This sure-footed company keeps getting the basics right.
I feel almost duty bound to point out that the shares of my favourite supermarket chain, Wm Morrison (LSE: MRW), are selling more cheaply now than they were when fellow Fool Cliff D'Arcy extolled the company's virtues in March, at the time of the full-year results.
The shares were good value then, and they are even better value now. Leading the long list of the company's attractions is the forward dividend yield of almost 4.5%, more than twice covered by anticipated earnings for 2012.
Morrison gets most of my food money as well as my share money. When I go to the local store, it feels fresh and vibrant. In fact, the company has fitted its new fresh-food concept, Fresh Format, in the store. Now, exotic fruits and vegetables, temptingly arranged and bathed in swirling mist, greet me seductively as I enter the store.
These types of growth initiatives are encouraging. Morrison intends to roll out Fresh Format during 2012, and it sits well with other initiatives. For example, there are the first three 'M local' convenience stores that are performing well; the launch of Morrisons.com, scheduled for late 2012; the recent acquisition of Flower World and planned investments in meat and fish that are designed to progress vertical integration of the supply chain.
I shop at Morrison with an investor's eye, not just as a value-seeking shopper, but also with a finger to the pulse of the place. To me, it feels upbeat, wholesome, and rather pleasant to shop there. I reckon the experience will attract others, too.
The figures suggest that to be the case:
|Net cash from operations (£m)||735||898||928|
|Diluted earnings per share||22.37p||23.43p||26.03p|
It's pleasing to see that cash flow has fuelled profits, which have kept the steadily progressing dividend well covered.
Meanwhile, to support £901m of capital investment during the year, debt has risen to give a gross gearing figure of about 32%.
On 3 May, the company updated the market with an 'in line' statement. There was the usual cautionary note about the challenging economic environment, and assurances about the company's ability to continue to deliver profitable growth.
At today's 272p share price, you can pick the shares up on a forward earnings multiple of just under 10 for the current year, which compares to Tesco's (LSE: TSCO) forward multiple of about nine and J Sainsbury (LSE: SBRY) also at 10.
That's not a bad price for a company that seems to keep getting the basics right.
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Kevin owns shares in Morrison and Tesco. The Motley Fool owns shares in Tesco.