Patterson Companies: Don’t Be Tempted By The 5+% Dividend Yield

Many companies hit road bumps on their path for top and bottom line growth. Patterson Companies, Inc. (PDCO) is one such company. The company’s stock was trading over $50 per share in early 2015. The stock price has declined to about $19.75 and simultaneously the dividend yield has increased to over 5%. Seemingly, Patterson is the bargain bin with a P/E ratio of 14.8 below the S&P 500’s average of 22.2. The P/E ratio is also much less than that of Henry Schein, Inc. (HSIC), a close competitor in the dental supply market, and Covetrus, Inc. (CVET) a close competitor in the animal health distribution market.

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4 comments

  1. The cash flow math and comments in this article are totally inaccurate. Free Cash Flow in FY19 of $230M was more than sufficient to cover the dividend.

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    • Thanks for the comment! The cash flow data was from Morningstar.com and is accurate. Operating cash flow was $48M, capital expenditures was $61M and FCF was ($13M)-DP

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  2. The analysis is this article has a number of other errors. In the margin discussion the author uses a quarterly profit number and a full year revenue number to calculate the wrong operating margin. That is totally incorrect and misleading. And the full year FY18 revenues for segments are also wrong. Why do you publish inaccurate and wrong information and use false assumptions in your rationale?

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    • Thanks for your comment! Yes, there was a transcribing error in the article’s table for Dental segment revenue. The FY 2018 Dental revenue should be $2,196B and the FY 2019 Dental segment revenue should be $2,192B. The operating margins for the dental segment would be lower. Thanks for pointing it out.

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