George Weston is a leading food processing and distribution company in Canada. The company is also interested in the real estate business.

George Weston has a balanced portfolio with three complementary businesses in retail, real estate and consumer goods. All companies are leaders in their respective fields. The three reportable business segments are Loblaw Companies Ltd. (~ 94% of the company’s total sales in 2020), Choice Properties REIT (~ 2%) and Weston Foods (~ 4%).

Loblaw remains the market leader with more than 2,400 stores and over 10,000 private label products. Choice Properties is one of Canada’s leading diversified REITs with over 700 properties spanning retail, industrial, office and residential properties in the country’s largest markets. Weston Foods is a leader in commercial breads, crafts and donuts. Canada accounts for nearly 98% of the company’s sales, followed by the US (~ 2%).

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Investment data

Sales growth and market presence

With nearly 140 years of experience, George Weston continues to evolve and meet the demands of its customers. The diversified business covers a wide range of customer needs ranging from groceries, groceries, pharmacies, health and beauty to general goods, financial services and real estate.

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 number of loyal customers. It has established a strong goodwill and trust among its customers.

George Weston is aggressively investing in technology to fend off online competition. The company aims for long-term, stable growth of its business through continuous capital investments. As a result of the company’s decades of investment in systems and infrastructure, the e-commerce business has also gained momentum.

George Weston incurred $ 50 million in COVID-19 costs in the final quarter of fiscal 2020, but its businesses continued to do well with encouraging prospects. Loblaw delivered positive results driven by strong sales growth in the same store and in e-commerce. Choice Properties also posted stable profits from 98% contractual rental income. Investments in development initiatives continued throughout the year.

Weston Foods was negatively impacted by 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 to strengthen his portfolio and has completed a number of related acquisitions and divestitures over the past year.

Dividends

George Weston is a Canadian dividend aristocrat with a long history of paying dividends. The company has also increased its dividend, posting a dividend growth rate of 6% CAGR over the past three years. George Weston recently hiked its dividend 5.7% annually and currently has a dividend yield of more than 2% and a low payout ratio of 36%.

George Weston’s strategy of acquiring companies with sound management should go a long way in creating long-term shareholder wealth. The company owns over 52% in Loblaw, over 60% in Choice Properties and 100% in Weston Foods. George Weston’s well-diversified business and large exposure to Loblaw should make dividends reasonably safe.

George Weston should benefit from rising demand for food and pharmacy products in Loblaw as consumers choose to stay indoors in the first half of the year due to the ongoing effects of the pandemic. Loblaw expects EPS growth in the low double-digit range for 2021.

Choice Properties’ real estate platform is positioned to offer both income stability and long-term growth, powered by a diversified portfolio characterized by high occupancy and quality tenants. Weston Foods expects adjusted EBITDA to be higher year-on-year for fiscal 2021.

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competition

George Weston works in highly competitive industries. The company faces competition not only from traditional brick and mortar stores, but also from online gamblers. George Weston expands online shopping and delivery options as he faces acute pressure from e-commerce gamers.

Loblaw itself competes with a wide variety of retailers, including supermarket and drugstores, bulk retailers, discounters, convenience and specialty stores, etc. Weston Foods competes with multinational food processors as well as domestic bakeries in North America. Metro Inc., Sobeys, Walmart, Costco, and Amazon.com are the leading competition for the company.

Bottom line

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 in its three complementary businesses, retail, real estate and consumer goods. It has a solid track record of stability and maintaining a long-term outlook. George Weston should continue on his dividend growth streak well into the future, thanks to a steady cash flow from consumer defensive companies and ongoing investments.

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