Wednesday, May 14, 2014

Tupperware Brands Corporation (TUP) Dividend Stock Analysis



Tupperware Brands Corporation is listed on the New York stock exchange (NYSE) with ticker TUP.

Company Background (source Yahoo Finance):

Tupperware Brands Corporation operates as a direct-to-consumer marketer of various products across a range of brands and categories worldwide. The company is engaged in the manufacture and sale of preparation, storage, and serving solutions for the kitchen and home, as well as a line of cookware, knives, microwave products, microfiber textiles, water related items, and toys and gifts under the Tupperware brand. It also manufactures and distributes beauty and personal care products, including skin care products, cosmetics, bath and body care, toiletries, fragrances, jewelry, and nutritional products under the Armand Dupree, Avroy Shlain, BeautiControl, Fuller, NaturCare, Nutrimetics, and Nuvo brands. Tupperware Brands Corporation sells its products directly to distributors, directors, managers, and dealers. The company was formerly known as Tupperware Corporation and changed its name to Tupperware Brands Corporation in December 2005. Tupperware Brands Corporation was founded in 1996 and is headquartered in Orlando, Florida.


Analysis


Current Yield and Dividend Growth:
Tupperware currently pays a dividend of USD 0.68 per quarter for a USD 2.78 annual dividend. At the close of market on Tuesday, May 13th TUP’s price per share was USD 85.40. This gives the stock a current dividend yield of 3.26%. Normally I look for a dividend yield of at least 3%, so I will be satisfied with this dividend yield from TUP. In 2004, Tupperware paid an annual dividend amount of USD 0.88 per share. The dividend trend has been a flat until 2008. After 2008 the dividend has begun to grow strongly, in 2013 the dividend was 2.48. This gives TUP a 5 year annual compound dividend growth rate of 20.30%. Tupperware has increased its dividend now 5 years in a row, so TUP is the dividend challenger (U.S. Dividend Champions by David Fish). Tupperware´s dividend growth rate had been very high on last 3 and 5 years, 30.50% and 20.30%. 1 year growth rate is a huge 60.90%. However, it is unlikely that this kind of trend will continue. Tupperware normally pays dividend in January, April, July and October.

EPS Growth:
Tupperware's EPS has grown an average of 15.09% over the past 5 years and 13.56% in the past three years. Last year the growth of EPS was excellent 51.17%. Tupperware's EPS of development in the past years seems to be very good. Analyst estimates for 5 year earnings growth rate per annum are 12% (http://finance.yahoo.com/q/ae?s=TUP+Analyst+Estimates). It's in my opinion an optimistic estimate and if that will happen, investors can be very satisfied.

Net Income:
Tupperware's net income has increased by an average of 11.18% over the past 5 years and 6.72% in the past three years. Last year net income grew 42.07%. The net income trend looks similar to the EPS trend.

Revenue Growth:
Tupperware's revenue has increased 4.33% over the past 5 years, 5.11% in the last three years and 3.4% in the last year. The development of revenue looks worse as the development of EPS and net income.




Outstanding Shares:
The past 10 years, Tupperware's amount of shares has risen almost every year until 2010. After this, the number of shares has started to decline. I like this new trend, because less shares outstanding, my shares are giving me a bigger portion of the earnings.

  


Payout Ratio:
Tupperware's dividend payout ratio has been in the past 10 years on average 44.67%. Last 12 month period, the payout ratio was about 48.00%. This means that Tupperware was distributed around 50% of profits to shareholders and keeping 50% of profits to grow the company. I like this payout ratio because it is relatively low and I don’t believe Tupperware's should have any trouble maintaining dividend growth in the future.



ROE:
Tupperware's ROE has been around 35.53% over the past 10 years, which are good for me.




Net Profit to long term debt:
This number tells me how many years it will take to pay off the current long term debt of the company by using all net profit in it. I would like to see this ratio to be less than 5, because in that case the company is able to pay for all long-term debt for less than five years and on my opinion then the company doesn´t have too much debt. Tupperware's long term debt had been clearly below 5 times net profit in the past five years. In recent years, it had been around 2. End of the year 2013, it was 2.26.

  



Value

To find out share fair value I mainly use these methods. (http://www.passive-income-pursuit.com/search/label/stock%20valuation%20method).

Graham Number:
The Graham Number valuation method was conceived by Benjamin Graham, the father of value investing, and calculates the maximum price one should pay for a company given the earnings and book value. Tupperware has earned USD 5.17 per share in the last twelve months and has a current book value per share of USD 5.02. The Graham Number is calculated to be USD 24.17, suggesting that TUP is overvalued about by 250%.

Average P/E Ratio:
Tupperware`s current P/E is 16.42, which are lower as historical 5 years average high (18.50) and higher as 5 years average low (10.82).  By calculating using estimated EPS USD 5.71 for year 2014 and the average 5 years low P/E ratio (10.82) shares fair value will be USD 61.79. Calculating with 5 years average P/E ratio (14.66), fair value will be USD 83.71.

Average Dividend Yield:
Tupperware`s current annual dividend is USD 2.78. At the close of market on Tuesday, May 13th TUP’s price per share was USD 85.40. This gives the stock a current dividend yield of 3.26%. Average 5 years high dividend yields has been 4.13%. That dividend yield gives share fair value USD 67.36. Calculating with 5 year average yield 2.57%, the fair value will be USD 108.04.

Average P/S Ratio:
Tupperware`s current P/S ratio is 1.66 with revenue estimates for the year 2014 (2.71B). Average 5 years low P/S ratio is 0.95. By calculating using the estimated revenue for the year 2014 and the average 5 years low P/S ratio fair value will be USD 48.66. By calculating with 5 year average P/S ratio (1.28), fair value will be USD 65.69.

Discounted Cash Flow:
Analyst estimates for 5 year earnings growth rate per annum is 12%. I will use in my calculation 60% of that, which are 7.20%. Then I assume that continue growth after 5 years will be 3%. I use discount rate 10% and EPS USD 5.17. Total I calculate for next 30 years. That will give me share fair value USD 78.71.


Discount Rates8%9%10%11%12%
NPV of Future EPS$97.98$87.52$78.71$71.24$64.86



Dividend Discount Model:
Tupperware`s current annual dividend is USD 2.78. I assume that Tupperware will be able to grow dividends for the next 5 years at the lowest of the 1, 3, 5 year growth rate or 15%. In this case that would be 15%. Then I assume that after 5 years grow rate will be 5%. To calculate the value I used a discount rate of 10%. Total I calculate again for next 30 years. That will give me share fair value USD 67.07.


Discount Rate8%9%10%11%12%
NPV of Future Dividends$86.01$75.68$67.07$59.86$53.76



Future Price:
Tupperware has EPS 5.17 (ttm). When I calculate Tupperware`s future price with the analyst estimate for 5 years EPS growth (12%) and using the low P/E ratio last 5 years, I come from price USD 98.58. That would give about 13.87% upside for TUP´s current price. By calculating using the average last 5 years P/E ratio, I come from price USD 133.55.

Conclusion:
Tupperware Brands has expanded to almost 100 countries around the world under its seven brands Tupperware, Avroy Shlain, Beauticontrol, Fuller, NaturCare, Nutrimetics and Nuvo. Tupperware`s growth development in past years looks good to me, in the last 10 years there are two years, when TUP’s EPS went down (2005 and 2012). Tupperware`s payout ratio is now 48.00%, as it has almost always been below 50% in the past 10 years. So there will be a good reserve for dividend increases in the future. Net profit to long term debt is nowadays below 5, what I normally like to see. Based on my value calculation, TUP is now trading higher as its average low P/E ratio (10.82) and also higher as its average P/E ratio (14.66). When I look the average dividend yield (2.57%), I see that TUP is now trading below that price. To compare an average P/S ratio (1.28), I see that, TUP is now trading over of those prices. My calculation of discounted cash flow gives price USD 78.71 for the net present value, meaning that TUP is overvalued by 7.87%.  Based on the dividend discount model, Tupperware is worth USD 67.07, meaning it's currently overvalued by 26.6%. Overall I feel that Tupperware is overvalued at current levels. However, I will keep an eye on TUP and if the stock price will fall close to the 78.00 USD perhaps I will buy some TUP to my portfolio.

Disclosure:  I don't own any shares of TUP.

Click here to see my portfolio holdings. 

6 comments:

  1. Interesting pick for analysis, DH. I dont own TUP either, but will need to consider it once it gets down to better valuation.

    Best wishes
    R2R

    ReplyDelete
  2. Wow I never looked into TUP, I will add it to the watch list. Solid Brand name and a pretty good divi yield. Payout ratio also good. Nice Call !

    ReplyDelete
  3. Thanks for sharing this analysis. TUP has been on my watch list a long time ago and I haven't really looked at it or considered it for a while now. Thanks for bringing back to my attention.

    ReplyDelete
  4. Nice analysis. Have you also looked at NWL (Rubbermaid)? It provides solid competition for TUP, is bigger, but has a lower dividend yield. The pay out ratio is lower, and the dividend has increased in solid fashion for the last 5 years.

    Both are good stocks and competitors with each other.

    - Dividend Gremlin

    ReplyDelete
    Replies
    1. Hi Dividend Gremlin
      I'm not familiar with NWL, maybe I need to get better acquainted with the company, when I have time.
      Thanks for stopping by!
      DH

      Delete
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