- Pinnacle Foods' 2.92% dividend yield and high expected EPS growth make it very attractive for dividend growth investors.
- Its short-term balance sheet health is excellent, with a current ratio of 2.49.
- The stock is up 17+% YTD. I'll wait for a pullback before getting in.
- PF is trading at lower p/e and p/s ratios than its competitors.
Pinnacle Foods (NYSE:PF) produces, markets and distributes branded food products. The company recently increased its quarterly dividend to $0.235 per share, which at the current price of $32.23 provides investors with a dividend yield of 2.92%. Shares in the company are up 17.4% year to date. At these prices, is there still value to be found in PF?
PF Revenue (TTM) data by YCharts
Revenue for Pinnacle Foods totaled $2.54 billion in the most recent 12 months. For the current fiscal year, which ends in December, analysts expect the company's revenue to reach $2.60 billion, an increase of 5.5% to last year's $2.46 billion. Pinnacle Foods has a trailing price to sales ratio of 1.48 and a forward p/s ratio of 1.46, which is a lot lower than its competitors Mondelez (NASDAQ:MDLZ) and General Mills (NYSE:GIS), as can be seen in the next graph.
PF PS Ratio (TTM) data by YCharts
PF Payout Ratio (TTM) data by YCharts
PF has paid out 52.3% of its earnings in the form of dividends over the past 12 months, which is close to GIS' payout ratio of 58.1% but well above Mondelez's 27.2%. Analysts expect the company to increase EPS by 10.8% in the current fiscal year, to $1.74. This is on the high end of the company's guidance of $1.70-$1.75. For next year, average estimates stand at $1.92, which means the company is now trading at 16.8 times next year's expected earnings. General Mills is trading at 16.4 times next year's expected earnings, while Mondelez's forward p/e stands at 18.7.
PF Current Ratio (Quarterly) data by YCharts
Pinnacle's balance sheet looks very good, with a current ratio of 2.49 and a quick ratio of 1.01, which is far better than its competitors. A current ratio of more than 1.0 indicates good short-term financial health, as current assets are larger than current liabilities. Over the past 12 months, PF paid $91.8 million in interest for its debt, which is a lot less than its competitors. However, PF is much smaller in terms of revenue and market cap. $91.8 million is 3.7% of PF's revenue over the past 12 months. For comparison, GIS' interest costs were 1.7% of revenues, while MLDZ's $1.45 billion in interest expenses is equal to 4.1% of trailing twelve month revenues.
PF Net Interest Income (TTM) data by YCharts
Looking at the price to sales ratio, Pinnacle Foods appears to be slightly cheaper than its much larger competitors. The company has a p/e ratio that's very close to General Mills'. Mondelez is quite a bit more expensive, trading at 18.7 times expected earnings. Looking at the price to sales ratio, we can see Pinnacle Foods is a lot cheaper than its competitors, with a trailing price to sales ratio of 1.48, compared to Mondelez's 1.84 and General Mills' 1.92. The short-term balance sheet health is excellent, with a current ratio of 2.49, but the interest costs for the long-term debt are quite high, at 3.7% of trailing twelve-month revenues. The company's high dividend yield and high expected earnings growth make it a great addition to a diversified portfolio of stocks. PF isn't very expensive at the moment, despite the 17+% increase YTD, but I'll wait for a pullback to the $25-$30 range before getting in, as I like to have a margin of safety.