George Weston is a leading food processing and distribution company in Canada. The company also has an interest in the real estate business.
George Weston has a balanced portfolio with three complementary businesses in retail, real estate, and consumer goods. All of its businesses are leaders in their respective areas. Its three reportable operating segments are Loblaw Companies Ltd. (~94% of total company sales in 2020), Choice Properties REIT (~2%), and Weston Foods (~4%).
Loblaw remains the market leader with more than 2,400 stores and an offering of over 10,000 private label products, while Choice Properties is one of Canada’s leading diversified REIT with over 700 properties comprising retail, industrial, office, and residential assets, in the country’s largest markets. Weston Foods is a leader in commercial bread, artisan, and donuts. Canada accounts for nearly 98% of the company’s revenue followed by the U.S. (~2%).
- Opportunity Score: 43
- Ticker: TSE:WN
- Sector: Consumer Defensive
- Industry: Grocery Stores
- Market Cap: 18.05B
- P/E: 66.22
- Dividend Yield: 1.88%
- Payout Ratio (TTM): 118.52%
- Canadian Dividend Aristocrat: YES
- Chowder Score: Members Only
- Revenue Growth: Members Only
- Dividend Growth: Members Only
- Dividend Growth Fit: 5/10
- Dividend Income Fit: 5/10
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Revenue Growth & Market Exposure
With nearly 140 years of experience, George Weston continues to evolve and meet its customers’ demands. Its diversified businesses cater to a wide spectrum of customer needs, ranging from food, grocery, pharmacy, health, and beauty, to general merchandise, financial services, and real estate.
Given a leading reputation in the consumer industry, George Weston is known for offering a wide range of products and premium quality. The company has built a solid foothold that has resulted in a large base of loyal customers. It has firmly established strong goodwill and trust among its customers.
George Weston is investing aggressively in technology to ward off online competition. It seeks long-term, stable growth in its business through continuous capital investment. As a result of the company’s decade-long investment in systems and infrastructure, its e-commerce business has also picked momentum.
George Weston incurred $50 million in COVID-19 related costs in the last quarter of FY2020 but its businesses continued to perform well with encouraging outlooks. Loblaw delivered positive results driven by strong same-store and e-commerce sales growth. Choice Properties also reported stable earnings on the back of 98% contractual rent collections. It also continued its capital spending on development initiatives during the year.
Weston Foods was negatively impacted by stay-at-home orders and mandatory social distancing restrictions in several regions but made good progress on cost savings and productivity improvements and benefited from the transformation program. George Weston is working towards strengthening its portfolio and completed various acquisitions and dispositions in this regard in the last year.
George Weston is a Canadian Dividend Aristocrat with a long-standing history of paying dividends. The company has also been growing its dividend and has registered a dividend growth rate of 6% CAGR over the last three years. George Weston last increased its dividends by 5.7% annually, and currently has a dividend yield of more than 2% and a low dividend payout ratio of 36%.
George Weston’s strategy of acquiring companies with solid management should go a long way in creating long-term shareholders’ wealth. The company holds more than 52% stake in Loblaw, over 60% stake in Choice Properties, and 100% ownership in Weston Foods. George Weston’s well-diversified businesses and large exposure to Loblaw should make its dividends reasonably safe.
George Weston should benefit from the rising demand for grocery and pharmacy products at Loblaw, as consumers choose to stay indoors in the first half due to the continued impact of the pandemic. Loblaw is expecting EPS growth in the low double digits in 2021.
Choice Properties’ real estate platform is positioned to deliver both income stability and long-term growth driven by a diversified portfolio characterized by high occupancies and high-quality tenants. Weston Foods expects FY2021 adjusted EBITDA to be higher YoY.
George Weston operates in highly competitive industries. The company is facing competition not only from the traditional brick and mortar stores but also from online players. George Weston is expanding online shopping as well as delivery options as it faces acute pressure from e-commerce players.
Loblaw itself competes against a wide range of retailers including supermarket and drug store operators, mass merchandisers, discount, convenience and specialty stores, etc. Weston Foods’ competes with multinational food processing companies, as well as domestic bakery stores in North America. Metro Inc., Sobeys, Walmart, Costco, Amazon.com are the leading competition for the company.
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|TSE:ATD.B||ATD.B||Alimentation Couche-Tard Inc.||Consumer Defensive||Grocery Stores||0.74||44.68||48.89||14.83||14.83||3.12||0.0078||0.78||0.0000||4||0.35||0.2806||10||5||Consumable - Necessities||YES||YES||YES||NO||Canada||1|
|TSE:L||L||Loblaw||Consumer Defensive||Grocery Stores||0.47||74.83||26.04||22.69||22.69||4.43||0.0179||1.79||0.3913||4||1.34||0.0609||5||5||Consumable - Necessities||NO||NO||YES||NO||Canada||1|
|TSE:WN||WN||George Weston Limited||Consumer Defensive||Grocery Stores||0.43||117.26||18.05||66.22||66.22||6.90||0.0188||1.88||1.1852||4||2.20||0.0587||5||5||Consumable - Necessities||NO||NO||YES||NO||Canada||1|
|TSE:DOL||DOL||Dollarama Inc||Consumer Defensive||Discount Stores||0.43||55.90||17.16||29.49||29.49||1.90||0.0036||0.36||0.0939||4||0.20||0.0663||6||5||Consumable - Discretionary||YES||YES||YES||NO||Canada||1|
|TSE:MRU||MRU||Metro||Consumer Defensive||Grocery Stores||0.66||58.74||14.63||17.79||17.79||3.42||0.0170||1.70||0.2713||4||1.00||0.1448||8||6||Consumable - Necessities||YES||YES||YES||NO||Canada||1|
|TSE:EMP.A||EMP.A||Empire Co Ltd A Nvtg||Consumer Defensive||Grocery Stores||0.48||41.78||11.39||15.93||15.93||2.64||0.0124||1.24||0.1938||4||0.52||0.0664||5||5||Consumable - Necessities||NO||YES||YES||NO||Canada||1|
|TSE:NWC||NWC||The North West Company Inc.||Consumer Defensive||Grocery Stores||0.55||35.00||1.70||10.30||10.30||3.28||0.0411||4.11||0.3039||4||1.44||0.0411||4||7||Consumable - Necessities||NO||NO||YES||NO||Canada||1|
A consumer-defensive business model, strong cash flows, and growing dividends make Geroge Weston a good choice for long-term investors. The company should benefit from long-term opportunities across its three complementary businesses in retail, real estate, and consumer goods. It has a sound track record of stability and maintaining a long-term outlook. George Weston should continue its dividend growth streak in the future on the back of a regular stream of cash flow from consumer defensive businesses and ongoing investments.