Jamieson, Not Yet A Dividend Growth Stock

Jamieson Wellness is the No.1 consumer health brand in Canada. It is a leading branded manufacturer, distributor and marketer of natural health products. The company also has a growing presence globally with sales in more than 45 countries and regions. Its segments are Jamieson Brands (~93% of 2020 adjusted EBITDA) and Strategic Partners (~7%).

Jamieson has three in-house manufacturing facilities in Canada. It is the manufacturer and marketer of Jamieson, the No.1 VMS (vitamins, minerals and supplements) brand in Canada, Progressive, Precision, and Iron Vegan brands. It also markets the No.1 women’s health brand, Smart Solutions across the nation.

The company sells its products through 10,000 retail locations across Canada and also has a large digital presence. Jamieson’s international presence is growing steadily year after year with more than 25% growth in 2019.

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Investment Data

 


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Revenue Growth & Market Exposure

Jamieson’s branded business comprises a range of premium branded products such as Jamieson, Progressive, Precision, Iron Vegan, and Smart Solutions, while its Strategic Partners business includes co-manufacturing partnerships with globally leading consumer health companies.

The majority of Jamieson’s revenue is derived from the sale of Jamieson branded products to distributors, retail and wholesale customers, as well as from contract manufacturing services and the sale of product through its Strategic Partners segment. 

With a century old experience under its belt, Jamieson is known for its quality products. It has built a strong customer base and reputation for trust. The company has a consistent history of organic revenue growth registering a 13% CAGR in 2014-2020. Jamieson sales grew by 17% in the last year. It also pursues strategic acquisitions to further broaden and diversify product offerings.

Jamieson experienced growth in both domestic, with particular strength in e-commerce, food, drug, and mass retail channels, and international markets with elevated shipments to Eastern Europe and the Middle East in the fourth quarter. The company witnessed an increase in demand, across both its segments, and customer base as the pandemic pushed the daily demand for vitamins and supplements as well as immunity and general health. The COVID-19 pandemic has prioritized health and wellness for consumers globally.

The Strategic Partners segment, however, reported declining gross profits due to an unfavorable customer mix, a reduction in volume at the company’s powder facility, and higher supply continuity costs related to COVID-19. Jamieson is anticipating FY 2021 revenue in a range of $421-$438 million, representing an annual growth of 4.3%-8.6%. The company is focusing its future growth to come from established brands in developed markets and expanding manufacturing capabilities.

Dividends

Jameison Wellness sports a modest annual dividend yield of 1.3% and has a reasonable payout ratio of ~50%. The company last raised its dividend by 31% annually. It paid $5 million in dividend in the latest quarter.

Jamieson’s Strategic Partners business provides a good diversification to its main branded products business. It leverages the infrastructure and leads to cost optimizations with co-manufacturing partnerships with many blue chip healthcare companies. Jamieson’s scalable and quality production capabilities further attract strategic partnerships.

The company is well placed for expansion into new international markets and categories by leveraging brand equity and product innovations. Jamieson has registered a revenue growth of more than 2% from innovations, in each of the last four years. Its international sales also doubled between 2013 and 2016. Jamieson’s domestic retail is also experiencing strong double digit growth.

Jamieson continues to generate consistent cash flow while supporting its branded expansion in Canada and internationally. The company generated $18.7 million in cash from operations during the fourth quarter of 2020 compared with $13 million in the year-ago quarter. It ended the quarter with ~$127 million in cash and total debt of ~$149 million.

The demand for Jamieson’s quality products should keep increasing on the back of customers’ quest for better health and wellness. Jamieson is estimating adjusted EBITDA in a range of $95-$100 million and adjusted diluted EPS in a range of $1.24-$1.32 for FY 2021. The company expects a 15%-25% growth in the international branded segment reflecting growth in China and remaining international markets.

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Competition

VMS and sports nutrition are two large and growing segments of the consumer health industry and are highly competitive. Jamieson competes with both publicly and privately owned companies. Customer trust, quality products, extensive retail network, and strict regulatory standards form a deep moat around Jamieson’s business.

The company’s focus on changing consumer behavior is evident from its leading line of products focusing on healthy and active lifestyles, professional and semi-professional athletes, vegan alternative specialty products, and women’s focused health products. 

Bottom Line

Jamieson Wellness commands a 25% market share in the Canadian food, drug, and mass retailers. A solid momentum across businesses and scalable capacity positions Jamieson well to address the growing health and wellness demand. The company is poised to become a leading health and wellness brand in China and capitalize on supporting global trends.

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DISCLOSURE: Please note that I may have a position in one or many of the holdings listed. For a complete list of my holdings, please see my Dividend Portfolio.

DISCLAIMER: Please note that this blog post represents my opinion and not an advice/recommendation. I am not a financial adviser, I am not qualified to give financial advice. Before you buy any stocks/funds consult with a qualified financial planner. Make your investment decisions at your own risk – see my full disclaimer for more details.