Feast on Profits: Investing in Canada’s Food and Beverage Stocks

Female friends enjoying their dessert together at a mall

Companies that produce consumer goods, including food and beverages, are safer investments during turbulent times. Premium Brands Holdings Corporation (TSX:PBH), Lassonde Industries Inc. (TSX:LAS.A), and Maple Leaf Foods Inc. (TSX:MFI) exhibit stability, as evidenced by their market-beating returns in 2023.

These consumer-defensive stocks are recession-resistant. You can feast on profits through price appreciation and rock-steady dividend payments. Moreover, you have capital protection if the Bank of Canada raises interest rates in September 2023 due to stubborn inflation.

Transitory challenges

Premium Brands reported record sales in Q2 2023 due to the significant contribution of the Specialty Food Group. This $4.6 billion company produces, markets, and distributes branded specialty food products in Canada and the United States. At $103.68 per share (+28% year to date), the dividend yield is a decent 2.97%.

George Paleologou, Premium Brands’ President and CEO, said the Specialty Food Group is the key driver of performance during the quarter. He adds the over 8% organic volume growth indicates the value creation potential of the group after PBH pumped in $1.5 billion in the last five years.

In the three months that ended July 1, 2023, consolidated revenue and gross profit increased 7.3% and 16.7% respectively to $1.6 billion and $323.4 million versus Q2 2022. However, net earnings dropped 46.4% year over year to $33.9 million. PBH plans to consolidate three specialty production facilities into one to expand capacity and improve operating efficiencies.   

Long-term sustainable value

Lassonde’s solid quarterly performance shows in the stock’s outperformance. At $139.98 per share, investors enjoy a 27.6% year-to-gain on top of the modest but safe 1.43% dividend. The $954.9 million beverage company makes and sells pure juices, ready-to-drink fruit drinks, and fruit-based snacks in North America and other international markets.

In Q2 2023, sales rose 9.4% to $79.4 million versus Q2 2022, while profit jumped 83.6% year over year to $25.7 million. Its CEO and Vice-Chairman, Nathalie Lassonde, said, “During this quarter, we saw accelerated revenue growth, improved overall profitability and steady progress towards building long-term, sustainable value.”

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Lassonde President and COO Vince Timpano said the strong margin and profit growth were due to operational efficiencies and improved logistics costs. He adds that delivering growth at improved margins is one of the top priorities.

Winning playbook

Mississauga-based Maple Leaf Food is cheaper than Premium Brands and Lassonde but is a winning investment, too, in 2023. At $29.13 per share, the positive return is 21.2%. You can partake in the 2.84% dividend yield. Despite the net loss in the first half of 2023 ($111.4 million), market analysts recommend a buy rating. Their 12-month average price target is $37.40 (+28.4%).

The $3.6 billion protein company derives revenue from two core business groups (Meat Protein and Plant Protein). In Q2 2023, total sales increased 6.2% to $1.3 billion versus Q2 2022. The net loss improved 1.7% year over year to $53.7 million. Its CEO, Curtis Frank, said Maple Leaf successfully executed its playbook during the quarter.

Frank adds that recent substantial capital investments (in poultry and meat) will help Maple Leaf become the planet’s most sustainable protein company.

Better protective shield

Lassonde Industries is my choice over Premium Brands and Maple Leaf. The earnings of the beverage stock are more stable. You’d have a better protective shield in a market downturn.

The post Feast on Profits: Investing in Canada’s Food and Beverage Stocks appeared first on The Motley Fool Canada.

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* Returns as of 8/16/23

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Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.