RRSP Investors: Should Saputo Inc. (TSX:SAP) Be in Your Portfolio?

Saputo Inc. (TSX:SAP) has strong track record of growth. Is it time to buy this stock?

| More on:

Canadian investors often pick the most popular companies when buying stocks for the self-directed RRSP portfolios.

This strategy can certainly work, but there is also value in searching for off-the-radar names that are industry leaders and have strong track records of providing solid long-term returns.

Let’s take a look at Saputo Inc. (TSX:SAP) to see if it deserves to be on your buy list.

Uncertain times

Saputo recently made a rare appearance in the headlines when CEO Lino Saputo Jr. broke ranks with the country’s dairy farmers, suggesting Canada’s dairy supply-management system needs an overhaul. It’s not the first time he has made such statements, but the media decided to pay more attention, given the current NAFTA talks.

What’s the issue?

Supply management has been in effect in Canada for decades, and many reports have come out to say it should end. The country’s dairy farmers limit production to meet the needs of the Canadian market and have an agreement in place with processors, such as Saputo, to ensure a Canadian market exists for Canadian milk ingredients. Currently, less than 10% of market is served by imports.

Last year, the Federal government agreed to allow 16,000,000 kg of new European cheese into Canada over the next five years as part of the Canada-E.U. trade deal. Now that NAFTA negotiations are underway, the U.S. is focused on reducing or eliminating tariffs placed on American dairy producers that want to export to Canada.

Canadians pay some of the highest prices in the world for their dairy products.

Should you buy Saputo?

Saputo’s recent comments shouldn’t come as a surprise to investors, as the company is one of the top 10 dairy processors in the world. It is the largest cheese manufacturer in Canada, but also the top dairy processor in Australia and number two in Argentina. In the United States, Saputo is among the top three cheese producers and is one of the largest makers of extended-shelf-life and cultured dairy products.

A dismantling of supply management in Canada shouldn’t have a significant negative impact on Saputo. In fact, it could turn out to be a net benefit for the company.

Saputo is making strategic acquisitions in Canada and abroad, and investors should see steady growth continue.

Long-term holders of the stock have done well. A $10,000 investment in Saputo 20 years ago would be worth more than $125,000 today with the dividends reinvested. The current payout provides a yield of 1.5%.

If you are looking for a top-quality Canadian company to put in your RRSP portfolio, Saputo deserves to be on your radar.

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 Andrew Walker has no position in any stock mentioned. Saputo is a recommendation of Stock Advisor Canada.

More on Investing

funds, money, nest egg

Retirees: 3 Canadian Stocks You Can Confidently Own for the Next 20 Years

Here's why retirees need to plan beyond 20 years in retirement. Fortis Inc. (TSX:FTS), Royal Bank of Canada (TSX:RY) stock…

Read more »

Question marks in a pile
Tech Stocks

Should You Invest in Absolute Software Stock Right Now?

Absolute Software (TSX:ABST) is a tech stock that is worth your attention, as it offers exposure to exciting security markets.

Read more »

Dividend Stocks

1 Oversold Dividend Stock I’d Buy in December 2022

Here’s one of the best Canadian dividend stocks to buy in December that I find undervalued.

Read more »


FOR TUESDAY – 3 TSX Stocks to Buy Today and Hold for the Next 3 Years

Given their growth prospects, these three TSX stocks could outperform over the next three years.

Read more »

Supermarket aisle with empty green shopping cart
Stocks for Beginners

Is Dollarama Stock a Buy at All-Time Highs?

Dollarama stock (TSX:DOL) remains at all-time highs while the rest of the market drops. Does this mean it's due to…

Read more »

Online shopping
Tech Stocks

Should You Buy Shopify Stock If the Rate Hike Cycle Slows?

Is SHOP stock a buy after its 72% drop this year?

Read more »

A bull outlined against a field

2 Canadian Stocks Set to Soar in a New Bull Market

Consider Sleep Country Canada Holdings (TSX:ZZZ) stock and another mid-cap bargain, as the bear market moves on.

Read more »

Gold bars
Metals and Mining Stocks

Better Buy: Newmont or Barrick Gold Stock?

If you think better days are ahead for gold miners, consider exploring gold stocks Newmont and Barrick Gold.

Read more »