Today, it’s Quebec’s National Day. For this occasion, I suggest to you two Quebec-based companies that are outperforming the market: Quebecor Inc. (TSX:QBR.B) and Lassonde Industries Inc. (TSX:LAS.A).
Quebecor is one of the largest media conglomerates in Canada. The company has three key business segments: telecommunications, including its core asset Videotron; media, which includes TVA Group; and sports and entertainment, its smallest segment.
Quebecor’s first-quarter results showed a strong increase in profit. Indeed, net income attributable to shareholders amounted to $56.7 million ($0.24 per share) in the first quarter of 2018 compared with $3.9 million ($0.02 per share) in the same period of 2017. Adjusted operating income was up 9.5% to $407.4 million.
The telecommunications segment was the main profitability driver in the quarter.
The telecommunications company has reached an agreement to repurchase the Caisse de dépột et placement du Québec’s 18.5% stake in Quebecor Media Inc. The transaction — valued at $1.69 billion — will improve the stock’s valuation, removing Quebecor’s holding company discount.
Last month, Quebecor announced a 100% dividend hike, increasing the dividend to $0.055 per share from $0.0275 per share for a current yield of 0.6%.
While this is a strong hike, you can expect the dividend to keep increasing fast over the coming years as Quebecor has set a dividend target of 30-50% of the company’s annual free cash flows to be achieved gradually by the end of a four-year period. The stock shows a 10-year average annual dividend-growth rate of 16%.
Quebecor’s earnings are estimated to grow by 25.5% this year and by 11% next year. The company’s return on equity is very high, reaching almost 70%, so the company is very profitable.
The stock is trading at a discount with a P/E of 15.8, which is much lower than its five-year average of 94.3.
Year to date, the stock has outperformed its telecom peers, rallying over 13%. In comparison, the share price of Rogers Communications Inc. is down 1.5%, BCE Inc. is down 8%, and Telus Corporation is down 0.2%.
Quebecor’s stock has a 15-year compound annual growth rate of return (CAGR) of 14%.
Lasssonde Industries Inc.
Lassonde Industries develops, manufactures, and markets a wide range of fruit and vegetable juices and beverages, including Oasis and Rougement brands as well as specialty food products and wine.
The juice and beverage producer posted a net profit attributable to shareholders of $14.5 million ($2.08 per share) for its 2018 first quarter, an increase of 11.2% compared to the same quarter a year earlier. The company benefited from the tax reform in the United States.
Lassonde continues its expansion in the United States and is now making 58% of its sales in this country. At the end of last month, Lassonde acquired Old Orchard Brands for US$148.9 million. This juice and beverage producer based in Michigan employs nearly 100 people and had sales of US$103.3 million last year.
In addition to producing ready-to-drink juices, Old Orchard Brands is the second-largest player in the United States in the frozen concentrated juice sector, which will allow Lassonde to enhance its brand portfolio in this market segment.
For Lassonde, this is a third acquisition in the United States since 2011. The company first bought Clement Pappas for US$414 million, and in 2014 it acquired Apple & Eve for US$150 million.
Lassonde’s earnings are estimated to grow by 18.1% this year and by 10.6% next year.
The juice producer recently increased its quarterly dividend by 32.8% from $0.61 to $0.81. The current dividend yield is around 1%, and the 10-year average annual dividend-growth rate is 14.2%.
The stock is up 13% year to date and has a 15-year CAGR of 20%.
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 Stephanie Bedard-Chateauneuf owns shares of QUEBECOR INC., CL.B, SV.