George Weston Limited (WN)

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George Weston Limited (WN)

Postby Taggart » 16 Dec 2010 02:56

I'm copying this from PI's post in the dividend hikes section.

Peculiar_Investor wrote:This one is special, George Weston Limited Announces $1 Billion Special Dividend
George Weston wrote:George Weston Limited ("Weston") (TSX: WN) announced today that it will pay a special one-time common share dividend of $1 billion, representing $7.74751 per common share, on January 25, 2011 to all common shareholders of record at the close of business on January 18, 2011.

"The Corporation's track record of solid operating performance, combined with significant cash balances and ample liquidity to grow the business, provides the Corporation with the opportunity to reward shareholders with a return in excess of our normal dividend," said W. Galen Weston, Chairman and President of the Corporation.

Mr. Weston added: "Capital markets have come through some very turbulent times and the Corporation took a conservative position holding excess cash. Now with increased stability in the capital markets and our strong balance sheet, the directors felt that a return of capital was appropriate. At the same time, we are preserving sufficient financial flexibility to meet the Corporation's ongoing operational and capital requirements and to pursue growth opportunities."

Wow! They think money is better in their shareholders hands rather than their own. Of course, it probably doesn't hurt that the Weston family has a large ownership stake so are paying themselves. Perhaps the Shaw family could have followed this example?


I highlighted the part above that has me puzzled. Since when does a Total Debt to Equity Ratio of 89.56 constitute a strong balance sheet? Wouldn't it have been better if they'd just increased the annual dividend payments a little bit, and used the rest of the cash to pay down debt? Even the company's current ratio of 1.8 wouldn't of passed Ben Graham's minimum of 2 to 1.
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Re: George Weston Limited (WN)

Postby FinEcon » 16 Dec 2010 12:54

Not that I am looking to buy WN but it does indicate a strong balance sheet given the industry the firm participates in. IMHO, you have to adapt Graham's rules a fair bit for between industry comparison of securities or ranking against any arbitrary absolute number like the 2:1, which is sort of the same thing an an abstract sense (i.e. you're effectively creating a dummy industry against which all others are compared).

If the ratio itself is not to your liking, consider the cost of debt to the firm or revenue stability against margin stability. Don't get me wrong, you, I and Norm are probably the biggest Graham-ites on this board but I think now so many people know the basic Graham criteria that you have to add some flavour to it. Just my 2 cents.
To suppose that safety-first consists in having a small gamble in a large number of different [companies] where I have no information to reach a good judgment, as compared with a substantial stake in a company where one’s information is adequate, strikes me as a travesty of investment policy.
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Re: George Weston Limited (WN)

Postby DanH » 16 Dec 2010 14:58

Taggart wrote:I highlighted the part above that has me puzzled. Since when does a Total Debt to Equity Ratio of 89.56 constitute a strong balance sheet? Wouldn't it have been better if they'd just increased the annual dividend payments a little bit, and used the rest of the cash to pay down debt? Even the company's current ratio of 1.8 wouldn't of passed Ben Graham's minimum of 2 to 1.


I'm not familiar with how Reuters presents info so is that supposed to be a percentage or a raw number? Also, recall that a debt to equity ratio of 1:1 is equal to a debt to asset ratio of 0.5:1.

In any case, the Reuters data don't line up with Weston's third quarter report for that stat. The latest report shows a D/E ratio of 1.9x and a D/A ratio of 0.65x.

DISCLOSURE: I own Weston currently but bought it many months ago below $60.
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Re: George Weston Limited (WN)

Postby Taggart » 16 Dec 2010 17:55

Two of Westons competitors, both Empire and Metro have far stronger balance sheets at around 40% debt to total equity.

Note: I own both competitors and am not doing a selling job.
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Re: George Weston Limited (WN)

Postby Peculiar_Investor » 21 Feb 2012 14:11

Imagefiniki, the Canadian financial wiki, a collaborative enterprise by the members of FWF. Add your wisdom, help fix our typos!

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