What Does the Future Hold for Dividend Stock Petra Foods Limited? – Part 1

Shares of Petra Foods Limited (SGX: P34) have outperformed the broader market over the last five-plus years.

To that point, the company’s shares are up 240% from 1 January 2010 to last Friday. By comparison, the capital gains of the SPDR STI ETF (SGX: ES3) is 14.5% for the same period; the SPDR STI ETF is a proxy for Singapore’s market barometer, the Straits Times Index (SGX: ^STI).

Besides being a market-beater, the firm has also been a nice dividend stock by virtue of its growing payouts over the past five years:

Financial Year Dividends per share
(Singapore cents)
2010 3.78
2011 4.84
2012 4.92
2013 8.12
2014 7.50

Source: Petra Foods’ Earnings Report

Although Petra’s returns and its growing dividends have been tasty, as Foolish investors, we should look behind the covers to understand its drivers of growth.

A closer look

The business of Petra Foods is focused around the production of branded chocolate confectionaries with brands such as Top, Silver Queen, Knick Knacks, and Goya falling under the firm’s portfolio. In addition, Petra Foods also distributes a diverse mix of agency brands from other global companies.

In terms of geography, the majority of Petra Foods’ sales come from Indonesia and other regional markets such as Malaysia, Singapore, and the Philippines.

Business Segment Petra Foods

Source: Petra Foods’ Earnings Report

From 2010 to 2014 (Petra Foods’ financial year coincides with the calendar year), we can see that the company’s topline has fallen markedly (by a hefty 68% to be precise).

That may seem like a cause for alarm at first glance, but when we dig through the details, we can see that much of the fall in revenue over the period came from Petra Foods’ divestment of its Cocoa Ingredients business in late 2012. In fact, the company’s Branded Consumer business had seen a 10.6% annual growth in revenue over the five year period from 2010 to 2014.

For a closer look at the consumer products aspect of the business, the Branded Consumer (own brands) business segment made up about 63% of 2014’s sales while Branded Consumer (agency brands) took up the rest.

Foolish summary

The exercise above is to look at the sales dynamics of Petra Foods alone.

As a next step, we should observe if the firm’s topline growth trickles down to the bottom-line in order for it to be able to sustain its growth in share price. But, that’s for the next article.

As of Petra Foods’ closing price of S$3.50 on 12 June 2015, the chocolate maker’s trading at a trailing price-to-earnings ratio of about 36 and has a dividend yield of around 2.2% (thanks to its annual dividend in 2014).

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong doesn’t own shares in any companies mentioned.