December 10, 2018

Premium Brands Holdings Corporation (PBH)

The Premium Brands Holdings Corporation (PBH) is my pick for best investment in the Canadian food and agricultural sector.  The company (like many in the dividend-leader field) switched over from an income fund structure in July of 2009 in advance of the 2010 deadline for the new taxation rules for income trusts.  Basically, this means that the previous tax advantages that were enjoyed by income trusts, and enabled them to pay larger distributions to their stakeholders were nullified.  The corporation has an incredible portfolio of agricultural/food manufacturing and distribution facilities across Canada and into the USA.  They employ about 1,650 people.  The company’s mission is, “To build a great food company through the acquisition and development of speciality branded food businesses and unique proprietary distribution networks.”

 

Premium Brand HoldingsTo understand the corporate structure of Premium Brands, an investor must first be familiar with the concept of a holding company.  The famous holding company is Berkshire Hathaway (BRK) of Warren Buffet fame.  The idea is that an initial company decides to invest its profits in buying up shares (often controlling shares) in various other companies; thus, the company’s overall performance and profits are determined by the efficiency of the companies that it owns parts of.  Premium Brands Holdings Corp (PBH) owns parts of many different successful food and agricultural companies from around the world, but mostly based out of Canada.  Some of the more popular holdings of the company include: Centennial Foodservice, B&C Foods, Direct Plus, Harlan Fairbanks, Kids Eat, Hempler’s, McSweeny’s, Quality Fast Foods, SK Food Group, Made Right, and MultiNational Foods.

 

Premium’s most recent acquisition was announced recently and it has decided to purchase the entire assets of Piller Sausages and Delicatessens Limited (more commonly known by its brand name “Piller’s”).  Piller’s is one of Canada’s largest producers of European meats.  They have about 600 employees and their annual sales are over $170 million.  The paperwork that is needed for the Canadian Competition Bureau is all that is left for the deal to be completed.  The acquisition allows Premium Brands Holdings (PBH) to claim that it holds two major meat retailers in Piller’s and Grimm’s that cover the vast majority of Canada in terms of their respectful regional dominance.  Wilhelm Huber, a co-founder of Piller’s stated that, “We are proud of the business we have built over the last 54 year but wanted to find a partner to help take Piller’s to the next stage in its development.”  The purchase price is estimated at about $73 million dollars and almost 2 million shares of Premium Brand Holdings.

 

Premium (PBH) is one of the most diversified companies within its sector in all of North America.  Their management team has proved to be very adept at consistently  recognizing profitable acquisition opportunities to add to the company’s portfolio.  The 7.3% dividend yield is absolutely un-paralleled within the sector, and represents a great value for any investor, let alone one that is focused on income-producing stocks.  Barring any major management changes, I cannot foresee an economic environment that Premium does not continue to thrive in.  Nearly every expert in the market today has either a, “buy” or “strong buy” recommendation for the stock.

 

 

Premium Brands Holdings Corporation (PBH) Dividend Stock Graph:

TSE PBH

Premium Brands Holdings Corporation (PBH) Dividend Metrics:

TickerNamePriceDividend YieldPayout RatioDEBT_TO_MKT_CAPDividend Growth 5 yearsDividend Growth 1 years
PBHPremium Brands Holdings Corp16.557.11129.350.71486615.5469159.090912

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