Canadian Dividend All-Stars Expected To Announce Dividend Increases - Week Of June 10

|
About: Andrew Peller Limited (ADWPF)
by: Mat Litalien
Summary

Canadian Dividend All-Stars are companies that have raised dividends for at least five consecutive years.

There are three All-Stars scheduled to report earnings this week.

Andrew Peller Ltd is the lone All-Star expected to raise dividends.

After a flurry of activity by Canada’s banks, last week didn’t produce any surprise. It was a quiet week for Canadian Dividend All-Stars and this week there are only a few scheduled to report earnings. Of those however, there is one that is expected to announce a dividend increase. With nothing to recap from last week, let’s jump right into what to expect this coming week. Of note, all figures are in Canadian dollars unless otherwise noted.

Expected Increases

Andrew Peller Ltd (OTC:ADWPF)[TSX:ADW.UN]

  • Current Streak: 13 years
  • Current Yield: 1.54%
  • Earnings: Wednesday, June 12

What can investors expect: Andrew Peller is one of only two All-Stars in the alcoholic beverages industry. It produces and markets wine and spirits, and its products are available worldwide. It also owns and operates over 100 independent retail locations under The Wine Shop, Wine Country Vinters and Wine Country Merchants brands. The company has a robust 13-year dividend growth streak and usually announces a dividend raise along with fourth quarter and year-end results.

Andrew Peller is one of the few All-Stars whose dividend growth rate is on the rise. Over the past 10, 5 and 3-year time frames, its average growth rate has been on a steady upwards trend. Last year, the company raised dividends by 13.89%, the highest in its history.

Is another double-digit raise in the cards? It is quite possible. The company has a low yield and its payout ratio is a respectable 33%. I do caution however, that although sales are up approximately 6% through the first nine-months of the year, net earnings have dropped considerably (-10%).

Despite the earnings drop, operating cash flow has almost doubled and as such, I still expect double-digit dividend growth.

EST DGR

EST INCR

EST NEW DIV

10.24%

$0.0053

$0.0565

As an aside, Andrew Peller has struggled to catch a bid in 2019. Year to date, the company has lost approximately 1.9% of its value. This underperformance in relation to the TSX (+13.32%) might lead investors to believe a buying opportunity exists.

Not so fast, the recent weakness is due in large part to its overperformance from recent years. As a result, its share price got ahead of itself. See the F.A.S.T. Graphs chart below.

As you can see, in late 2017, Andrew Peller’s P/E ratio sky-rocketed. It may be a little difficult to make some direct comparisons as the company’s earnings are expected to drop by about 25% this year before rebounding in 2020. This has magnified its P/E ratio.

On a forward P/E basis, it is trading at a respectable 19 times earnings. It isn't cheap however and still above historical averages. Should the company surprise to the upside, it could catch a bid. If you are interested in the company thanks to its status a consumer defensive stock, I would suggest taking half a position before earnings.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.