Andrew Peller Ltd.: Something We Can All Relate to — Dividends Included

How much have you contributed to the bottom line of Andrew Peller Ltd. (TSX:ADW.A) this past holiday season?

| More on:
The Motley Fool

Over the holidays, like many of you, I had the opportunity to sample a number of different wines from many different places in the world. This year I enjoyed the red much more than the white. The difference in selection this time around was very noticeable from previous years. Traditionally, I’ve enjoyed wines from Italy and France with the occasional North American wine. Ontario or B.C. wines were rarely served.

Things are starting to change

I have noticed at almost every social event the presence of Ontario wines and the occasional wine from B.C. It seems distribution for companies such as Andrew Peller Ltd. (TSX:ADW.A) and other Canadian wineries has improved dramatically. As a client and now a potential investor, I’ve begun to take notice like many others.

What began in 1964 in Port Moody, B.C. has grown into a company with wine-making operations in B.C., Ontario, and Nova Scotia, which include a number of well-known wine brands, including the Wayne Gretzky brand, Peller Estates, XOXO, French Cross, Sandhill, and a favourite to shout out, Red Rooster.

In the past year, investors, in addition to consumers, have noticed the company. In 2016, shares increased approximately 72% in addition to the dividend, which currently yields just under 1.5%. Going back to the beginning of the year, the dividend yield would have been in excess of 2.25% for a buyer at the lower prices.

With growth in revenues from $289 million in fiscal 2013 to $334 million in fiscal 2016, the CAGR (compounded annual growth rate) of revenues translates to 4.94%. The CAGR of net income has been at a rate of 7.72% over the same period. Clearly, the increase in revenues has translated to an increase in profits to the bottom line. This is exactly what investors like to see.

As the company continues to increase dividends and revenues, it is clear the market is expecting a high flow-through rate from the top line to the bottom line.

Currently trading at a price to earnings ratio (P/E) of 23 times, there are high expectations for the future growth prospects of the company. Since 2014, management has increased the dividend a number of times signaling a prosperous future.

Looking at the technical indicators of the company, the past year has been fantastic for investors. The 10-day, 50-day, and 200-day averages are all moving upwards with the 10-day moving average topping the 50-day moving average, which in turn is flying higher than the 200-day moving average. Things are going well for long-term investors.

Conclusion

Being a consumer of the company’s products does not necessarily translate to an automatic buy. Although things are going well at Andrew Peller Ltd., the reality is, the wine business is very capital intensive with a long lag time to production. This security could potentially offer excellent upside in the next few years, but it will be difficult to get the train back on the tracks if there were ever to be a derailment.

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 Ryan Goldsman has no position in any stocks mentioned.

More on Investing

Clean energy
Energy Stocks

Better Buy: Renewable Energy or Uranium Stocks?

The world is shifting towards clean energy sources, creating investment opportunities in the renewables sector. What's a better bet: environmental…

Read more »

retirees and finances
Energy Stocks

These 3 Stocks Can Help Make You Richer by Retirement

Future retirees can be rich in their sunset years with the help of three distinguished dividend-payers on the TSX.

Read more »

A worker uses the cloud for paperless work. tech
Tech Stocks

Why I Think Constellation Software (TSX:CSU) Stock Has Market-Beating Potential

Constellation Software (TSX:CSU) could outperform the market over the next few years.

Read more »

data analytics, chart and graph icons with female hands typing on laptop in background
Investing

Got $5,000? These Are 2 of the Best TSX Growth Stocks to Buy Right Now

Canadian investors with some extra cash on hand should look to snatch up TSX growth stocks like goeasy Ltd. (TSX:GSY)…

Read more »

Senior Couple Walking With Pet Bulldog In Countryside
Dividend Stocks

Retirees: 2 On-Sale TSX Dividend Stocks to Buy Now for Passive Income

These top TSX dividend stocks now offer 6% yields.

Read more »

Electric car being charged
Investing

Forget Rivian: This Canadian EV Stock Is Cheaper and Safer

If you're still tempted to buy EV stocks, Magna International (TSX:MG) is probably safer than Rivian (NASDAQ:RIVN).

Read more »

Payday ringed on a calendar
Dividend Stocks

New Investors: The 3 Best TSX Dividend Stocks for Monthly Cash

New investors looking for monthly dividend cash are in luck! Here are three attractive Canadian dividend stocks for growth and…

Read more »

Man data analyze
Investing

If I Could Only Buy 1 Stock Right Now, This Would Be it

Investors will likely benefit from this company’s ability to deliver profitable growth, solid dividend payments, and a low valuation.

Read more »