4. PetMed Express, Inc. (NASDAQ:PETS)
Dividend Yield as of August 17: 5.13%
PetMed Express, Inc. (NASDAQ:PETS) is a Florida-based online pet pharmacy that sells prescription and non-prescription pet medication. At the end of fiscal Q1 2023, the company reported $105.4 million in cash and cash equivalents with $134 million available in total assets. The company’s free cash flow for the quarter came in at roughly $5.4 million and paid over $6 million in dividends to shareholders during the quarter.
PetMed Express, Inc. (NASDAQ:PETS) currently pays a quarterly dividend of $0.30 per share, with a dividend yield of 5.13%, as of August 17. Though the company does not hold any dividend growth track record, its five-year dividend CAGR came in at 9%.
At the end of Q1 2022, 9 hedge funds tracked by Insider Monkey owned stakes in PetMed Express, Inc. (NASDAQ:PETS), down from 13 in the previous quarter. These stakes hold a consolidated value of over $53 million. Jim Simons’ Renaissance Technologies was the company’s leading stakeholder in Q1.
Silver Ring Value Partners mentioned PetMed Express, Inc. (NASDAQ:PETS) in its Q4 2021 investor letter. Here is what the firm has to say:
“PETS was one of the original online sellers of pet medication directly to consumers. Once upon a time this was a growing business, given that they offered much lower prices than those which could be obtained at the vet’s office. However, with Chewy’s entry into the pet pharmacy business and Covetrus’s online offering that allows vets to sell drugs online at only a small premium to PETS’s prices, the value of PETS’s customer proposition has greatly diminished.
The company has been squeezed out of obtaining new customers through paid search by Chewy’s massive ad blitz. This is a situation that is likely long-term in nature. As a results, PETS’s business has entered into a decline in terms of both existing and new customers. This is a trend that I view as likely to continue over the long-term. Essentially, there is no longer a strong reason for PETS to exist as a business – it is neither the lowest priced nor the most differentiated, and is facing bigger competitors that are muscling it out of the business.
As a result of these structural changes, I believe the business is going to continue to decline for a long time, resulting in a far smaller business value than the recent price. I purchased a small put option position during the quarter. My plan is to stick to a total budget of no more than 2% cumulatively over the life of the investment. I will be monitoring new information, and if my thesis appears to be validated by the facts, I will likely continue with the position up until the 2% threshold.”
