Is it a good company at a reasonable price? This would not be a favourite stock for me. You have to analyze both companies of Pizza Pizza Limited and Pizza Pizza Royality Corp. I do not think I can properly analyze Pizza Pizza Limited and I do not like Pizza Pizza Limited debt ratios especially the Liquidity Ratios. It is PPL that will be funding the dividends. Yes, the dividend is good, but growth is very low. This stock is not well followed. Personally, I would not be interested in this stock. Stock price is still reasonable, but at the top end of the range.
I do not own this stock of Pizza Pizza Royalty Corp (TSX-PZA, OTC-PZRIF). A number of people have recommended this stock, so I decided to take a look at it. It was on once on John Heinzl's Dividend Hog Portfolio, but has been taken off.
I do not like this setup. You have to analyze both companies. It would seem that Pizza Pizza Ltd is making a profit after paying Royalty Payments to Pizza Pizza Royalty Corp. Pizza Pizza Royalty Corp can basically payout all their income as their only income is Royality Payments. There is nothing inherently wrong with this type of royalty corp. I do not like the complexity of the accounting and having to evaluate both companies involved. The more complex a situation the more likely one can make an error in evaluating a company.
When I was updating my spreadsheet, I noticed they did not publish the financial statements for 2024 on their web site. I updated my spreadsheet as best as I could from the information I could find.
If you had invested in this company in December 2014, for $1,008.00 you would have bought 72 shares at $14.00 per share. In December 2024, after 10 years you would have received $590.26 in dividends. The stock would be worth $936.72. Your total return would have been $1,526.98. This would be a total return of 5.30% per year with 0.73% from capital loss and 6.03% from dividends.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $14.00 | $1,008.00 | 72 | 10 | $590.26 | $936.72 | $1,526.98 |
The current dividend yield is good (5% to 6% ranges) at 6.27%. The 5, 10 and historical dividend yields are also good at 6.45%, 6.31% and 6.92%. The dividend growth is low (below 8% per year) at 1.7% per year over the past 5 years. The last dividend increase was in 2023 and it was for 3.3%.
The Dividend Payout Ratios (DPR) are fine. The DPR for 2024 for Earnings per Share (EPS) is good for this company at 99% with 5 year coverage at 93%. The DPR for 2024 for Adjusted Earnings per Share (AEPS) is good for this company at 98% with 5 year coverage at 91%. The DPR for 2024 for Cash Flow per Share (CFPS) is good for this company at 73% with 5 year coverage at 69%. The DPR for 2024 for Free Cash Flow (FCF) is high for this company at 107% with 5 year coverage is good for this company at 98%. However, there is also no agreement on what the FCF is. The thing is that Pizza Pizza Royalty Corp can pay out all its income because the one that pays is Pizza Pizza Limited.
| Item | Cur | 5 Years |
|---|---|---|
| EPS | 98.83% | 93.23% |
| AEPS | 97.59% | 90.94% |
| CFPS | 72.99% | 69.21% |
| FCF | 106.85% | 97.60% |
Debt Ratios are good for Pizza Pizza Royality Corp. The Long Term Debt/Market Cap Ratio for 2024 is good at 0.15 and currently at 0.13. The Liquidity Ratio for 2024 is very low at 0.19 (because it contains Long Term Debt) and good at 5.65 currently. The Debt Ratio for 2024 is good at 4.95 and 5.01 currently. The Leverage and Debt/Equity Ratios for 2024 are good 1.75 and 0.35 and currently at 1.81 and 0.36.
| Type | Year End | Ratio Curr |
|---|---|---|
| Lg Term | 0.15 | 0.13 |
| Intang/GW | 1.14 | 1.00 |
| Liquidity | 0.19 | 3.09 |
| Liq. + CF | 0.35 | 5.65 |
| Debt Ratio | 4.95 | 5.01 |
| Leverage | 1.75 | 1.81 |
| D/E Ratio | 0.35 | 0.36 |
Debt Ratios for Pizza Pizza Ltd need improving. The Long Term Debt/Total Assets Ratio for 2024 is fine at 0.73 and currently at 0.73. The Liquidity Ratio for 2024 is very low at 0.79 and at .80 currently. If you added in Cash Flow after dividends, the ratios are still far too low at 0.85 and currently at 0.99. The Debt Ratio for 2024 is low at 1.27 and 1.25 currently. The Leverage and Debt/Equity Ratios for 2024 are fine at 2.72 and 1.71 currently at 2.86 and 1.86. I am adjusting the Debt Ratio, Leverage and D/E Ratio for Deferred Gain.
| Type | Year End | Ratio Curr |
|---|---|---|
| Lg Term | 0.73 | 0.73 |
| Intang/GW | 0.00 | 0.00 |
| Liquidity | 0.79 | 0.80 |
| Liq. + CF | 0.85 | 0.99 |
| Debt Ratio | 1.27 | 1.25 |
| Leverage | 2.72 | 2.86 |
| D/E Ratio | 1.72 | 1.86 |
The Total Return per year is shown below for years of 5 to 19 to the end of 2024. 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. |
|---|---|---|---|---|---|
| 2019 | 5 | 1.68% | 13.08% | 5.90% | 7.18% |
| 2014 | 10 | 1.53% | 5.30% | -0.73% | 6.03% |
| 2009 | 15 | 0.00% | 13.18% | 4.04% | 9.14% |
| 2005 | 19 | 1.05% | 8.94% | 1.39% | 7.55% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 13.17, 14.55, and 16.02. The corresponding 10 year ratios are 13.28, 14.69 and 16.48. The corresponding historical ratios are 13.01, 14.69 and 19.67. The current ratio is 15.46 based on a stock price of $14.84 and EPS estimate for 2025 of $0.96. The current ratio is between the median and high ratio of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable but above the median. I
also have Adjusted Earning per Share (AEPS) data. The 5-year low, median, and high median Price/Earnings per Share Ratios are 13.00, 14.37 and 15.71. The corresponding 10 year ratios are 13.02, 14.46, 15.94. The corresponding historical ratios are 11.96, 14.18 and 15.71. The current ratio is 15.46 based on a stock price of $14.84 and AEPS estimate for 2025 of $0.96. The current ratio is between the median and high ratio 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 $13.60. The 10-year low, median, and high median Price/Graham Price Ratios are 0.90, 1.00 and 1.11. The current P/GP Ratio is 1.09 based on a stock price of $14.84. The current ratio is between the median and high ratio 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 1.55. The current P/B Ratio is 1.73 based on a stock price of $14.84, Book Value of $211M, and Book Value per Share of $8.56. The current ratio is 12% 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 10.98. The current ratio is 11.51 based on Cash Flow for the last 12 months of $31.8M, Cash Flow per Share of $1.29 and a stock price of $14.85. The current ratio is 5% 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 6.92%. The current dividend yield is 6.27% based on dividends of $0.93 and a stock price of $14.85. The current dividend yield is 9% below 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 6.31%. The current dividend yield is 6.27% based on dividends of $0.93 and a stock price of $14.85. The current dividend yield is 1% below the 10 year median dividend yield. This stock price testing suggests that the stock price is relatively reasonable but above the median.
The 10-year median Price/Sales (Revenue) Ratio is 0.56. The current ratio is 0.57 based on Royalty System Sales of $636M, Sales per Share of $25.83 and a stock price of $14.85. 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.
Results of stock price testing is that the stock price is reasonable, but above the median. The Dividend Yield tests say that the stock price is reasonable but above the median. This is confirmed by the P/S Ratio test. All the tests are saying the same thing.
When I look at analysts’ recommendations, I find a Hold (1) recommendation. There is only one analysts following this stock. The consensus is a Hold. The 12 month stock price consensus is $14.00 with a high of $14.00 and a low of $14.00. The consensus stock price of $14.00 implies a total return of 0.61% with 5.66% from capital loss and 6.27% from dividends based on a current stock price of $14.85.
The are only entries on Stock Chase for 2024. Some analysts like it and others did not. The negative comments were that the stock was range bound and same store sales decline. Rajiv Nanjapla on Motley Fool liked this stock for its reliable cash flow. Daniel Da Costa on Motley Fool for its high yield. The company put out a Press Release about their fourth quarter of 2024. The company put out a Press Release about its first quarterly results for 2025.
Gurufocus via Yahoo Finance reviews this company’s fourth quarter of 2024. Simply Wall Street has one warning for Dividend of 6.27% is not well covered by earnings or free cash flows.
Pizza Pizza Royalty Corp through its subsidiary, Pizza Pizza Royalty Limited Partnership, owns and franchises quick-service restaurants under the Pizza Pizza and Pizza 73 brands. It receives the benefit of Pizza Pizza Royalty and Pizza 73 Royalty payable by PPL under the Pizza Pizza License and Royalty Agreement and the Pizza 73 License and Royalty Agreement, respectively, as well as royalty payments under the international agreement, indirectly through its interests in the partnership. Its web site is here Pizza Pizza Royalty Corp.
The last stock I wrote about was about was Canadian Utilities Ltd (TSX-CU, OTC-CDUAF) ... learn more. The next stock I will write about will be HLS Therapeutics Inc (TSX-HLS, OTC-HLTRF) ... learn more on Wednesday, May 28, 2025 around 5 pm. Tomorrow on my other blog I will write about Large Grocery Retailers.... learn more on Tuesday, May 27, 2025 around 5 pm.
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