Ahold is a defensive business with stable cash flow, a 4% dividend yield, and a 3.7% buyback yield, offering a high single-digit long-term return, but the stock is not cheap enough for a 10%+ return, so it's interesting but not a buy at current prices.

Ahold stock analysis, and one of the benefits of sharing my research on YouTube is that when something declines, I immediately get comments from you. So, and check this, this is going on, this is going on.

And let's check what's going on with Ahold. What's above 40? Now, it's back to 30. I did a few analysis in the past. This is from a lot of years ago, but I said 10% return. The stock price was at 27 50.

It delivered 10% per year with the dividend. Now, we are a little bit lower than that, so we have to check for the value.

For those who don't know, Ahold is a Dutch-traded company, but it's an American grocery retailer. We have American companies and of course Dutch companies, Belgium, something else, retail, pharmaceuticals, things like that, and other smaller businesses.

But I think 55-60% revenue comes from the United States. But they also have the ADR if you want to be just in US dollars. Good liquidity, same dividend yield, everything looks good.

If we look at the Q2 results, when you have to go to page 15 for the numbers, you know that the numbers are not stellar. Constant rates, stagnant, a little bit growth here, but not that much, not the expectable, nothing crazy that would entice Wall Street.

So, online it's still growing, but that also means that the rest is growing slower. Margin stable, earnings per share down 1.4%, nothing bad, but also nothing great. And Wall Street is always looking for growth, and immediately their stock adjusts.

So, US a little bit of weakness in the consumer there. Europe still doing good, but not as good as earlier. They are winning market share in the US, 14 billion euros, that's what 14 and something billion US dollars in revenues. They're doing their job there.

Okay, stable cash flow, very defensive business. Same in Europe. We can quickly go to the outlook because more stable than this you don't find around. 1 billion share buyback, dividend keeping the dividend there, growing a little bit every year.

Capital expenditures, free cash flow 2.3 billion. And if I look at the free cash flow or the net income, that's what they will likely spend on the dividends and repurchases, 2 billion.

They're covering that. If you look at the balance sheet, they have just a little bit of that long-term debt, just 5 billion euros. That's not much compared to the company. The equity, not that much, but okay, they are doing buybacks.

So, okay, it's a grocery business, so there will be a lot of liabilities. When we look to at the buybacks, we look at the market cap, divide the buybacks with the market cap. So, 3.7% buyback yield.

I'm including that into the growth part of my calculation.

This is our intrinsic value table, and you can play around with it. And here is Let's say that the business, let's take a dividend per share as base of valuation. Growth rate, 3% from buybacks, and just 2 1 and 1/2% from organic, then we are at 5% growth for dividend per share.

If I expect a 10% discount rate going forward, if I keep the dividend yield at 4%, the intrinsic value for a 10% return down the road is at 28, which is not far from the current stock price.

So, you can expect on What is that? 8% return, something higher from this defensive business if you're happy with an 8% expected return. Nothing bad with that. If I go a little bit more exuberant, let's say that they grow 3% from buybacks, 3% inflation organic, and that interest rates go down, and we are at a 3% dividend yield, the present value is quickly 34.

And if just interest rates go down, then you see immediately the stock going to 40, and you make your 30% on top of the dividend. Worst-case scenario, recession, things like that, the dividend yield goes to, let's say, 5%, slower growth rate, the present value is for another 30% down, but in that case, one should buy more.

I put nominal case 60% 2020. Maybe it was should be 4040 here, better. And here we are. The intrinsic value for 10% return is close to the stock price. At 9% looks interesting.

So, you're getting a 4% defensive situation. Everything looks good. Good return, high single digit likely long term.

What's going on? Why is the stock down? Well, you have to always compare it to interest rates. We discussed last Saturday, interest rates up, interest costs up, Germans paying the most for their 30-year bond going to almost 4%.

And when it comes to such stable businesses that are practically like a bond, everything is compared to interest rates that you can get from governments. 4.7% on the 10-year US Treasury, and this is 4% with little growth.

That's what hit the stock. Just a little bit of sluggishness here or stability that's expected, and boom, it goes down 40%. So, relatively it looks very good, 8% long-term return, but from an absolute value investing perspective, I'm always thinking, especially to add to my portfolios, 10% and more.

Can I get to 12%? Because then I'm not that under the influence of interest rates, of temporary situations. I know, okay, at that price, in the low 20s, a hold will give me a return no matter what.

And now I still have to gamble on perhaps lower interest rates down the road, on the good consumer, on not a bad recession, on people being happy with 4%, not a 6% dividend. That happens in bad times.

People say, "Great business, I want a 6% yield from that." Because all other opportunities are cheaper. I'll keep Ahold here on my table. Good return. We'll compare it to others, Tencent's, Visa's, depending on how exuberant was I hear Alibaba's, and then we'll see others.

See how the risk and reward of things fits you, how you can structure a portfolio. So, for now, interesting it is here and let's see how it develops over time.