Take a Break From Tech: Feast on Consistent Food Company Dividends

People have to eat and Metro, Inc. (TSX:MRU) and Saputo Inc. (TSX:SAP) are whetting the appetites of consumers and dividend investors alike.

| More on:
The Motley Fool

Food processing and retail food aren’t going anywhere as people have to eat and continually look for new food options. Metro, Inc. (TSX: MRU) and Saputo Inc. (TSX: SAP) are addressing these needs and providing returns on investment for dividend investors. Consider these two companies as additions to your income portfolio for the following reasons:

1. Metro, Inc.

Metro operates under a number of banners, which gives it broad market penetration in Ontario and Quebec. It has a network of more than 800 grocery stores under the Metro, Metro Plus, Super C and Food Basics names. Metro also operates more than 250 drugstores. These are under the Brunet, The Pharmacy and Drug Basics banners.

In the ultra-competitive supermarket arena, Metro’s sales increased for Q3 2014. It had sales of $3.6 billion, which is an increase of 1.4% over the year prior. The company’s same-store sales were up a modest 1.0%. Same-store sales is a significant metric. Sales by stores open for more than one year (same-store sales) lets the company know how much demand for its products is growing in stores that currently exist.

If a company can increase its same-store sales, it is reaping financial benefits without investing in new store infrastructure. Conversely, the cash flow from increased sales from existing operations can help when it comes to financing expansion. Metro reorganized its Ontario store network, which led to increased sales in the tough Ontario retail food market.

Metro pays dividends representing 20% to 30% of its net earnings from the previous year (before extraordinary items). The company’s current dividend yield is 1.70%. Metro recently declared a quarterly dividend of $0.30 per share, which represents a 20% increase. Its dividend rate is $1.20. On an annualized basis, Metro’s dividend represents roughly 22% of 2013 adjusted net earnings from continuing operations.

2. Saputo Inc.

Saputo is one of the top 10 dairy processors globally. In Canada, it is the largest dairy processor and snack-cake manufacturer. The company’s strength is its extensive brand portfolio with broad reach in Canada. It also has its brand portfolio in the United States, Argentina, and Australia.

In Canada, Saputo has well-known brands such as its namesake Saputo Italian and Mediterranean style cheese, as well as Armstrong, Bari, and Stella cheeses, among others. Its dairy product brands in Canada include Dairyland, Neilson, Saputo, Nutrilait, and others. Its popular bakery brands in Canada include Vachon, Hostess, Jos. Louis, and others.

Saputo is growing revenues via acquisitions. It has acquired Warrnambool Cheese & Butter Factory of Australia and the fluid milk activities of Scotsburn Co-Operative Services Limited (Atlantic Canada). Warrnambool is a supplier of low-cost raw milk. It operates two manufacturing plants and produces a variety of dairy products for Australian and export markets.The Scotsburn Co-Operative transaction will allow Saputo’s Dairy Division (Canada) to grow its footprint in Atlantic Canada.

Last year, Saputo acquired Morningstar Foods. This acquisition, now called Saputo Dairy Foods (USA), complements Saputo’s cheese operations in the U.S.

For Q1 2015 (ended June 30, 2014), Saputo had net earnings of $145.3 million. This represents an increase of $8.6 million or 6.3% over the same prior-year period. The company had revenues for Q1 of $2.621 billion. This represents an increase of $447.3 million, or 20.6%, over Q1 2013.

Saputo’s current dividend yield is 1.60% and its dividend rate is $1.04. The company recentlyincreased its quarterly dividend from $0.23 per share to $0.26 per share. This represents a 13% increase.

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 Michael Ugulini has no position in any stocks mentioned.

More on Dividend Stocks

Canadian Dollars
Dividend Stocks

5 Stocks You Can Confidently Invest $500 in Right Now

These five stocks are all some of the top businesses in Canada, making them stocks you can buy confidently in…

Read more »

A worker drinks out of a mug in an office.
Dividend Stocks

Worry-Free Dividends: 3 Stocks for Canadian Investors

These three Canadian stocks can help you earn worry-free dividends irrespective of market conditions.

Read more »

Woman has an idea
Dividend Stocks

The Smartest TSX Dividend Stocks to Buy With $1,000 Right Now

Here's why blue-chip TSX dividend stocks such as BAM and BMO should be a part of your shopping list in…

Read more »

stock data
Dividend Stocks

TFSA Pension: 1 Great Canadian Dividend Stock to Own for Growing Passive Income

This TSX dividend stock is down 35% from the 2022 high. Is it finally oversold?

Read more »

question marks written reminders tickets
Dividend Stocks

Can You Earn $250 a Month With Dividend Stocks?

These three dividend stocks could help you earn a stable passive income of over $250/month.

Read more »

calculate and analyze stock
Dividend Stocks

Best Stocks to Buy in May 2024: TSX Consumer Staples Sector

Consumer staples stocks are a core part of a diversified portfolio. Here are some of the best stocks to consider…

Read more »

financial freedom sign
Dividend Stocks

Could This Undervalued Stock Make You a Millionaire One Day?

An undervalued stock with a resilient business model, scale, and growth platforms could make you a millionaire someday.

Read more »

Dividend Stocks

Is Allied Properties (TSX:AP.UN) the Best REIT Stock for You?

Allied Properties REIT offers investors a forward yield of 10.44%, but is it a good REIT to own right now?

Read more »