For your weekend reading pleasure, the articles listed below contain some of the best dividend and value investing insights found on the web. They were written by various members of the Dividend Investing and Value Network over the past week:
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What makes a company successful in the long term is its service, innovation, management, and products. All of these do not happen without good people. From a short term perspective layoffs make the company more viable but from a long term perspective it can seriously damage the culture and effect the good people who you need to run the business in the future. This article was written by buyingvalue. If you enjoyed this article, please vote for it by clicking the Buzz Up! button below.
A recent mass layoff at my company has given me a fresh perspective on layoffs. Normally, as an investor, we see layoffs as a courageous way to drive profits forward by shaking off some areas of weakness. I have personally invested in companies shortly after a mass layoff if I believe that such changes will benefit the profitability of the business. From a purely financial perspective viewing a company as a machine is an easy thing to catch one’s self doing. However there are some soft costs involved in layoffs to a company culture that I wasn’t really aware of until the week after I witnessed fellow employees walking out the door for the last time:
Unilever PLC, together with its subsidiaries, engages in the production and supply of fast moving consumer goods in food, home, and personal care product categories in Western Europe, the Americas, Asia, Africa, and Central and Eastern Europe. This international dividend achiever has raised dividends for over one decade.
This dividend stock pays dividends semi-annually. Another odd factor about it is the fact that it trades in the UK and the Netherlands. In this analysis I am concentrating on the British based, American Depositary Receipts. Unilever operates as a single business entity. However, there are two owners: Unilever (NV) and Unilever (PLC) are the two parent companies of the Unilever Group, having separate legal identities and separate stock exchange listings for their shares. You can find Unilever shares trading on NYSE as (UN) or (UL) representing NV and PLC respectively. (source)
The stock has delivered an average annual total return of 10.20% over the past decade.
Earnings per share have grown at an average pace of 12.10% per annum. Future growth in EPS would depend on how the company balances its pricing with the need for volume growth in its segments. For 2009, analysts expect the company to earn $2.01/share, which is lower than 2008’s EPS of $2.53. For 2010 analysts expect Unilever PLC to earn $2.21/share.
Annual dividends per share have increase by an average of 10.30% annually, which is lower than the growth in earnings. The reason why the dividend fluctuates is because it is typically translated from the British Pound to the US Dollar, and the exchange rate is fluctuating constantly. A 10% growth in dividends translates into the payment doubling every seven years.
The return on equity has fluctuated between a low of 13.50% in 2001 and a high of 58.40% in 2004. Over the past few years it has remained above 30%, which is impressive.
The dividend payout ratio has consistently remained above 50%, with the exception of 2000, 2001 and 2009.
Unilever (UL) currently trades at a P/E of 15.50 times 2009 earnings, has an adequately covered dividend, and yields 3.20. Overall Unilever (UL) does seem attractively valued at the moment.
I would definitely consider initiating a position in the stock when funds are available.
Full Disclosure: None
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- Best International Dividend Stocks
- Dividends versus Share Buybacks/Stock repurchases
- Dividend Aristocrats List for 2010
- Capital gains for dividend investors
This article was written by Dividend Growth Investor. If you enjoyed this article, please vote for it by clicking the Buzz Up! button below.
Archer Daniels Midland (ADM) is one of the world's leading agribusiness companies, with significant market presence in agriculture processing and merchandising. ADM has approximately 230 plants located worldwide. It is one of the world's largest processors of agricultural commodity products such as oilseeds, corn, wheat, protein meal, corn sweeteners, flour, biodiesel, ethanol, and other food and feed ingredients. ADM is a dividend aristocrat and has been raising its dividends for last 34 years. The last dividend increase was in February 2009. I last reviewed ADM in July 2009. My objective here is to see if ADM continues to be a good dividend growth stock and how does it rate on my scale of risk-to-dividends. Trend Analysis Here I am looking at trends for past 10 years of corporation’s revenue and profitability. These parameters should show consistently growth trends. The trend charts is shown in image below. Risk Parameter Calculation Here I use the corporation’s financial health to assign a risk number for measuring risk-to-dividends. The risk number for risk-to-dividends is 2.09. This is a medium risk category as per my 3-point risk scale. The negative EPS growth rate in 2008/2009 makes it a medium risk to dividends. Quality of Dividends This section measures the dividend growth rate, duration of growth, consistency over a period of past five years. Fair Value Calculation The range of fair value is calculated as $24.1 to $30.3. Qualitative Analysis ADMs history can be traced back to 1902. It has survived all the significant ups and downs in the economic growth of United States. This demonstrates that it keeps adapting to changes in the market place. 
Conclusion
I like ADM’s global asset base, focus on long term profitability, and diversified product strategy. I also like ADM as a proxy for agriculture commodity asset class. It has been raising dividends for last 34 years. The stock’s current risk-to-dividend rating is 2.09 (medium risk). I am long on ADM, and would continue to add based on my allocation levels. However, before I add any new positions, I will wait for declaration for 2010 dividend increase which I expect sometime in February 2010.
Full Disclosure: I am long on ADM.
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Full Disclosure: At the time of this writing, I was long in UTX (4.2% of my Income Portfolio). See a list of all my income holdings here.
Company Description: United Technologies Corp. is an aerospace-industrial conglomerate with a portfolio including Pratt & Whitney jet engines, Sikorsky helicopters, Otis elevators and Carrier air conditioners, among other products.
Fair Value: I consider four calculations of fair value, see page 2 of the linked PDF for a detailed description:
UTX is trading at a discount to 1.) and 2.) above. Since UTX's tangible book value is not meaningful, a Graham number can not be calculated. The stock is trading at a slight discount to its calculated fair value of $69.44. UTX earned a Star in this section since it is trading at a fair value.
Dividend Analytical Data: In this section there are three possible Stars and three key metrics, see page 2 of the linked PDF for a detailed description:
UTX earned three Stars in this section for 1.), 2.) and 3.) above. A Star was earned since the Free Cash Flow payout ratio was less than 60% and there were no negative Free Cash Flows over the last 10 years. The stock earned a Star as a result of its most recent Debt to Total Capital being less than 45%. The stock earned a Star as a result of its most recent Debt to Total Capital being less than 45%. UTX earned a Star for having an acceptable score in at least two of the four Key Metrics measured. Rolling 4-yr Div. > 15% means that dividends grew on average in excess of 15% for each consecutive 4 year period over the last 10 years (1999-2002, 2000-2003, 2001-2004, etc.) I consider this a key metric since dividends will double every 5 years if they grow by 15%. The company has paid a cash dividend to shareholders every year since 1936 and has increased its dividend payments for 17 consecutive years.
Dividend Income vs. MMA: Why would you assume the equity risk and invest in a dividend stock if you could earn a better return in a much less risky money market account (MMA)? This section compares the earning ability of this stock with a high yield MMA. Two items are considered in this section, see page 2 of the linked PDF for a detailed description:
UTX earned a Star in this section for its NPV MMA Diff. of the $3,003. This amount is in excess of the $1,800 target I look for in a stock that has increased dividends as long as UTX has. If UTX grows its dividend at 15.0% per year, it will take 5 years to equal a MMA yielding an estimated 20-year average rate of 3.98%.
Other: UTX is a member of the S&P 500 and a member of the Broad Dividend Achievers™ Index.
Conclusion: UTX earned one Star in the Fair Value section, earned three Stars in the Dividend Analytical Data section and earned one Star in the Dividend Income vs. MMA section for a total of five Stars. This quantitatively ranks UTX as a 5 Star-Strong Buy.
Using my D4L-PreScreen.xls model, I determined the share price would need to increase to $83.47 before UTX's NPV MMA Differential decreased to the $1,800 minimum that I look for in a stock with 17 years of consecutive dividend increases. At that price the stock would yield 1.84%.
Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the target $1,800 NPV MMA Differential, the calculated rate is 13.3%. This dividend growth rate is slightly less than the 15.0% used in this analysis, thus providing only a slim margin of safety. UTX has a risk rating of 1.25 which classifies it as a low risk stock.
UTX's product leadership has produced a wide-moat. Over the last ten years, the company has shown steady growth in both earnings and dividends. UTX has a strong balance sheet with 34% debt to total capital and an excellent free cash flow payout of 29%. Large backlogs at Airbus and Boeing, moderate demand for global infrastructure, strong demand for military helicopters and sustained productivity improvements will benefit UTX in the near-term. UTX is trading near my buy price of $69.44. However, I will limit purchases based on its low dividend yield. For additional information, including the stock's dividend history, please refer to its data page.
Disclaimer: Material presented here is for informational purposes only. The above quantitative stock analysis, including the Star rating, is mechanically calculated and is based on historical information. The analysis assumes the stock will perform in the future as it has in the past. This is generally never true. Before buying or selling any stock you should do your own research and reach your own conclusion. See my Disclaimer for more information.
Recent Stock Analyses:
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For your weekend reading pleasure, the articles listed below contain some of the best dividend and value investing insights found on the web. They were written by various members of the Dividend Investing and Value Network over the past week:
Articles From DIV-Net Members
There are some really good articles here, please take time and read a few of them.
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It has become formulaic that when a movie comes out one of the advertisements will feature reviewers comments like "riveting", or "one of the must see movies of the year" and of course my favorite "an instant classic". The point, obviously, of these reviews is to convince you, based on some other expert's testimony, that you need to see this movie.
Have you noticed though that over the last few years that the font on the source of the quote has gotten smaller and smaller? To the point now that on my 36 inch TV I would need a microscope to make out the author of the quotes in the advertisement for the new Sherlock Holmes movie. The reason for the ever shrinking font is equally simple, there are just so many people calling themselves experts out there that their is always someone at a media agency that will have found something good to say about a terrible movie.
Analyst downgrading/upgrading of stocks is the same. I have one stock in my portfolio with 40 analyst following it. Analysts like movie reviewers come in a varying degrees of credibility, so why would you buy or sell based off a change in view one may have of a stock in your portfolio? There are some analysts who's opinions I respect having listened to their questions to management on calls and having an understanding of their fund's investment philosophy. I treat their opinions like those of an acquaintance who tells me about a good movie they recently watched, it doesn't mean I will watch it, but I respect their opinions enough to hear them out- the others are just noise.
It never fails to perplex me how aggressive a stock price can move when an analyst recommends a sell or buy on a company's stock. By the way Sherlock Holmes was not "riveting".
Universal Corporation (UVV), together with its subsidiaries, operates as the leaf tobacco merchants and processors worldwide. It engages in selecting, procuring, buying, processing, packing, storing, supplying, shipping, and financing leaf tobacco for sale to, or for the account of, manufacturers of consumer tobacco products. This dividend champion has raised dividends for 39 consecutive years.
Over the past decade, Universal has delivered a total return of 11.60% to shareholders.
At the same time earnings per share have grown by 1.50% on average since 2000. Analysts expect UVV to earn $5.25/share in 2010 and $5.63/share in 2011. This is an increase over the $4.32/share Universal earned in 2009. The slow growth in tobacco consumption worldwide and risk of increased taxation and regulation in the sector represent one of the major risks for the company going forward.
The annual dividend has increased by 4% annually over the past decade. A 4% growth in dividends translates into the distribution doubling every 18 years. The current quarterly dividend of $0.46/share is double what it was in 1993-1994. The latest dividend increase was for 2.20% in November 2009.
The return on equity has generally decreased from a high of 22% in 2000 down to 15.30% in 2009. I generally like to see a stable value of this indicator over time.
The dividend payout ratio has generally remained below 50%, with the exception of 2006 and 2007, which struck as outliers.
Overall Universal Corporation does appear to be attractively valued, trading at a P/E of 9, yielding 3.90% and having an adequately covered dividend. The main problem for the company is the slow earnings growth, and concentration in the tobacco industry, which comes with its own inherent risks. I already have exposure to the tobacco sector through my position of already, Altria (MO) and Philip Morris International (PM). However I would consider initiating a position in UVV on dips whenever I have extra cash on hand.
Full Disclosure: None
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Whenever I have a conversion about dividend investing, I get few different types of questions. It is very natural for people to ask questions. What is interesting is often these questions can be grouped into following two:
Selling a dividend stock when it is overpriced? This comes from the thought process that say any of my dividend stock is overpriced by 1.25x or 1.5x. In that case, it is likely that the dividend I expect in 10 years, I may get by selling the overpriced stocks. Why wait for that long for dividends to trickle in?
When we think about it, it may appear to make sense. However, I believe we should build a portfolio based on certain objectives. In my case, my primary objective is to build a portfolio for growing dividends. And hence, I buy stocks for that objective. The characteristics of such stocks are such that I do not expect to see such wild swings as 1.25x or 1.5x or more. Assuming, if they do, it is an opportunity to buy at very good initial yields (and increase your YOC). Furthermore, I also expect that as dividends grow over next 10 years or more, the price of the stocks will also grow i.e. capital appreciation. Assuming the dividends keep growing, the capital appreciation is likely to much more than 1.25x or 1.5x. So dividend investing is not for standalone dividends only. It is also accompanied by capital appreciation. It is about total returns.
What is good number of stocks? It depends upon individuals. For me, I have limited my self to 5% maximum dividends from any single company. This is for managing risk of dividend cuts. So this gives me a minimum of 20 companies. However, I am comfortable keeping around 40 to 45 stocks in the portfolio. I do not have any reasoning why this is number. I believe I would comfortable following that many number of companies. There would few stocks in those 40 that would cut dividends and I will need to replace them. While some of them would continue to increase dividends.
What is your comfortable level of number of stocks?
A few years ago, Heelys' footwear product for children was all the rage. The company had designed a sneaker with a removable wheel on the heel that had taken the consumer market by storm. Below is a demonstration of the dual-purpose footwear in action:
Full Disclosure: At the time of this writing, I held no position in RAVN (0.0% of my Income Portfolio). See a list of all my income holdings here.
Company Description: Raven Industries Inc. manufacturer provides electronic precision-agriculture products, reinforced plastic sheeting, electronics manufacturing services, specialty aeronautics, and sewn products.
Fair Value: I consider four calculations of fair value, see page 2 of the linked PDF for a detailed description:
RAVN is trading at a discount to 2.) and 3.) above. The stock is trading at a slight premium to its calculated fair value of $31.75. RAVN did not earn any Stars in this section.
Dividend Analytical Data: In this section there are three possible Stars and three key metrics, see page 2 of the linked PDF for a detailed description:
RAVN earned three Stars in this section for 1.), 2.) and 3.) above. A Star was earned since the Free Cash Flow payout ratio was less than 60% and there were no negative Free Cash Flows over the last 10 years. The stock earned a Star as a result of its most recent Debt to Total Capital being less than 45%. RAVN earned a Star for having an acceptable score in at least two of the four Key Metrics measured. Rolling 4-yr Div. > 15% means that dividends grew on average in excess of 15% for each consecutive 4 year period over the last 10 years (2000-2003, 2001-2004, 2002-2005, etc.) I consider this a key metric since dividends will double every 5 years if they grow by 15%. The company has paid a cash dividend to shareholders every year since 1972 and has increased its dividend payments for 23 consecutive years.
Dividend Income vs. MMA: Why would you assume the equity risk and invest in a dividend stock if you could earn a better return in a much less risky money market account (MMA)? This section compares the earning ability of this stock with a high yield MMA. Two items are considered in this section, see page 2 of the linked PDF for a detailed description:
RAVN earned a Star in this section for its NPV MMA Diff. of the $1,649. This amount is in excess of the $1,200 target I look for in a stock that has increased dividends as long as RAVN has. If RAVN grows its dividend at 15.0% per year, it will take 6 years to equal a MMA yielding an estimated 20-year average rate of 3.72%.
Other: RAVN is a member of the Broad Dividend Achievers™ Index.
Conclusion: RAVN did not earn any Stars in the Fair Value section, earned three Stars in the Dividend Analytical Data section and earned one Star in the Dividend Income vs. MMA section for a total of four Stars. This quantitatively ranks RAVN as a 4 Star-Buy.
Using my D4L-PreScreen.xls model, I determined the share price would need to increase to $35.67 before RAVN's NPV MMA Differential decreased to the $1,200 minimum that I look for in a stock with 23 years of consecutive dividend increases. At that price the stock would yield 1.54%.
Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the target $1,200 NPV MMA Differential, the calculated rate is 14.0%. This dividend growth rate is slightly less than the 15.0% used in this analysis, thus providing only a slim margin of safety. RAVN has a risk rating of 1.25 which classifies it as a low risk stock.
RAVN is a company that I have recently started to follow closely. Its solid cash flows, stong balance sheet and lack of debt are alluring to a dividend investor. Although RAVN is trading near my buy price of $31.75, I have two concerns: 1.) the low dividend yield and 2.) the high growth rate needed to meet my NPV MMA Differential target. For now I will pass on a buy, but ill continue to closely monitor the stock. For additional information, including the stock's dividend history, please refer to its data page.
Disclaimer: Material presented here is for informational purposes only. The above quantitative stock analysis, including the Star rating, is mechanically calculated and is based on historical information. The analysis assumes the stock will perform in the future as it has in the past. This is generally never true. Before buying or selling any stock you should do your own research and reach your own conclusion. See my Disclaimer for more information.
Recent Stock Analyses:
This article was written by Dividends4Life. If you enjoyed this article, please vote for it by clicking the Buzz Up! button below.
For your weekend reading pleasure, the articles listed below contain some of the best dividend and value investing insights found on the web. They were written by various members of the Dividend Investing and Value Network over the past week:
Articles From DIV-Net Members
There are some really good articles here, please take time and read a few of them.
If you enjoyed this article, please vote for it by clicking the Buzz Up! button below.
The largest struggle I have as an investor is not researching companies, or finding and analyzing data, or even pricing a stock; it is having the patience to do all of these things properly.
Patience serves as a protection against wrongs as clothes do against cold. For if you put on more clothes as the cold increases, it will have no power to hurt you. So in like manner you must grow in patience when you meet with great wrongs, and they will then be powerless to vex your mind.Leonardo da Vinci
Recently I have struggled with this. Having found a good company to invest in and having arrived at what I believe to be a fair price I placed a GTC order. As the days turned into weeks this trade hung on the line never reaching my desired price. In lamenting this fact I found myself at my computer with the mouse over the cancel button on the order with all the intention of canceling my current order and increasing my bid to a price more inline with the current market price for no other reason than that I lacked patience.
Two days later and I am still waiting but the stock has already dropped 9%. I'm calling this 9% a reward for being stubborn. I hope all of you are stronger in this regard than I am and find these challenges a breeze, but for those who don't I hope we can all learn to take a little bit more time to read the financials, price the company, and patiently await an investment to come back to where we know it should be.
Realty Income Corporation engages in the acquisition and ownership of commercial retail real estate properties in the United States. The company leases its retail properties primarily to regional and national retail chain store operators. Realty Income is widely known among its investors as the monthly dividend company. The company is a dividend achiever, which has increased its dividend for 15 years in a row by raising its monthly distributions several times per year. The company is one my best dividend stocks for 2010 list.
Over the past decade the stock has delivered a total return of 18% per annum to its shareholders.
Realty Income owned 2348 retail properties at the end of 2008. The company’s properties which are leased by 119 retail chains in 30 industries are located in 49 states. Most new properties acquired are under long term leases (15-20 years) with tenants from a variety of industries and geographic location. The average remaining lease life was 11.9 years in 2008. Tenants are typically responsible for monthly rent and property operating expenses including property taxes, insurance and maintenance. In addition, occupants are also responsible for future rent increases based on increases in the consumer price index, fixed increases or, to a lesser degree, additional rent calculated as a percentage of the tenants’ gross sales above a specified level. Due to the stability of company's revenue streams and above average yield, the company might be a good pick for investors who are seeking current retirement income.
As a Real Estate Investment trust, the company has to distribute almost all of its net income to shareholders. An important metric for evaluating REITs is Funds from operations (FFO), which stood at $1.83/share in 2008. Realty Income distributed $1.66 /share in 2008. FFO is defined as net income available to common stockholders, plus depreciation and amortization of real estate assets, reduced by gains on sales of investment properties and extraordinary items. The company doesn’t have any debt maturing until 2013 and also has an unused credit facility worth $355 million.
Over the past decade FFO has increased by 4.5% on average.
Over the past decade distributions have increased by 5.3% per annum. A 5% annual gowth in distributions translates into dividends doubling every 14 years. In 2009 the company has raised distributions by 1.10%.
The FFO payout ratio has increased to 90.80% in 2008, which is higher than the 86.60% to 81.50% average range over the past decade.
The main risk for the company is if occupancy rate decreases. About 3% - 4% of the company’s properties face lease expirations each year, which is why it has to be able to find new tenants. The company could try to sell properties which are not occupied currently however, which might be problematic in the current market for real estate. Another negative for the company is the fact that it typically expands its operations through additional sales of its common stock, which dilutes the stakes of existing stockholders.
While Realty Income acquired 108 new properties in 2008, so far in 2009 it has only acquired 3 new properties. Without new acquisitions, the company might not be able to increase distributions above the rate of inflation in the future.
The company owns and actively manages a diverse mix of properties, which provide a stable and dependable income stream for the company’s shareholders. Realty Income currently yields and has raised distributions and FFO’s for over 15 years in a row. I believe that Realty Income is a good addition to any dividend growth portfolio, since it provides growing income and also provides diversification into commercial real estate.
Full disclosure: Long O
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This article was written by Dividend Growth Investor. If you enjoyed this article, please vote for it by clicking the Buzz Up! button below.
McCormick & Company Inc (MKC) is the world's largest spice company, with operations in the manufacture, marketing and distribution of spices, seasonings, flavorings and other specialty food products. The company markets its products to retail food, foodservice and industrial markets under the McCormick and Schilling brand names. Risk Parameter Calculation Here I use the corporation’s financial health to assign a risk number for measuring risk-to-dividends. The risk number for risk-to-dividends is 1.9. This is a medium risk category as per my 3-point risk scale. The negative EPS growth and historically high payout factor makes in medium risk to dividend. Quality of Dividends This section measures the dividend growth rate, duration of growth, consistency over a period of past five years. Fair Value Calculation This section determines what price I should pay to buy a given stock The range of fair value is calculated as $23.9 to $27.9. Qualitative Analysis MKC is a founded in 1889 and is worlds largest spice company. Its growth model consists of growing by acquisition, focusing on higher-margin products, and cost reducing efforts. Conclusion MKC is a slow growing company. I expect MKC to continue to have a sustainable cash flow and dividend growth over next few years. I like its geographical diversification and strong brand in spice consumer market. MKC is trading at $37.7 which is approximately 35% higher than what I would be willing to pay. I would be open to add MKC when in my buy range. Full Disclosure: No positions at the time of writing.
MKC is member of Mergent’s Broad Dividend Achiever Index and S&P500 Index. The most recent dividend increase was in December 2009.
Trend Analysis Here I am looking at trends for past 9 years of company’s revenue and profitability. These parameters should show consistently growth trends. The trend charts is shown in image below. 
Hartco (HCI) is an IT solutions company servicing the private and public sectors. The company appears to offer some value potential at its current price, with a market cap of $50 million, which is not much more than its net current asset value, and earnings of almost $2 million in its last quarter.
Full Disclosure: At the time of this writing, I held no position in T (0.0% of my Income Portfolio). See a list of all my income holdings 
Company Description: AT&T Inc. (formerly SBC Communications) provides telephone and broadband service, and the company holds full ownership of AT&T Mobility (formerly Cingular Wireless).
Fair Value: I consider four calculations of fair value, see page 2 of the linked PDF for a detailed description:
T is trading at a discount to 1.) and 3.) above. Since T's tangible book value is not meaningful, a Graham number can not be calculated. The stock is trading at a 28.1% premium to its calculated fair value of $21.16. T did not earn any Stars in this section.
Dividend Analytical Data: In this section there are three possible Stars and three key metrics, see page 2 of the linked PDF for a detailed description:
T earned three Stars in this section for 1.), 2.) and 3.) above. A Star was earned since the Free Cash Flow payout ratio was less than 60% and there were no negative Free Cash Flows over the last 10 years. The stock earned a Star as a result of its most recent Debt to Total Capital being less than 45%. T earned a Star for having an acceptable score in at least two of the four Key Metrics measured. The company has paid a cash dividend to shareholders every year since 1984 and has increased its dividend payments for 26 consecutive years.
Dividend Income vs. MMA: Why would you assume the equity risk and invest in a dividend stock if you could earn a better return in a much less risky money market account (MMA)? This section compares the earning ability of this stock with a high yield MMA. Two items are considered in this section, see page 2 of the linked PDF for a detailed description:
T earned a Star in this section for its NPV MMA Diff. of the $1,408. This amount is in excess of the $900 target I look for in a stock that has increased dividends as long as T has. The stock's current yield of 6.05% exceeds the 3.72% estimated 20-year average MMA rate.
Other: T is a member of the S&P 500 and a member of the Broad Dividend Achievers™ Index.
Conclusion: T did not earn any Stars in the Fair Value section, earned three Stars in the Dividend Analytical Data section and earned one Star in the Dividend Income vs. MMA section for a total of four Stars. This quantitatively ranks T as a 4 Star-Buy.
Using my D4L-PreScreen.xls model, I determined the share price would need to increase to $31.80 before T's NPV MMA Differential decreased to the $900 minimum that I look for in a stock with 26 years of consecutive dividend increases. At that price the stock would yield 5.16%.
Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the target $900 NPV MMA Differential, the calculated rate is 0.8%. This dividend growth rate is less than the 2.5% used in this analysis, thus providing a margin of safety. T has a risk rating of 1.75 which classifies it as a medium risk stock.
The weak economy will have a minimal impact on T, but it will see revenue pressure as customers cut back spending, especially on older, highly profitable services, like long-distance voice. Customer migration to wireless is likely to occur faster than expected, thus, near-term margins will likely contract. Long-term, T's scale, customer relationships, and network reach give it an advantage over most of its rivals. Its strong balance sheet and its power over suppliers should help the company generate cash and maintain its dividend. Though T is trading above my buy price of $21.16, it is one I will give strong consideration to initiate a position in in the coming weeks, based on its quality as my allocation and its dividend fundamentals allow. For additional information, including the stock's dividend history, please refer to its data page.
Disclaimer: Material presented here is for informational purposes only. The above quantitative stock analysis, including the Star rating, is mechanically calculated and is based on historical information. The analysis assumes the stock will perform in the future as it has in the past. This is generally never true. Before buying or selling any stock you should do your own research and reach your own conclusion. See my Disclaimer for more information.
Recent Stock Analyses:
This article was written by Dividends4Life. If you enjoyed this article, please vote for it by clicking the Buzz Up! button below.
For your weekend reading pleasure, the articles listed below contain some of the best dividend and value investing insights found on the web. They were written by various members of the Dividend Investing and Value Network over the past week:
Articles From DIV-Net Members
There are some really good articles here, please take time and read a few of them.
If you enjoyed this article, please vote for it by clicking the Buzz Up! button below.
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