Value Investing with Sven Carlin, Ph.D.|26. Aug.
Ahold Stocks Looks Much Better Now With 4% Yield!
Overview
Ahold is a Dutch-listed grocery retailer with strong exposure to the US (55-60% of revenue). The stock dropped from over €40 to €30, triggering viewer comments.
Q2 Financial Performance- Revenue: Stagnant on constant currency basis.
- Online: Growing, but traditional business slowing.
- Margins: Stable.
- Earnings per share: -1.4% – neither bad nor stellar.
- Free cash flow: €2.3 billion, covering dividends and buybacks (€2 billion).
- Dividend yield: 4%.
- Buyback yield: 3.7% (included in growth assumptions).
- Growth assumption: 3% from buybacks + 2.5% organic = 5% dividend growth.
- At a 10% discount rate, intrinsic value is €28 – close to current price.
- Expected long-term return: high single digits (around 8%).
- The decline is due to rising rates: US 10-year Treasury yields 4.7% vs Ahold’s 4%.
- If interest rates fall (e.g., 3% dividend yield assumption), intrinsic value jumps to €34, and if the stock re-rates to 40, you get a 30% upside.
From an absolute value perspective, the analyst prefers a entry price in the low 20s to achieve a 10-12% return, independent of interest rate fluctuations. For now, Ahold stays on the watchlist – interesting but not yet compelling.
