Metro Inc. vs Loblaw Companies Limited: Which Is the Better Investment?

Metro Inc. (TSX:MRU) and Loblaw Companies Limited (TSX:L) are two of the largest operators of grocery stores and pharmacies across the country, but which one is the better investment?

| More on:
The Motley Fool

Metro Inc. (TSX:MRU) and Loblaw Companies Limited (TSX:L) comprise the two largest operators of grocery stores and pharmacies in the country. While both have enjoyed relative success and growth over the past few years, investors looking to add one of these companies are left wondering which company is the better investment for their portfolio.

Let’s take a look at both of these companies to find out.

The case for Loblaw

Loblaw currently trades just shy of $71 and is up by 1.5% over the past three months. Year-to-date, the company is outperforming the market and is up by nearly 14%. Expanding this out to a full calendar year extends this growth to 21%. Long-term investors will rejoice in seeing the five-year price of Loblaw has increased by nearly 67%.

Loblaw pays a quarterly dividend of $0.25 per share at a yield of 1.41.  The company has steadily increased the dividend payment over the years, with the most recent increase coming in the form of a 2% increase earlier this year.

In the most recent quarter, Loblaw reported consolidated sales of $10.3 billion, representing an increase of 2.2% for the same quarter last year. Both the drug and food retail segments of the company reported moderate growth over the last year, coming in at 4.2% and 3.7%.

Loblaw managed to further decrease debt during the quarter by over $320 million—this leaves just over $350 million of remaining debt from the acquisition of Shoppers Drug Mart.

Loblaw is constantly expanding, looking both at new markets, and closing up unprofitable locations where necessary. Recently, the company announced that 52 unprofitable locations would be closed. The company has over 20 brands, and many of these are located in close proximity to one another, particularly locations obtained through acquisitions, such as Shoppers.

The case for Metro

Metro currently trades at just over $37, below the 52-week high of $38.17.  Over the past three months, the stock is up by 8%. Year-to-date, the stock has outperformed the market by nearly 48%. Year-to-date the stock is up by 20%, and looking at the longer term, the stock is up by over 240% over the past five years.

Metro pays a quarterly dividend of $0.117 per share at a yield of 1.25%. Metro has a long history of increasing this dividend. It has increased the dividend consecutively for over 20 years and is likely to continue that trend.

In the most recent quarter, Metro reported net income of $163.5 million, which was an increase of 13% over the same quarter in the previous year. Additionally, revenues for the quarter were up by over 6% to $3.81 billion over the same quarter in the prior year.

And the better investment is…

Both of these companies represent great opportunities for investors seeking long-term growth. In my opinion, Loblaw is the better investment of the two. The company has a stronger and more diverse brand portfolio and is actively pursuing expansion on multiple fronts, making it a better long-term choice.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Demetris Afxentiou has no position in any stocks mentioned.

More on Investing

A cannabis plant grows.
Cannabis Stocks

Canopy Growth Stock Is Rising But I’m Worried About This One Thing

Canopy Growth stock is soaring as the legalization effort makes real progress in both Germany and the United States.

Read more »

young woman celebrating a victory while working with mobile phone in the office
Investing

3 Roaring Stocks to Hold for the Next 20 Years

These top TSX stocks are excellent long-term buys, given their multi-year growth potential and solid underlying businesses.

Read more »

Two seniors float in a pool.
Dividend Stocks

TFSA: How to Earn $1,890 in Annual Tax-Free Income

Plunk these investments into your TFSA to earn passive income and avoid the taxman.

Read more »

grow dividends
Investing

Here’s My Top 3 TSX Stocks to Buy Right Now

Even though the TSX has been rising, there are still some good bargains out there. Here are three top compounding…

Read more »

Target. Stand out from the crowd
Investing

Prediction: This Canadian Growth Stock Could Double by 2030

Alimentation Couche-Tard (TSX:ATD) is a top growth stock that could do well over the next six or so years.

Read more »

Businessman holding AI cloud
Tech Stocks

Could Investing $20,000 in Nvidia Make You a Millionaire?

Nvidia stock has made investors millionaires in the last 10 years. Is it too late to invest to become a…

Read more »

Engineers walk through a facility.
Dividend Stocks

1 TSX Stock I Wouldn’t Touch With a 10-Foot Pole

AtkinsRéalis (TSX:ATRL) is one TSX stock I'd never invest in.

Read more »

money cash dividends
Stocks for Beginners

Have $500? 3 Absurdly Cheap Stocks Long-Term Investors Should Buy Right Now

If you're looking for cheap stocks, these three have a huge future ahead of them, all while costing far less…

Read more »