Is it a good company at a reasonable price? The company has basically stop increasing their dividends. This is never a good sign for the short term as it shows that management is not optimistic in the short term. This increases the risk of investment, but can also increase the total return when buying such a stock. The stock is showing currently as cheap. It may take a while to recover, but I am sure it will. I am not selling any shares at this time.
I own this stock of Saputo Inc (TSX-SAP, OTC-SAPIF) . This was a stock on Mike Higgs' Canadian Dividend Growth Stock list and on the dividend lists that I followed. I bought this stock first in 2006 for my RRSP account. Because I am now taking money from my RRSP accounts, I have been selling this stock because of the low dividend. I still like this stock so I have been buying it in my TFSA. Note that this stock has a March 31 year end, so I am reviewing March 2023 annual report.
When I was updating my spreadsheet, I noticed I have had this stock for 17 years and I have made a total return of 15.49% per year with 12.90% from capital gains and 2.59% from dividends. This is a dividend growth stock and the return is good. People who have had this stock for shorter periods have not done as well. See below. The long slow recovery from 2008 bear market has been a problem for many companies. Covid lockdowns and its recovery has also been a problem.
If you had invested in this company in December 2012, for $1,006.20 you would have bought 40 shares at $25.16 per share. In December 2022, after 10 years you would have received $246.40 in dividends. The stock would be worth $1,420.80. Your total return would have been $1,667.20. This is a total return of 5.58% per year.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $25.16 | $1,006.20 | 40 | 10 | $246.40 | $1,420.80 | $1,667.20 |
If you had invested in this company in December 2017, for $1,039.14 you would have bought 23 shares at $45.18 per share. In December 2022, after 5 years you would have received $79.47 in dividends. The stock would be worth $816.96. Your total return would have been $896.43. This is a total loss of 3.01% per year.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $45.18 | $1,039.14 | 23 | 5 | $79.47 | $816.96 | $896.43 |
The current dividend yield is moderate with dividend growth low to flat. The current dividend is moderate (2% to 4% ranges) at 2.50%. The 5, 10 and historical dividend yields are low (below 2%) at 1.96%, 1.59% and 1.73%. The current dividend growth is low (below 8%) at 2.7% per year over the past 5 years. The last dividend increase was in 2021 and it was for 2.9%. The dividends see to being going flat. They used to increase the dividends every year, but they have been the same for the last 8 dividends.
The Dividend Payout Ratios (DPR) are fine. The DPR for 2023 for Earnings per Share (EPS) is 49% with 5 year coverage at 49% also. The DPR for 2023 for Adjusted Earnings per Share (AEPS) is 40% with 5 year coverage at 44%. The DPR for 2023 for Cash Flow per Share (CFPS) is 26% with 5 year coverage at 21%. The DPR for 2023 for Free Cash Flow (FCF) is 49% with 5 year coverage at 57%.
| Item | Cur | 5 Years |
|---|---|---|
| EPS | 48.65% | 49.08% |
| AEPS | 40.00% | 43.86% |
| CFPS | 26.23% | 20.62% |
| FCF | 48.77% | 56.77% |
Debt Ratios are fine. The Long Term Debt/Market Cap Ratio for 2023 is good and low at 0.20. The Liquidity is good at 1.62. The Debt Ratio for 2023 is good at 1.98. The Leverage and Debt/Equity Ratios for 2023 are fine at 2.02 and 1.02.
| Type | Ratio '23 | Ratio Curr |
|---|---|---|
| Lg Term R | 0.20 | 0.24 |
| Intang/GW | 0.31 | 0.38 |
| Liquidity | 1.62 | 1.62 |
| Liq. + CF | 1.86 | 1.98 |
| Debt Ratio | 1.98 | 1.98 |
| Leverage | 2.02 | 2.02 |
| D/E Ratio | 1.02 | 1.02 |
The Total Return per year is shown below for years of 5 to 26 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 | 2.71% | -3.01% | -4.70% | 1.69% |
| 2012 | 10 | 15.72% | 5.58% | 3.51% | 2.07% |
| 2007 | 15 | 7.90% | 8.16% | 5.96% | 2.21% |
| 2002 | 20 | 10.37% | 11.78% | 9.11% | 2.67% |
| 1997 | 25 | 13.56% | 12.69% | 10.14% | 2.54% |
| 1996 | 26 | 13.00% | 10.57% | 8.51% | 2.06% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 19.50, 23.33 and 27.21. The corresponding 10 year ratios are 19.26, 22.44 and 25.74. The corresponding historical ratios are 16.97, 19.13 and 21.76. The current P/E Ratio is 15.31 based on a stock price of $28.78 and EPS estimate for 2024 of $1.88. 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) data. The 5-year low, median, and high median Price/Adjusted Earnings per Share Ratios are 21.04, 23.29 and 25.33. The corresponding 10 year ratios are 19.68, 22.79 and 25.91. The current P/AEPS Ratio is 15.90 based on an AEPS estimate for 2024 of $1.81 and a stock price of $28.78. 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 $26.26. The 10-year low, median, and high median Price/Graham Price Ratios are 1.52, 1.78 and 2.06. The current P/GP Ratio is 1.10 based on a stock price of $28.78. The current ratio is below the low ratio 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 3.22. The current P/B Ratio is 1.70 based on a stock price of $28.78, Book Value of $7,140M and Book Value per Share of $16.94. The current ratio is 47% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I get a 10-year median Price/Cash Flow per Share Ratio of 16.41. The current P/CF Ratio is 8.77 based on Cash Flow per Share estimate for 2024 of $3.28, Cash Flow of $1,383M and a stock price of $28.78. The current ratio is 47% 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 1.73%. The current dividend yield is 2.50% based on dividends of $0.72 and a stock price of $28.78. The current dividend yield is 45% 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 1.59%. The current dividend yield is 2.50% based on dividends of $0.72 and a stock price of $28.78. The current dividend yield is 57% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively cheap.
The 10-year median Price/Sales (Revenue) Ratio is 1.17. The current P/S Ratio is 0.68 based on Revenue estimate for 2024 of $17,919M, Revenue per Share of $42.50 and a stock price of $28.78. The current ratio is 42% 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 and it is confirmed by the P/S Ratio test. All the tests I have done, the stock price is showing as cheap.
When I look at analysts’ recommendations, I find Strong Buy (1), Buy (5), Hold (2) and Underperform (2). The consensus would be a Buy. The 12 month stock price consensus is $36.28. This implies a total return of 28.56%, with 26.06% from capital gains and 2.50% from dividends.
Some analysts on Stock Chase think this stock is a buy and others do not. Stock Chase gives this stock 4 stars out of 5. It is not on the Money Sense list. There is a Bloomberg item saying there was cautious note from the CEO. Kay Ng on Motley Fool thinks there is a buying opportunity as the stock has fallen on this usual defensive stock. Tony Dong on Motley Fool thinks you should buy this stock as it is generally less volatile than the overall market. The company put out a Press Release about their fourth quarter results for March 2023.
Simply Wall Street via Yahoo Finance reviews this stock. Simply Wall Street has one warning for this stock of has a high level of debt. Simply Wall Street gives this stock 4 stars out of 5.
Saputo is a global dairy processor domiciled in Canada with operations in the United States, the U.K., and other international markets. It sells cheese, cream, fluid milk, and other dairy products. Its web site is here Saputo Inc .
The last stock I wrote about was about was Parkland Fuel Corp (TSX-PKI, OTC-PKIUF) ... learn more. The next stock I will write about will be Empire Company Ltd (TSX-EMP.A, OTC-EMLAF) ... learn more on Friday, June 20, 2023 around 5 pm. Tomorrow on my other blog I will write about Investment Strategy.... learn more on Thursday, June 29, 2023 around 5 pm.
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