Consumer goods stock Andrew Peller is expected to earn more this year. It remains a buy for long-term share price recovery and dividends that provide a generous yield.
Andre Peller is a buy for share price recovery and generous dividends.
Grimsby, Ontario-based consumer goods stock Andrew Peller Ltd. (TSX—ADW.A) has struggled due to the COVID-19 pandemic. Since November, 2021, its shares have fallen by 14.5 per cent. This gives them downward price momentum. Then again, the shares are now less costly.
President and Chief Executive Officer John Peller expects the company to regain its profitable stride. Indeed, this year ADW.A’s earnings are expected to recover significantly. As a result, the stock remains a buy for a long-term share price recovery and dividends that yield an attractive 3.4 per cent.
ADW is one of Canada’s “leading producers and marketers of wines and craft beverage alcohol products”. It produces premium and ultra-premium wines as well as a number of popularly priced varietal offerings, wine-based liqueurs, craft ciders, beer and craft spirits. The company owns and operates 101 independent retail locations in Ontario. It operates Andrew Peller Import Agency and The Small Winemaker’s Collection Inc., importers and marketing agents of premium wines from around the world. With a focus on serving the needs of all wine consumers, ADW produces and markets premium personal wine-making products.
The outlook is favourable
Mr. Peller said: “We have performed well so far this year given all the challenges and uncertainties created by the pandemic. We have reacted well to the cycle of numerous openings and closings experienced through the year, and we continue to prudently invest in our properties, our facilities, our trade channels, our operating platform and our people. As a result, we will emerge from the pandemic stronger and more efficient than ever before.” Entrepreneurs such as Mr. Peller are eternal optimists.
Mr. Peller is also optimistic about the company’s long-term future. He said: “Looking ahead, we expect the pandemic will continue to negatively impact our business through the balance of the year and into fiscal 2023. However, over the longer term, our vision and strategy remain the same—to capitalize on our robust and scalable operating platform and well-established network of trade channels to grow our business through the introduction of new products, new brands and new market categories while leveraging our strong reputation for quality.”
One risk is the sixth wave of the pandemic in Canada. Waste-water samples show that a highly contagious variant of Omicron is spreading through the country. No one wants restrictions or lock-downs, of course. Least of all Ontario Premier Doug Ford, who will soon face an election. But if he puts his political ambitions ahead of the people’s health, we may need restrictions or lock-downs so as not to overwhelm the hospitals again.
In the year to March 31, 2022, ADW is thought to have earned only 34 cents a share. That would represent a drop of over 38 per cent from earnings of 55 cents a share last year. This year, which began on April Fools’ Day, the company’s earnings are expected to partly recover to 45 cents a share. Based on this estimate, the stock’s forward earnings per share ratio is less than 16.1 times. This seems reasonable for a company on the mend.
Last June, ADW raised its dividend by 10 per cent, to a yearly $0.244 a share. Since its earnings per share comfortably exceed the dividend, we see it as sustainable. Also, the company sold its Port Coquitlam property for a gain of $7.5 million, or 21 cents per Class A share. The dividend provides an attractive yield of almost 3.4 per cent.
Andrew Peller Limited remains a buy for a long-term share price recovery and dividends.
This is an edited version of an article that was originally published for subscribers in the April 22, 2022, issue of The Investment Reporter. You can profit from the award-winning advice subscribers receive regularly in The Investment Reporter.
The Investment Reporter, MPL Communications Inc.
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The Investment Reporter •5/17/22 •