Canadian stock raises dividend with increased sales in sight

This Canadian stock has raised its dividend following a 10% sales increase in the latest quarter.

The acquisition of wineries in British Columbia adds to the company’s premium brands. Its sales could also see a boost if the United States and China continue to erect trade barriers against each other. Canada’s own retaliatory tariffs against the U.S., which includes U.S. whisky, could also up sales for Peller’s premium offering under the Gretzky label.


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ANDREW PELLER LTD. (Toronto symbol ADW.A; www.andrewpeller.com) is Canada’s second-largest producer of wines, after Constellation Brands.

At the beginning of 2018, Peller acquired three wineries in B.C.: Black Hills Estate, Gray Monk Estate, and Tinhorn Creek. In all, it paid $94.8 million for those businesses. That price consisted of $77.6 million in cash, plus $17.2 million worth of class A common shares.

The new wineries will add between $30 million and $35 million to Peller’s annual sales over the next five years; overall, its revenue for the fiscal year ended March 31, 2018, was $342.6 million. As well, the new operations expand the company’s portfolio of premium brands. They generate higher profits per litre than regular wines.

The company’s sales for the fiscal 2018 fourth quarter rose 10.4%, to $79.8 million from $72.3 million a year earlier. The three new wineries contributed $3.7 million to its sales in the quarter. Higher prices also boosted sales.

The company lost $1.7 million, or $0.04 a share, in the quarter. That’s partly due to the costs related to its recent acquisitions. A year earlier, it earned $2.0 million, or $0.05 a share.

Dividend Stocks: Ontario revenue grows with wine sales in supermarkets

Because Peller has wineries in both Ontario and B.C., the Supreme Court of Canada’s recent decision to uphold restrictions on the movement of alcohol between provinces could hurt the company’s ability to expand sales.

However, the company could benefit from the U.S. government’s threats to impose tariffs on goods it imports from China. In retaliation, China is considering new tariffs on U.S. goods, including wine. Higher prices on U.S. wines in China could make Canadian wines more attractive.

At the same time, the Ontario government is letting more supermarkets sell wine and beer inside their stores. Demand continues to be strong for the company’s premium-priced wines, including those the company produces under a long-term licencing deal with hockey star Wayne Gretzky. In 2017, Peller opened a new facility to make both wine and whisky under that Gretzky brand. Domestic sales of that premium liquor also stands to benefit from Canada’s retaliatory tariffs against U.S. goods. On that list is U.S. whisky.

Peller is raising its quarterly dividend by 13.9%, starting with the July 2018 payment. Investors will receive $0.05125 a share, up from $0.045. The new annual rate of $0.205 yields 1.1%.

Peller has paid dividends since 1979. Including the latest increase, the company has now increased the annual rate by an average 7.9% each year for the past five years.

The company’s shares now trade at 19.8 times the $0.86 a share it is projected to earn in fiscal 2019.

Recommendation in TSI Dividend AdvisorAndrew Peller Class A is a buy.

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