A Consistent Core Holding in Saputo (SAP)

SaputoSaputo is the tenth largest diary producer in the world. It’s one of those companies that operate in the necessity business. It may not have a subscription business like the banks or the utilities but it certainly provide products we want to eat or drink.

Saputo Summary

Saputo TSE:SAP earns nearly 50% of its revenue from the U.S. while Canada provides 36% of its revenue and the rest coming from their International business.

  • Stock Price: $29.97 CDN
  • Market Cap: $11.77 B
  • P/E: 19.59
  • Dividend Yield: 1.74%
  • Dividend Payout Ratio: 33.99%

Below are some of the company data from the latest earnings.

Saputo Info 1
Saputo Info 2

Core Metric #1: DIVIDEND GROWTH

Dividend growth is really consistent with Saputo and consistently above 10% as well. You may not like the yield but consider the growth it has.

  • 3 year average of 12.04%
  • 5 year average of 10.76%
  • 10 year average of 14.13%

Core Metric #2: DIVIDEND PAYOUT RATIO

Another consistent metric and one that leaves Saputo able to grow and re-invest in their business by having a manageable dividend payout ratio of 33.99%. In fact, their 10-year historical dividend payout ratio is also pretty consistent.

  • 2014 – 32.97%
  • 2013 – 33.61%
  • 2012 – 38.62%
  • 2011 – 29.36%
  • 2010 – 31.35%
  • 2009 – 40.00%
  • 2008 – 34.29%
  • 2007 – 34.78%
  • 2006 – 39.13%
  • 2005 – 26.91%

As you can see, there is consistency in the management team and it has provided both growth in dividends and stock appreciation.

Core Metric #3: CONSECUTIVE DIVIDEND INCREASES

Dividend Snapshot
It’s a Dividend Aristocrats alright but it’s more than that as it meets the requirement for the 10/10 rule of a dividend stock.

  • 10 years of consecutive dividend increases
  • 10% CAGR dividend growth over the past 10 years

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Investment Philosophy #1: BUSINESS QUALITY

The business has strict regulations in some countries and it provides one of the major food groups we all try to feed ourselves with. It’s not an oligopoly per say but there are that many competitors and they have been expanding in other businesses for growth.

Investing Opportunity Score: 71%

Based on my Opportunity Score formula, Saputo is a Canadian blue chip stock with a 71% score (the higher the better) for being an investing opportunity. I opted to calculate a score based on the metrics that matter to me as I have found that using one of the formula advocated by renown value investors, I may wait forever to reach the price target even though the stock may continue to rise. Early in my investing journey, I concluded that determining the value price and waiting for it was a futile process for me.

Instead, I rank companies based on a number of metrics and stack rank them. Currently, Saputo has gained a good score due to its pullback within its 52-week trading range. The yield and P/E is hurting it from a scoring perspective. While the yield will remain in the low range based on historical values, the P/E is on the high side and maybe a show stopper for some investors.

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DISCLOSURE: Please note that I may have a position in one or many of the holdings listed. For a complete list of my holdings, please see my Dividend Portfolio.

DISCLAIMER: Please note that this blog post represents my opinion and not an advice/recommendation. I am not a financial adviser, I am not qualified to give financial advice. Before you buy any stocks/funds consult with a qualified financial planner. Make your investment decisions at your own risk – see my full disclaimer for more details.