Value Stocks: Tupperware’s cash flow supports dividend

Tupperware sales continue to climb, but factoring in the high U.S. dollar, means revenue fell in 2015. Still, the dividend seems secure given the company’s expected earnings and cash flow for 2016.

TUPPERWARE BRANDS CORP. (New York symbol TUP; www.tupperwarebrands.com) makes plastic food and beverage containers, as well as cosmetics and fragrances. It sells these products through 3.1 million independent dealers, which keeps its distribution costs down.

We made Tupperware our Stock of the Year in 2011 when it was trading at $47. The stock got as high as $97 in 2013, but has moved down since. That’s mainly because the company gets over 80% of its revenue from outside of North America, and the high U.S. dollar has hurt the contribution of its overseas operations.

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Tupperware’s sales were flat at $2.6 billion in 2011 and 2012, but rose to $2.7 billion in 2013. Due to unfavourable exchange rates, sales fell to $2.6 billion in 2014, and to $2.3 billion in 2015. Without exchange rates, sales rose 3.5% in 2015.

Earnings fell 11.6%, from $218.3 million in 2011 to $193.0 million in 2012. Due to fewer shares outstanding, per-share earnings fell 3.7%, from $3.55 to $3.42.

Value Stocks: $65 million in capital expenditure

The company’s earnings improved to $5.17 a share (or a total of $274.2 million) in 2013, but dropped to $4.20 a share (or $214.4 million) in 2014, and to $3.69 a share (or $185.8 million) in 2015. If you exclude unusual items, including a writedown of its Venezuelan operations, earnings per share fell 18.8% in 2015, to $4.37 from $5.38.

Tupperware continues to pay quarterly dividends of $0.68 a share, for an annualized yield of 5.6%. In 2015, the company paid out 62% of its earnings in dividends before unusual items, which is above its target of 50%.

Tupperware expects its cash flow in 2016 will range from $225 million to $235 million. Even after $65 million in capital expenditures, it would still have around $165 million. That’s more than enough to cover its dividend payments, which totaled $138 million in 2015.

Tupperware now expects unfavourable currency rates to cut its earnings by $0.58 a share in 2016. As a result, it should earn between $4.07 and $4.17 a share this year. The stock trades at a low 11.9 times the midpoint of that range.

Recommendation in Wall Street Stock Forecaster: BUY

For our advice on uncovering the most promising value stocks, read How to identify the most undervalued stocks to invest in.

For our recent report on a leading Canadian value stock, read Revenue jumps for Calian Technologies.

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Jim Bates

Jim is an associate editor at TSI Network. He is the lead reporter and analyst for The Successful Investor and Wall Street Stock Forecaster and a member of the Investment Planning Committee. Jim has held the Chartered Financial Analyst designation since 1992 and spent more than a decade at the Financial Post DataGroup before joining TSI Network. He has a Bachelor of Commerce degree from the University of Toronto.

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