Sunday, July 11, 2010

Shoppers Drug Mart on Sale!

Trading near it's 52 Week low on news of the Ontario government's announcement in April that they are reducing the price of generic drugs (to 25% of brand name's), the market has since begun to take a liking to Shoppers again (SC.TO). Currently at 35.89, the stock is only trading at 13 times earnings, a very attractive price for this company, which historically has garnered a premium valuation. With a dividend yield of 2.5%, the stock pays you a reasonable amount to hold onto it until your capital appreciation kicks in.

Why else should you own Shoppers besides it's dividend and valuation?
- Demographics are on their side as our population gets older and they need to intake more medications.
- Debt levels are low, especially for a retailer still very much in a growth stage of its business model (refer to the chart below).
- Revenue is on a strong upward trend and profit margins are remaining healthy and stable (refer to chart below).

So take a look at including Shoppers as part of your dividend portfolio, and hopefully you will be pleased the next time you see a brand new Shoppers going up in your neighbourhood, as I am sure we all will : )

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