Chicken or Fish? Maple Leaf Foods Inc. vs. High Liner Foods Inc.

Investors should focus on companies such as Maple Leaf Foods Inc. (TSX:MFI) and High Liner Foods Inc. (TSX:HLF), as food prices are set to rise 1-3% in 2018.

| More on:
dining, salmon, seafood

Grocers are set to experience a challenging year in 2018 with the rise of Amazon.com, Inc. as a competitor and the Ontario minimum wage hike. In September, I’d covered rising food prices in Canada and whether or not this could give a boost to suppliers like Saputo Inc.

Researchers at Dalhousie University and the University of Guelph recently released Canada’s Food Price Report. The report projected that the annual food bill for a Canadian family would rise by $348 in 2018. Food inflation is expected to rise between 1% and 3%. However, much of the rise will be due to more Canadians eating at restaurants or eating prepared food. Vegetables are projected to experience the largest increase of the food groups — a rise in price between 4% and 6% in 2018.

Let’s take a look at two food companies and pick one to add to our portfolios in 2018.

Maple Leaf Foods Inc. (TSX:MFI)

Maple Leaf Foods is a Toronto-based packaged meats company. Shares of Maple Leaf Foods have increased 28.8% in 2017 as of close on December 20. Canada’s Food Price Report projected that meats would experience overall price inflation from zero to 2% in 2018.

Maple Leaf Foods released its third-quarter results on October 26. Sales jumped 6.6% to $908.4 million, and net earnings increased 18.2% to $37.6 million. Maple Leaf Foods benefited from the February acquisition of the vegetarian and meat substitute company, LightLife. It also reported a 5.2% rise in free cash flow to $154.3 million.

The board of directors approved a quarterly dividend of $0.11 per share, representing a 1.2% dividend yield at offering.

High Liner Foods Inc. (TSX:HLF)

High Liner Foods is a seafood company that packages and distributes product to restaurants and other entities. Its stock has dropped 25.1% in 2017. Seafood prices are also expected to rise between zero and 2% in 2018. In this respect, there is no distinct advantage between the two companies when comparing overall food price inflation.

High Liner Foods released its third-quarter results on November 9. The company reported solid growth as a result of its acquisition of Rubicon Resources LLC in May, allowing it to diversify its seafood offerings. In the third-quarter sales rose to $282.7 million compared to $230.4 million in the prior year. The company reported gross profit of $48.3 million, which represented a $2.3 million increase from Q3 2016.

The company incurred $2.7 million in additional net losses from a second-quarter recall. Adjusted net income was still down to $8.4 million from $8.9 million in the prior year. High Liner Foods posted a quarterly dividend of $0.14 per share, representing a 3.9% dividend yield.

Which is the better buy for 2018?

High Liner Foods aims to improve its manufacturing facilities in 2018, while also focusing on strategic objectives to boost financial performance. Shares have climbed 10.4% in a three-month span as of December 20, as the company appears to have shed poor investor sentiment following its recall.

Still, the performance at Maple Leaf Foods is difficult to overlook in making this comparison. Its foray into vegetarian and vegan alternatives is a fantastic move considering consumer trends for younger demographics. I like Maple Leaf Foods stock over High Liner Foods in 2018.

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 Ambrose O'Callaghan has no position in any stocks mentioned. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. David Gardner owns shares of Amazon. The Motley Fool owns shares of Amazon.

More on Investing

A worker overlooks an oil refinery plant.
Energy Stocks

What to Know About Canadian Energy Stocks for 2025

Today, I'll explore tariffs, pipelines, and profit potential on TSX energy stocks for 2025, and how Suncor stock and two…

Read more »

An investor uses a tablet
Bank Stocks

Better Banking Stock: Royal Bank vs TD Bank?

Royal Bank has outperformed TD in recent years. Will 2025 be different?

Read more »

Canadian Dollars bills
Dividend Stocks

Invest $22,000 in 2 TSX Stocks for $1,279 in Passive Income

Passive income doesn't need to be difficult or costly, and these two stocks offer it up in spades!

Read more »

Piggy bank with word TFSA for tax-free savings accounts.
Dividend Stocks

The Best Canadian Dividend Stocks to Buy and Hold Forever in a TFSA

These Canadian stocks all pay reliable dividends and consistently grow their earnings, making them three of the best to buy…

Read more »

Stocks for Beginners

The Best Stocks to Invest $25,000 in Right Now

Got a bunch of cash to deploy? These four Canadian stocks would make an excellent start for a long-term investment…

Read more »

Dividend Stocks

Got $1,000? 3 REITs to Buy and Hold Forever

Do you want some REITs to buy and hold forever? Here’s a look at a trio of options to consider…

Read more »

data analyze research
Dividend Stocks

2 Stocks I Loaded Up on in 2024 for Long-Term Wealth

A tech giant and a renewable energy giant were strong picks in 2024 and will continue to be strong through…

Read more »

dividend growth for passive income
Dividend Stocks

Need Decades of Passive Income? 2 Stocks to Buy Without Delay

These two dividend stocks offer it all. Stable passive income, with growth opportunities already on the way.

Read more »