There is no questioning what the biggest constant is in this whole pandemic. Everyone needs to eat and someone needs to provide that food to the public. I could have easily gone in and invested in the typical Alimentation Couche-Tard Inc(ATD), Loblaws(L) or Metro, Inc(MRU). But instead I wanted to find the underdog, a diamond in the rough. When I started to look into financials of companies in the food supply industry I wanted to do the Peter Lynch and look for those companies competitors. That is when I came across 2 stocks I feel really go head to head in the food supply industry, Empire Company(EMP.A) and The North West Company(NWC).
Now, when I first started looking into The North West Company I truly was not sold on them. I Looked at how spread out they are in Canada and I just did not think that they were a company that could be worth very much. Boy was I wrong. I did not expect to find out that they are located all across Canada, Alaska, Hawaii, the South Pacific Islands and The Caribbean. They have over 240 Locations all over the world which include retail, grocery, gas, pharmaceutical needs and even a small Ontario airline. So tell me this, are all of those not things that you NEED each and every single day? They are a very diverse company that has every day essentials for people and is exactly what makes them a constant in this world wide pandemic.
Some of their stores and holdings include 117 Northern Stores, 46 Giant Tiger stores, 24 Quick stop convenience stores, 27 Alaska commercial company stores, 12 cost-u-less stores, Transport Nanuk Inc and North Star Air Ltd(water and air travel).
So far since I have been following this company all the changes that they make have been whats best for the company. That is why I am a big supporter of their president and CEO Edward Kennedy. He has been with the company since 1989, that is 31 years which to me is a VERY long time now a days to be in a roll like that. They have been a very slow grower but that is a very good thing for a company that is as old as this, especially since they are acquiring companies in a smart way and not going into huge amounts of debt to do it. But their latest acquisition of North Star Air Ltd. was a very smart and strategic one by helping them deliver their own products and cargo to the northern stores in a more cost-efficient way. As an investor, how do you not like to hear things like that?
While I was doing my very important Due Diligence that every investor should do, I really dug into their financials. Since January 31, 2000 The North West Company has increased Sales and Revenue EVERY year and their net assets also seem to be growing every year as well. That is literally 20 years of sales growth and increases, those are some great numbers to hear. They have also been paying a dividend since 2011 and have increased it 7 times since then and have not lowered or cut a dividend payment either which with their strong financial numbers shows that there is no reason to. They also recently just sold 34 Giant Tiger stores for $45 Million and closed 6 more which will save them $9 Million which should all have been completed by Q2.
Now for Empire Company. They are a food industry conglomerate, which they used to simply do everything. They used to own a movie theater chain but sold that off for almost $250 Million and same with Wajax(but only $50 million). Currently they are in the grocery chain, convenience stores, gas stations, liquor stores, pharmacy and they even have equity interest in Crombie REIT. To say that they aren’t diverse is so very dead wrong. They really have their hands in all aspects of the food industry and they seem to make big moves and acquisitions every couple of years.
To give you a little perspective as to how big they are, they currently employ approximately 125,000 people with roughly 2000 stores across Canada. That is alot of people and alot of retail space. This actually makes them the second biggest grocery store chain in the entire country(Loblaws is the biggest). They can be very appealing to investors due to their competitiveness and their diversity, not to mention that they aren’t afraid to buy out their competition. They bought out all safeways in Canada in 2013 for $5.8 billion dollars, thats a nice chunk of change.
Some of their stores and holdings include over 160 Safeway grocery stores, 1500 Sobeys grocery stores, 64 Freshco grocery stores, 67 Lawtons drug stores and 31 Farmboy grocery stores.
Empire has truly lived up to their name in not only how big they are but also in their finances. They have managed to increase their sales by over $10 Billion since 2009 and they have increased their assets by $4 Billion. Empire has actually payed out a dividend since 1985 and have gone through 4 stocks splits. They even just this month released their own home grocery delivery service for the Greater Toronto Area called Voila. Much like everyone else they to have been hit by this global pandemic but they have already recovered nicely and are continuing to increase in share price.
They are both very good companies but I will continue to add The North West Company to my portfolio and continue to cost average in my case. The main reasons why I chose The North West Company over Empire Company is because they are in direct competition with all the other big grocery store chains. The North West Company has taken over the rural Canadian spots with minimal competition. Although the lower dividend payout ratio is a little more appealing and safe from Empire Company I feel that The North West Companies dividend yield makes up for their higher payout ratio. Not to mention Empire Company has such a high debt load right now that they need to be paying it down, fast, otherwise they could be in over their heads if interest rates start to rise.
The North West Company(NWC)
$29.68/share as of July 1/20
$1.45 Billion Market Cap
21.4 P/E Ratio
1.4 Earning Per Share(EPS)
Dividend Yield 4.43%
Dividend Payout Ratio of 70%.
$32.51/Share as of July 1/20
$8.75 Billion Market Cap
15.12 P/E Ratio
2.15 Earning Per Share(EPS)
Dividend Yield 1.6%
Dividend Payout Ratio 20%