years you would have received $235.45 in dividends. The stock would be worth $1,818.66. Your total return would have been $2,054.11. This is a total return of 7.90% per year.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $19.65 | $1,002.15 | 51 | 10 | $235.45 | $1,818.66 | $2,054.11 |
A low dividend is not necessarily a disadvantage. Look at the following chart. Today, the dividend is $0.73 with a yield of 1.96%. In 15 years and if dividend growth continues at 9.46%, the dividend will be $2.56 and you will get a yield on today’s price of $37.19 of 5.53% and the dividends would have paid 46.86% of the cost of your stock.
| Div Pd | Div Yield | Years | At IRR | Div Cov. |
|---|---|---|---|---|
| $1.04 | 2.24% | 5 | 9.46% | 10.72% |
| $1.63 | 3.52% | 10 | 9.46% | 24.77% |
| $2.56 | 5.53% | 15 | 9.46% | 46.86% |
The current dividend yield is low with dividend growth moderate. The current dividend yield is low (below 2%) at 1.42%. The 5, 10 and historical dividend yields are also low at 1.56%, 1.56% and 1.45%. The dividends have grown at a moderate rate (8% to 14% per year) at 9.46% per year over the past 5 years. The last dividend increase was in 2023 and it was for 10.6%.
The Dividend Payout Ratios (DPR) are good. The DPR for 2023 for Earnings per Share (EPS) is 25% with 5 year coverage at 23%. The DPR for 2023 for Adjusted Earnings per Share (AEPS) is 24% with 5 year coverage at 23%. The DPR for 2023 for Cash Flow per Share (CFPS) is 8% with 5 year coverage at 8%. The DPR for 2023 for Free Cash Flow is 13% with 5 year coverage at 12%.
| Item | Cur | 5 Years |
|---|---|---|
| EPS | 25.00% | 23.08% |
| AEPS | 23.57% | 22.52% |
| CFPS | 7.76% | 7.56% |
| FCF | 12.58% | 11.66% |
Debt Ratios need improving. The Long Term Debt/Market Cap Ratio for 2023 is good at 0.10. The Liquidity Ratio for 2023 is very low at just 0.70. If you add in Cash Flow after dividends, it is still low at 1.03. It is a bit better currently at 1.21. I prefer this to be 1.50 or higher. The Debt Ratio is fine at 1.48, but I also prefer this to be at 1.50 or higher. The Leverage and Debt/Equity Ratios are too high at 3.17 and 2.14. I prefer these to be below 3.00 and below 2.00.
| Type | Ratio '23 | Ratio Curr |
|---|---|---|
| Lg Term R | 0.10 | 0.09 |
| Intang/GW | 0.36 | 0.35 |
| Liquidity | 0.70 | 0.77 |
| Liq. + CF | 1.03 | 1.21 |
| Debt Ratio | 1.48 | 1.48 |
| Leverage | 3.17 | 3.17 |
| D/E Ratio | 2.14 | 2.14 |
The Total Return per year is shown below for years of 5 to 38 to the end of 2022. 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. |
|---|---|---|---|---|---|
| 2017 | 5 | 9.46% | 9.67% | 7.80% | 1.86% |
| 2012 | 10 | 7.51% | 7.90% | 6.14% | 1.76% |
| 2007 | 15 | 7.60% | 8.04% | 6.30% | 1.74% |
| 2002 | 20 | 9.37% | 8.39% | 6.66% | 1.73% |
| 1997 | 25 | 11.82% | 11.70% | 9.57% | 2.13% |
| 1992 | 30 | 10.85% | 12.83% | 10.57% | 2.26% |
| 1987 | 35 | 10.02% | 10.68% | 8.96% | 1.72% |
| 1984 | 38 | 9.89% | 14.64% | 11.77% | 2.87% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 12.65, 14.49 and 16.33. The corresponding 10 year ratios are 13.94, 17.21 and 17.32. The corresponding historical ratios are 11.27, 13.15 and 14.65. The current P/E Ratio is 12.27 based on a stock price of $37.19 and EPS estimate for 2024 of $3.03. The current ratio is below the low ratio of the 10 year median ratios. This stock price testing suggests that the stock price is relatively cheap.
I also have Adjusted Earnings per Share (AEPS) Ratios. The 5-year low, median, and high median Price/Earnings per Share Ratios are 11.93, 1401 and 16.30. The corresponding 10 year ratios are 13.37, 15.12 and 17.20. The current ratio is 12.11 based on a stock price of $37.19 and a AEPS estimate for 2024 of $3.07. The current ratio is below the low ratio of the 10 year median ratios. This stock price testing suggests that the stock price is relatively cheap.
I get a Graham Price of $36.98. The 10-year low, median, and high median Price/Graham Price Ratios are 0.95, 1.14 and 1.32. The current P/GP Ratio is 1.01 based on a stock price of $37.19. The current ratio is below the low ratio of 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 1.87. The current ratio is 1.88 based on a Book Value of $5,200M, Book Value per Share of $19.80 and a stock price of $37.19. The current ratio is 0.4% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and at the median.
I get a 10-year median Price/Cash Flow per Share Ratio of 6.64. The current P/CF Ratio is 5.15 based on Cash Flow per Share estimate for 2024 of $7.22, Cash Flow of $1,897M and a stock price of $37.19. The current P/CF Ratio is 22% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I get an historical median dividend yield of 1.45%. The current dividend yield is 1.96% based on a dividend of $0.73 and a stock price of $37.19. The current dividend yield is 35% 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 1.56%. The current dividend yield is 1.96% based on a dividend of $0.73 and a stock price of $37.19. The current dividend yield is 26% 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 0.31. The current P/S Ratio is 0.31. the current ratio is the same the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and at the median.
Results of stock price testing is that the stock price is reasonable and maybe cheap. The dividend yield tests say that the stock price is cheap, but the P/S Ratio test just says it is reasonable. Most of the other test, but the P/B Ratio test, say that the stock price is cheap.
When I look at analysts’ recommendations, I find Strong Buy (1), Buy (4), Hold (2) and Underperform (1). The consensus would be a Buy. The 12 months stock price consensus is $41.44. This implies a total return of 13.39% with 11.43% from capital gains and 1.96% from dividends. Negative views on this is that there is a preference for Loblaws rather than this company, so there are better places to invest and that the stock is relatively expensive. A positive view is that it is a defensive stock.
Some analysts on Stock Chase think this is a buy and one thinks it is expensive. Stock Chase gives this stock 3 stars out of 5. This company is on Money Sense list at number 21. Aditya Raghunath on Motley Fool says the company has good growth and is cheap. Ambrose O'Callaghan on Motley Fool says company is a dependable dividend stock. The company put out a press release on Newswire about its fourth quarter of 2023 results.
Simply Wall Street reviews this company via Yahoo Finance. Simply Wall Street gives this stock 2 and one half stars out of 5. Simply Wall Street shows no risks for this company.
Empire Co Ltd key businesses are food retailing, investments, and other operations. The food retailing division operates through Empire's subsidiary Sobeys and represents nearly all the company's income. The company's investment and other operations segment include the investment in Crombie REIT, which is an open-ended Canadian real estate investment trust, as well as the Genstar Development Partnership. Its web site is here Empire Company Ltd .
The last stock I wrote about was about was Saputo Inc (TSX-SAP, OTC-SAPIF) ... learn more. The next stock I will write about will be Premium Brands Holdings Corp (TSX-PBH, OTC-PRBZF) ... learn more on Monday, July 3, 2023 around 5 pm.
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