December 10, 2018

Canada Bread (CBY)

Canada Bread (CBY) is basically a subsidiary of Maple Leaf Foods Inc (MFI) (but MFI doesn’t support Canadian Dividend Stock minimum dividend requirements), which owns 90% of the company.  They are one of the leading makers of frozen baked goods in North America.  They specialize in products such as speciality pasta, pasta sauces, partially baked breads and bagels, tortillas, and countless fresh breads and breakfast pastries. You may recognize some of their brand names including Oliveri, Ben’s, POM, Dempster’s, and Olafson’s.  Canada Bread has over 8,000 employees in Canada, the United Kingdom, and the USA.

 

Canada Bread LogoThe company’s most recent financial reports show revenues staying fairly neutral at $406 million (compared to $402 million in 2010).  Canada Bread (CBY) launched a fresh sandwich product this year which hurt bottom lines somewhat, but this was offset by the price increases that the company put forth in the first part of 2011.  Adjusted earnings per share for the quarter increased 14%, from $30.7 million to $35 million.  This was mainly due to reduced promotional costs, as the price increases noted above were offset by the costs of input materials.

 

CBY recently announced that it will close the facility located in Delta, British Columbia, near the end of 2011.  The location primarily produced fresh baked goods including pantry breads, tortillas, and rolls.  Canada Bread Inc (CBY) put out a press release stating that the facility was closed, “In order to increase efficiencies and provide new capacity at another bakery for its fast-growing tortilla category.”  Speculation is that the company will invest $11 million more at its Edmonton, Alberta location in order take up the slack.  Barry McLean, President of the Fresh Bakery had this to say, “We regret the impact on our skilled and dedicated employees and we will provide resources and support to ease their transition to new employment.”  The facility had employed about 155 employees who have been offered various termination packages.

 

While certain divisions of Canada Bread (CBY) have seen decent growth the last few years, and bread products are the type of consumer staple that do well in the economic environment, I just don’t see much growth potential for the company.  I do appreciate the company’s efforts to streamline operations for the sake of efficiency, but I don’t think it will be enough to generate much value for investors at its current price point.  It is currently trading around $45 per share, and has a relatively high price-to-earnings ratio at 23.66.  Its annual dividend of $.80 gives it a dividend yield of 1.8%.  While this is respectable, I think there are better dividend options out there on the TSX.  Investors looking for exposure to the Canadian food sector might be better served looking at Canada Bread’s parent company in Maple Leaf foods.

 

Canada Bread (CBY) Dividend Stock Graph:

TSE CBY

Canada Bread (CBY) Dividend Stock Metrics:

TickerNamePriceDividend YieldPayout RatioDEBT_TO_MKT_CAPDividend Growth 5 yearsDividend Growth 1 years
CBYCanada Bread Co Ltd47.981.67100.0100922300

 

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