Recent Posts From DIV-Net Members

Show All

Stock Analysis: Owens & Minor, Inc. (OMI)

Linked here is a detailed quantitative analysis of Owens & Minor, Inc. (OMI). Below are some highlights from the above linked analysis:

Company Description: Owens & Minor Inc. is a leading domestic distributor of medical and surgical supplies to the acute care market, a health care supply chain management company, and a direct-to-consumer (DTC) supplier of testing and monitoring supplies for diabetes.

Fair Value: I consider four calculations of fair value, see page 2 of the linked PDF for a detailed description:

1. Avg. High Yield Price
2. 20-Year DCF Price
3. Avg. P/E Price
4. Graham Number

OMI is trading at a discount to 1.), 2.) and 3.) above. The stock is trading at a 19.3% discount to its calculated fair value of $35.94. OMI 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:

1. Free Cash Flow Payout
2. Debt To Total Capital
3. Key Metrics
4. Dividend Growth Rate
5. Years of Div. Growth
6. Rolling 4-yr Div. > 15%

OMI earned two Stars in this section for 2.) and 3.) above. The stock earned a Star as a result of its most recent Debt to Total Capital being less than 45%. OMI 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 1926 and has increased its dividend payments for 12 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:

1. NPV MMA Diff.
2. Years to > MMA

OMI earned a Star in this section for its NPV MMA Diff. of the $4,530. This amount is in excess of the $2,300 target I look for in a stock that has increased dividends as long as OMI has. If OMI grows its dividend at 15.1% per year, it will take 3 years to equal a MMA yielding an estimated 20-year average rate of 3.4%. OMI earned a check for the Key Metric 'Years to >MMA' since its 3 years is less than the 5 year target.

Memberships and Peers: OMI is a member of the Broad Dividend Achievers™ Index. The company's peer group includes: Cardinal Health, Inc. (OMI) with a 2.2% yield, McKesson Corporation (MCK) with a 1.1% yield and Patterson Companies Inc. (PDCO) with a 1.4% yield.

Conclusion: OMI earned one Star in the Fair Value section, earned two 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 OMI as a 4 Star-Buy.

Using my D4L-PreScreen.xls model, I determined the share price would need to increase to $34.79 before OMI's NPV MMA Differential decreased to the $2,300 minimum that I look for in a stock with 12 years of consecutive dividend increases. At that price the stock would yield 1.87%.

Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the target $2,300 NPV MMA Differential, the calculated rate is 12.8%. This dividend growth rate is below the 15.1% used in this analysis, thus providing a margin of safety. OMI has a risk rating of 1.75 which classifies it as a medium risk stock.

OMI should see increasing demand for its medical/surgical supplies based on our aging society. The company has been focused on developing new services and cost control. OMI expects its new third-party logistics business to achieve break-even by year-end 2010 and its ambulatory surgery center initiative should start contributing to operating earnings in 2011. Long-term health care reform should eventually lead to higher utilization of hospitals. I will continue to add to my OMI position when it is trading below my fair value price of $35.94 and as my allocation allows. 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.

Full Disclosure: At the time of this writing, I was long in OMI (2.0% of my Income Portfolio). See a list of all my income holdings here.

Related Articles:
- The Procter & Gamble Company (PG) Dividend Stock Analysis
- Kimberly-Clark Co. (KMB) Dividend Stock Analysis
- Abbott Laboratories (ABT) Dividend Stock Analysis
- Colgate-Palmolive Co. (CL) Dividend Stock Analysis
- More Stock Analysis

This article was written by Dividends4Life. If you enjoyed this article, please subscribe to my feed [RSS], or have future articles emailed to you [Email] or follow me on Twitter [Twitter].


Continue Reading »

Labels:

Weekend Reading Links - November 28, 2010

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.


Continue Reading »

Labels:

Stock Analysi: Intel Corporation

Intel Corporation designs, manufactures, and sells integrated circuits for computing and communications industries worldwide. This dividend challenger has increased distributions for the past 8 years in a row. The latest dividend increase was in November 2010, when the company raised distributions by 15% to 18 cents/share.

Over the past decade this dividend stock has delivered a negative annualized total return of 6.40% to its shareholders.

The company has managed to deliver a negative 7.20% average annual increase in its EPS between 2000 and 2009. Analysts expect Intel to earn $1.99 per share in 2010 and $1.94/share in 2011. In comparison, the company earned $0.77/share in 2009.

Intel is basically the main game in town when in comes to microchips. The PC replacement cycle in addition to IT spending driven by the new Microsoft (MSFT) Windows 7 system could boost sales in the near term. The company shipped 80% of all microprocessors in 2009. It’s main competitor is Advanced Micro Devices (AMD), whose market share is approximately 20%. Product differentiation is very difficult to achieve in the semiconductor industry, and there is some commoditization of the product line. As a result price wars could affect profitability in a negative fashion. In addition to that, the need to constantly invest money in R&D in order to keep competitive is a typical characteristic behind every tech stock, including Intel. Tech spending is highly cyclical, which leads to EPS volatility. This could provide a ceiling to consistent dividend increases, and could also increases the risks of a dividend cut.

The company’s return on equity has been in a steady decline, after peaking in 2005. Rather than focus on absolute values for this indicator, I generally want to see at least a stable return on equity over time.

The annual dividend has increased by an average of 26% annually since 2000, which is much higher than the growth in EPS. The main reason is the increase in the dividend payout ratio over the past decade.

A 26 % growth in dividends translates into the dividend payment doubling every three years. If we look at historical data, going as far back as 1995, Intel has indeed managed to double its dividend payment every three years on average.

The dividend payout ratio has increased over the past decade, reaching 73% in 2009. Based off 2010 forward earnings, the dividend payout would decrease to 37%. A lower payout is always a plus, since it leaves room for consistent dividend growth minimizing the impact of short-term fluctuations in earnings.

Currently, Intel is attractively valued at 10.80 times 2010 earnings and yields 3.00%. The company is the leader in microprocessors and it is cheaper by historical standards. However given the erratic earnings trend and the fact that the company is two years away from being eligible for inclusion in the dividend achievers index, I would rate it as a hold for the time being.

Full Disclosure: None

Relevant Articles:

- Six Reliable Dividend Growth Stocks Raising Distributions
- Has the time for Tech Dividends arrived?
- Dividends are Powering Up the Tech Sector
- Emotionless Dividend Investing

This article was written by Dividend Growth Investor. If you enjoyed this article, please subscribe to my feed [RSS], or have future articles emailed to you [Email] or follow me on Twitter [Twitter].


Continue Reading »

Labels:

Measuring The Bottom

Due to cyclical lag effects, recessions affect different industries at different times. This makes it difficult to know whether a particular company has hit bottom, or whether the worst is yet to come. But there are clues investors can use to make this determination. For example, consider EnviroStar (EVI), a stock that currently sits on the Stock Ideas page.

EnviroStar distributes industrial laundry and dry-cleaning equipment, some of which requires long lead times. Intuitively, it's not easy to tell whether the recession (in the form of reduced equipment orders by customers, which belong to several industries) would hit EnviroStar early, late or somewhere in between.

But by looking at the company's receipts of customer deposits (which are essentially down payments on future purchases), investors can get a sense of how revenues are trending. Consider EnviroStar's customer deposits over the last few quarters:


As can be seen from the chart, deposits have been down for several quarters until recently rebounding, suggesting revenue may be on the rise. Seeing as how the company managed through the worst part of the recession without losing much money at all suggests this is a safe investment, particularly considering the company's cash balance.

Investors must, however, be careful not to rely too much on such data. For one thing, just because the trend is up for now does not mean it can't go back down. Furthermore, such data is susceptible to random (quarter-end) timing, particularly as customer deposits represent only a portion of one quarter's revenues. Finally, it should be noted that EnviroStar has been using its cash assets in order to finance some customer purchases; this may be serving to increase sales in the short-term at the expense of taking on higher risk.

Disclosure: Author has a long position in shares of EVI

This article was written by Saj Karsan of Barel Karsan. If you enjoyed this article, please consider subscribing to the feed.


Continue Reading »

Labels:

Time Warner Has Growth Again

Time Warner Inc. (TWX) has not been a worthwhile investment since the company merged with AOL Inc. The company’s earners were dragged down by the massive losses at its AOL division. Time Warner has been able to free itself from the AOL albatross by spinning off the company into its own entity. Now that Time Warner Inc. is free from AOL, the company is worth looking at as a potential investment again.

Time Warner has a hand in every area of the media market. The company owns a number of different media properties including New Line Cinema, Warner Brothers, Turner Broadcasting System, HBO, Sports Illustrated, Time Inc, CNN, and Cartoon Network. They compete in every area of the media market including television, movies, DVD’s, blog’s, gaming, entertainment, and print journalism.

The company is in good financial shape with $4 billion dollars in cash. Time Warner has generates nearly $3 billion dollars in cash flow this year. Time has been making moves over the past year to reduce its $16 billion dollar debt burden. The company has been slowly redeeming its outstanding debt.

Time had negative earnings growth of -4.5% over the past five years. Much of those losses can be blamed on AOL. The failure of the merger with the former Internet king forced Time Warner to take massive writedowns and losses in the billions. The company’s margins are still solid with Time Warner boasting a 20% operating margin and a 9% profit margin. The company’s return on equity and return on assets should improve now that the company’s worst asset has been sold. Both numbers are low at just 7% and 5% respectively.

Time Warner should see growth in the advertising market over the next few years as demand returns to the private sector. Time is forecasting double digit earnings growth of 14%. The stock looks like a decent value right now as the company trades near its book value. Shares are currently trading at 13 times this year’s earnings and 11 times next year’s earnings. This is reasonable based on Time Warner’s earning potential.

Time Warner is one of the cheapest companies in the media industry based on its earnings growth The stock has a nice yield as well. Time Warner is yielding 2.8% which is just slightly higher than its historical yield.


This article was written by [Buy Like Buffett]. If you enjoyed this article, please consider subscribing to my feed at [RSS].


Continue Reading »

Labels:

Stock Analysis: Pepsico, Inc. (PEP)

Linked here is a detailed quantitative analysis of Pepsico, Inc. (PEP). Below are some highlights from the above linked analysis:

Company Description: PepsiCo, Inc. is a major international producer of branded beverage and snack food products.

Fair Value: I consider four calculations of fair value, see page 2 of the linked PDF for a detailed description:

1. Avg. High Yield Price
2. 20-Year DCF Price
3. Avg. P/E Price
4. Graham Number

PEP is trading at a discount to 1.) and 3.) above. The stock is trading at a slight discount to its calculated fair value of $64.84. PEP 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:

1. Free Cash Flow Payout
2. Debt To Total Capital
3. Key Metrics
4. Dividend Growth Rate
5. Years of Div. Growth
6. Rolling 4-yr Div. > 15%

PEP earned two Stars in this section for 1.) 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. PEP 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 1952 and has increased its dividend payments for 38 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:

1. NPV MMA Diff.
2. Years to > MMA

PEP earned a Star in this section for its NPV MMA Diff. of the $605. This amount is in excess of the $500 target I look for in a stock that has increased dividends as long as PEP has. If PEP grows its dividend at 6.5% per year, it will take 3 years to equal a MMA yielding an estimated 20-year average rate of 3.4%. PEP earned a check for the Key Metric 'Years to >MMA' since its 3 years is less than the 5 year target.

Memberships and Peers: PEP is a member of the S&P 500, a Dividend Aristocrat and a member of the Broad Dividend Achievers™ Index. The company's peer group includes: The Coca-Cola Company (KO) with a 2.8% yield, Dr Pepper Snapple Group, Inc (DPS) with a 2.7% yield and Fomento Econ (FMX) with a 1.2% yield.

Conclusion: PEP earned one Star in the Fair Value section, earned two 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 PEP as a 4 Star-Buy.

Using my D4L-PreScreen.xls model, I determined the share price would need to increase to $68.49 before PEP's NPV MMA Differential decreased to the $500 minimum that I look for in a stock with 38 years of consecutive dividend increases. At that price the stock would yield 2.76%.

Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the target $500 NPV MMA Differential, the calculated rate is 5.9%. This dividend growth rate is below the 6.5% used in this analysis, thus providing a margin of safety. PEP has a risk rating of 1.25 which classifies it as a low risk stock.

PEP enjoys stable end markets, strong cash flows and leading global market positions. Unlike KO, the majority of PEP's revenues come from non-carbonated soft drinks with beverages accounting for less than 50% of total revenue. Additionally, over 60% of the company's beverage sales come from non-carbonated brands like Gatorade and Tropicana. PEP's diverse portfolio can mitigate the impact of poor conditions in any one of its markets. In addition, its exposure to strong international markets should offset to any domestic short-falls. I will continue to add to my PEP position when it is trading below my fair value price of $64.84 and as my allocation allows. 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.

Full Disclosure: At the time of this writing, I was long in PEP (1.7% of my Income Portfolio), and also long in KO. See a list of all my income holdings here.

Related Articles:
- Kimberly-Clark Co. (KMB) Dividend Stock Analysis
- Abbott Laboratories (ABT) Dividend Stock Analysis
- Colgate-Palmolive Co. (CL) Dividend Stock Analysis
- Wal-Mart Stores, Inc. (WMT) Dividend Stock Analysis
- More Stock Analysis

This article was written by Dividends4Life. If you enjoyed this article, please subscribe to my feed [RSS], or have future articles emailed to you [Email] or follow me on Twitter [Twitter].


Continue Reading »

Labels:

Weekend Reading Links - November 21, 2010

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.


Continue Reading »

Labels:

Stock Analysis: ONEOK Inc

ONEOK, Inc. (OKE), a diversified energy company, operates as a natural gas distributor primarily in the United States. The company operates in three segments: ONEOK Partners, Distribution, and Energy Services. This dividend challenger has increased distributions for the past 8 years in a row. The latest dividend increase was in October 2010, when the company raised distributions by 4% to 48 cents/share.

Over the past decade this dividend stock has delivered annualized total returns of 13.80 % to its shareholders.

The company has managed to deliver a 7.80% average annual increase in its EPS between 2000 and 2009. Analysts expect ONEOK Inc. to earn $2.97 per share in 2010 and $3.15/share in 2011. In comparison, the company earned $2.87/share in 2009.


ONEOK Inc.(OKE) owns the general partner interest in the ONEOK LP (OKS) partnership as well as almost half of the units outstanding of the partnership. In addition to that, investors in ONEOK Inc. do not receive K-1 tax forms, but would receive a regular 1099-DIV for dividend income earned. This makes this investment suitable for tax-deferred accounts. ONEOK LP (OKS) does account for 60% of ONEOK Inc’s (OKE) operating income. The beauty of master limited partnerships is that they are heavily regulated, there is very little competition in for transporting energy for specific geographic locations, and their revenues are typically not dependent on the rise or fall in energy prices. When a new pipeline is being constructed, after being approved by the Federal Energy Regulatory Commission (FERC), transportation rates are set by the agency. These rates also cover certain returns on investment. The monopoly of pipelines is further strengthened by the steep cost of entering of a particular market, which could be in the hundreds of millions of dollars.

The company’s return on equity has been stable around 15%, after peaking in 2005/ Rather than focus on absolute values for this indicator, I generally want to see at least a stable return on equity over time.

Annual dividends have increased by an average of 11.40% annually since 2000, which is much higher than the growth in EPS. The main reason is the increase in the dividend payout ratio over the past decade.
A 12 % growth in dividends translates into the dividend payment doubling every six years. If we look at historical data, going as far back as 1993, ONEOK Inc. has actually managed to double its dividend payment every eight and a half years on average.

The dividend payout ratio has increased over the past decade, breaking out above 50% in 2009. A lower payout is always a plus, since it leaves room for consistent dividend growth minimizing the impact of short-term fluctuations in earnings.

Currently, ONEOK Inc is attractively valued at 17.20 times earnings and yields 3.80%. Given the high dividend payout ratio and the fact that the company is two years away from being eligible for inclusion in the dividend achievers index, I would rate it as a hold for the time being.

Full Disclosure: None
Relevant Articles:

This article was written by Dividend Growth Investor. If you enjoyed this article, please subscribe to my feed [RSS], or have future articles emailed to you [Email] or follow me on Twitter [Twitter].


Continue Reading »

Labels:

A REIT With A Double Digit Yield

REIT’s are a favorite investment class of income seeking investors. They typically pay very high yields since they are required to pay out 90% of earnings to shareholders. Dividend investors can get a double digit yield by investing in one REIT in particular. Let’s take a look at a stock that you have probably never heard of, Hatteras Financial (HTS).

Hatteras is a relatively new REIT having only been around since 2007. Hatteras Financial is a real estate investment trust (REIT) that invests in mortgage backed securities that are guaranteed by the US government or a governmental agency. The company invests in many residential mortgages that are backed by Fannie Mae and Freddie Mac.

Hatteras has found a sweet spot in the mortgage market as the company has been able to take advantage of a low interest rate environment. Hatteras has been able to borrow money at low rates and invest in securities paying out a higher rate. The risks of in investing in Hatteras are that a rising interest rate environment will cut into the company’s profitability and that the US government defaults on its obligations.

The stock currently trades at just slightly over its book value of $26 per share. The company has a huge debt burden of $6.8 billion dollars which is normal since most real estate investment trusts use leverage position to generate returns. Hatteras’ operating margins and profit margins are higher than competitors. The firm’s revenue dipped -4% last month which is substantially higher than the -90% decline that competitors experienced.

The stock is currently trading at almost $30 a share and the company has a great dividend yield. Hatteras Financial is yielding 14.6% and has no plan to cut the dividend anytime soon. The company is currently paying out 100% of earnings via dividends. The company should be able to increase earnings over the next few years so that the payout rate will drop to just 90% of earnings.

The dividend alone makes Hatteras an attractive stock for income investors. The stock’s dividend should be trusted for at least the next year.

This article was written by [Buy Like Buffett]. If you enjoyed this article, please consider subscribing to my feed at [RSS].


Continue Reading »

Labels:

Stock Analysis: The Procter & Gamble Company (PG)

Linked here is a detailed quantitative analysis of The Procter & Gamble Company (PG). Below are some highlights from the above linked analysis:

Company Description: The Procter & Gamble Company is a leading consumer products company markets household and personal care products in more than 180 countries.

Fair Value: I consider four calculations of fair value, see page 2 of the linked PDF for a detailed description:

1. Avg. High Yield Price
2. 20-Year DCF Price
3. Avg. P/E Price
4. Graham Number

PG is trading at a discount to only 3.) above. Since PG'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 $65.10. PG 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:

1. Free Cash Flow Payout
2. Debt To Total Capital
3. Key Metrics
4. Dividend Growth Rate
5. Years of Div. Growth
6. Rolling 4-yr Div. > 15%

PG 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%. PG 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 1891 and has increased its dividend payments for 54 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:

1. NPV MMA Diff.
2. Years to > MMA

PG earned a Star in this section for its NPV MMA Diff. of the $761. This amount is in excess of the $500 target I look for in a stock that has increased dividends as long as PG has. If PG grows its dividend at 7.0% per year, it will take 2 years to equal a MMA yielding an estimated 20-year average rate of 3.4%.

Memberships and Peers: PG is a member of the S&P 500, a Dividend Aristocrat and a member of the Broad Dividend Achievers™ Index. The company's peer group includes: Kimberly-Clark Corporation (KMB) with a 4.2% yield, Colgate-Palmolive Co. (CL) with a 2.8% yield, and Clorox Corporation (CLX) with a 3.5% yield.

Conclusion: PG 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 PG as a 5 Star-Strong Buy.

Using my D4L-PreScreen.xls model, I determined the share price would need to increase to $73.35 before PG's NPV MMA Differential decreased to the $500 minimum that I look for in a stock with 54 years of consecutive dividend increases. At that price the stock would yield 2.63%.

Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the target $500 NPV MMA Differential, the calculated rate is 5.7%. This dividend growth rate is below the 7.0% used in this analysis, thus providing a margin of safety. PG has a risk rating of 1.00 which classifies it as a low risk stock.

PG is one of the few premier dividend growth stocks. As a company, it is a leader in understanding consumer needs, innovative marketing and building brand loyalty. The company enjoys a tremendous benefit of scale, providing enhanced sales opportunities and cost savings compared to its smaller peers. The company’s broad product portfolio and sizable distribution network will continue to be a strengths, along with its balance sheet and free cash flow. As my allocation allows, I will continue to buy PG when it is trading below my fair value price of $65.10. 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.

Full Disclosure: At the time of this writing, I was long in PG (4.4% of my Income Portfolio), and also long in KMB, CL and CLX. See a list of all my income holdings here.

Related Articles:
- Abbott Laboratories (ABT) Dividend Stock Analysis
- Colgate-Palmolive Co. (CL) Dividend Stock Analysis
- Wal-Mart Stores, Inc. (WMT) Dividend Stock Analysis
- Leggett & Platt, Inc. (LEG) Dividend Stock Analysis
- More Stock Analysis

This article was written by Dividends4Life. If you enjoyed this article, please subscribe to my feed [RSS], or have future articles emailed to you [Email] or follow me on Twitter [Twitter].


Continue Reading »

Labels:

Weekend Reading Links - November 14, 2010

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.


Continue Reading »

Labels:

Stock Analysis: V.F. Corp (VFC)

V.F. Corporation, together with its subsidiaries, engages in the design, manufacture, and sourcing of branded apparel and related products for men, women, and children in the United States. This dividend aristocrat has increased distributions for the past 38 consecutive years. The latest dividend increase was in October 2010, when the company raised distributions by 5% to 63 cents/share.


Over the past decade this dividend stock has delivered annualized total returns of 15.80 % to its shareholders.

The company has managed to deliver a 6.90% average annual increase in its EPS between 2000 and 2009. Analysts expect V.F. Corp to earn $6.19 per share in 2010 and $6.67/share in 2011. In comparison, the company earned $4.13/share in 2009.

The company’s return on equity has deteriorated steadily since hitting a hit in 2003. Rather than focus on absolute values for this indicator, I generally want to see at least a stable return on equity over time.

The annual dividend payment has increased by an average of 11.50% annually since 2000, which is much higher than the growth in EPS. The main reason is the increase in the dividend payout ratio over the past decade, triggered by a steep one time dividend increase of almost 90% in 2006.
A 12 % growth in dividends translates into the dividend payment doubling every six years. If we look at historical data, going as far back as 1986, V.F. Corp has actually managed to double its dividend payment every seven and a half years on average.

The dividend payout ratio has increased over the past decade, breaking out above 50% in 2009. Given the expected earnings of $6.19 in 2010 and the new annual dividend rate of $2.52/share, I would expect the payout to drop to 50% and to decrease further by 2011. A lower payout is always a plus, since it leaves room for consistent dividend growth minimizing the impact of short-term fluctuations in earnings.

Currently, VF. Corp is attractively valued at 13.50 times earnings, has an adequately covered distribution and yields 3%. I would consider initiating a position in the company on dips.

Full Disclosure: None

Relevant Articles:

- Eleven Dividend Machines Beating Inflation
- 33 Dividend Champions to Consider
- 12 Dividend Stocks to own in this market
- Diversifying into small and mid cap dividend stocks

This article was written by Dividend Growth Investor. If you enjoyed this article, please subscribe to my feed [RSS], or have future articles emailed to you [Email] or follow me on Twitter [Twitter].




Continue Reading »

Labels:

Detrimental vs Non-Detrimental Debt

A company with a large debt load due within a short period of time can see its stock price take a hit, as investors perceive increased risk under such circumstances. But just because a debt load is high versus a company's current assets and ability to generate cash flow, does not mean the company is on the verge of bankruptcy.

Consider Genesis Land Corp (GDC), a residential real-estate developer in Alberta, Canada. The company has $46 million in debt due over the next few months, and it does not have the current assets to be able to cover that obligation. It is therefore reasonably within the realm of possibility that the company will be unable to cover the $46 million obligation with cash from operations.

But that doesn't signify the end of the company in this case. In other cases, such as those of Blockbuster, Rite-Aid, or TLC Vision, risk of default may be high. But for Genesis Land, the risk is not nearly as great, despite how the share price has reacted over the past few weeks and months.

To see this, it is important to consider the perspective of its lenders. They just want to get paid, quickly and easily. As a result, they have no interest in a drawn out and costly bankruptcy process; they would rather the company operate as a going concern so that it can sell its ample long-term assets in an orderly fashion to make the lenders whole. As a result, the likelihood of the company being able to refinance or alter the terms of its current debt to increase its maturity is very high. Companies without long-term assets are in a much more precarious situation.

Debt due within a short period of time can bankrupt a company. But sometimes a company's particular circumstances can make this a very remote possibility. Investors cognizant of the factors that contribute to a company's safety despite the presence of near-term debt maturities are in a position to capitalize on low share prices and thereby generate abnormal returns.

Disclosure: Author has a long position in shares of GDC

This article was written by Saj Karsan of Barel Karsan. If you enjoyed this article, please consider subscribing to the feed.


Continue Reading »

Labels:

A Small Time Trash Company With A Big Time Yield

There is big money in the garbage industry and US Ecology is proof of it. US Ecology is a small cap company that has been in business nearly 60 years disposing of radioactive and hazardous waste. The company that was formerly known as American Ecology has a market cap of just $300 million dollars. US Ecology is headquartered in Idaho and has been around since 1952.

The company participates in the very competitive waste management industry with large players Waste Management and Republic Services. US Ecology has successfully carved out a niche for itself by hauling away hazardous materials like nuclear waste that other companies will not. The company may be small but its margins are superior to larger industry competitors.
 
The company's shares are dropping to levels that may make the company a decent value play. The stock appears to have bottomed out last month at $13 a share and are now trading at $16. This was due to the last quarterly report in which the company saw a significant drop off in earnings with revenue dropping 30.8% year over year and earnings declining 5.4%.

The company believes that growth is full steam ahead after negative earnings growth last year. Earnings declined roughly 6% over the past five years. US Ecology is expecting earnings to grow at 11% over the next few years. Shares are expensive trading at 27 times this year’s earnings and 19 times next year’s earnings.

US Ecology has a pristine balance sheet for a small cap stock. The company has over $30 million dollars in cash and just $12 thousand dollars in debt. The trash company generates over $32 million dollars in free cash flow as well. Operating margins are still high at almost 20% and profit margin comes in at 12%.

The company is currently offering up a great dividend yield. US Ecology has a dividend yield of 4.3% which is higher than its historical 5 year yield of 3.6%. The current payout is temporarily high at 120% but should return to normal next year. The company has enough cash from retained earnings to fund the dividend for the current year.

The current dividend payout should put the stock on the radar of dividend investors. Value investors should consider picking up shares around $13 a share.


This article was written by [Buy Like Buffett]. If you enjoyed this article, please consider subscribing to my feed at [RSS].


Continue Reading »

Labels:

Stock Analysis: Kimberly-Clark Co. (KMB)

Linked here is a detailed quantitative analysis of Kimberly-Clark Co. (KMB). Below are some highlights from the above linked analysis:

Company Description: Kimberly Clark Corp. is a global consumer products company produces tissue, personal care and health care. Its brands include Huggies, Pull-Ups, Kotex, Depend, Kleenex, Scott and Kimberly-Clark.

Fair Value: I consider four calculations of fair value, see page 2 of the linked PDF for a detailed description:

1. Avg. High Yield Price
2. 20-Year DCF Price
3. Avg. P/E Price
4. Graham Number

KMB is trading at a discount to 1.) and 3.) above. The stock is trading at a slight discount to its calculated fair value of $63.90. KMB 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:

1. Free Cash Flow Payout
2. Debt To Total Capital
3. Key Metrics
4. Dividend Growth Rate
5. Years of Div. Growth
6. Rolling 4-yr Div. > 15%

KMB earned two Stars in this section for 1.) 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. KMB 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 1935 and has increased its dividend payments for 38 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:

1. NPV MMA Diff.
2. Years to > MMA

KMB earned a Star in this section for its NPV MMA Diff. of the $1,736. This amount is in excess of the $500 target I look for in a stock that has increased dividends as long as KMB has. The stock's current yield of 4.19% exceeds the 3.4% estimated 20-year average MMA rate.

Memberships and Peers: KMB is a member of the S&P 500, a Dividend Aristocrat and a member of the Broad Dividend Achievers™ Index. The company's peer group includes: Procter & Gamble Co. (PG) with a 3.0% yield, Colgate-Palmolive Co. (CL) with a 2.7% yield, and Clorox Corporation (CLX) with a 3.5% yield.

Conclusion: KMB earned one Star in the Fair Value section, earned two 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 KMB as a 4 Star-Buy.

Using my D4L-PreScreen.xls model, I determined the share price would need to increase to $97.58 before KMB's NPV MMA Differential decreased to the $500 minimum that I look for in a stock with 38 years of consecutive dividend increases. At that price the stock would yield 2.71%.

Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the target $500 NPV MMA Differential, the calculated rate is 2.2%. This dividend growth rate is well below the 6.7% used in this analysis, thus providing a reasonable margin of safety. KMB has a risk rating of 1.25 which classifies it as a low risk stock.

Consumer spending remains soft and commodity prices, despite falling from unprecedented highs, remain elevated above long-term averages. However, given the firm's portfolio of market-leading essential products, we believe that Kimberly should generate steady returns despite these challenges.

KMB enjoys stable demand for its household and personal care products. The company is working to increase its market share through product innovation and marketing. In the face of commodity prices above long-term averages, the company is doing a good job of closely managing its cost structure. At 51% KMB's debt to total capital is above the 45% that I look for. However, it has trended down from 61% back in July. I will look to add to my KMB position while it is trading below my $63.90 fair value price. 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.


Full Disclosure: At the time of this writing, I was long in KMB (2.4% of my Income Portfolio). See a list of all my income holdings here.

Related Articles:
- Colgate-Palmolive Co. (CL) Dividend Stock Analysis
- Wal-Mart Stores, Inc. (WMT) Dividend Stock Analysis
- Leggett & Platt, Inc. (LEG) Dividend Stock Analysis
- The Clorox Company (CLX) Dividend Stock Analysis
- More Stock Analysis

This article was written by Dividends4Life. If you enjoyed this article, please subscribe to my feed [RSS], or have future articles emailed to you [Email] or follow me on Twitter [Twitter].


Continue Reading »

Labels:

Weekend Reading Links - November 7, 2010

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.


Continue Reading »

Labels:

Stock Analysis: Eaton Vance

Eaton Vance Corp. (EV) , through its subsidiaries, engages in the creation, marketing, and management of investment funds in the United States. This dividend champion has increased distributions for the past 30 consecutive years. The latest dividend increase was in October 2010, when the company raised distributions by 12.50% to 18 cents/share.

Over the past decade this dividend growth stock has delivered annualized total returns of 10.80 % to its shareholders.

The company has managed to deliver a 3.50% average annual increase in its EPS between 2000 and 2009. Analysts expect Eaton Vance to earn $1.39 per share in 2010 and $1.76/share in 2011.

The company generates very high return on equity, whose trend has closely followed the rise and fall in equity markets over the past decade. Rather than focus on absolute values for this indicator, I generally want to see at least a stable return on equity over time.

The company has managed to raise its annual dividend at a rate of of 22.50% annually since 2000, which is much higher than the growth in EPS. The main reason is the increase in the dividend payout ratio over the past decade. I would reasonably expect Eaton Vance to manage to raise distributions by at least 10% per year for the next few years. The latest dividend increase was in October 2010, when the company raised distributions by 12.50% to 18 cents/share.

A 22 % growth in dividends translates into the dividend payment doubling every three years. If we look at historical data, going as far back as 1990, Eaton Vance has actually managed to double its dividend payment every four years on average. The company last raised its dividends in 2010 by 12.50%.

The dividend payout ratio has increased over the past decade, breaking out above 50% in 2009. Given the expected earnings of $1.40 in 2010 and the new annual dividend rate of $0.72/share, I would expect the payout to drop to 50% and to decrease further by 2011. A lower payout is always a plus, since it leaves room for consistent dividend growth minimizing the impact of short-term fluctuations in earnings.

Currently Eaton Vance is overvalued at 21.20 times earnings, has an adequately covered distribution and yields only 2.40%. Eaton Vance would be more attractively priced below $28. I would continue to monitor this company for dips below $28.

Full Disclosure: None

Relevant Articles:

- Why dividend investing beats US Treasuries today?
- Dividend investing timeframes- what's your holding period?
- How to make money in dividend stocks despite Wall Street
- Six companies with 20% yields on cost

This article was written by Dividend Growth Investor. If you enjoyed this article, please subscribe to my feed [RSS], or have future articles emailed to you [Email] or follow me on Twitter [Twitter].




Continue Reading »

Labels:

Spread Too Thin

Integrated Electrical Services (IESC) provides wiring, power connection and related maintenance services to the industrial, commercial and residential markets. The company trades for $52 million, but has net current assets of $74 million.

As one might expect, revenues for this company are highly cyclical, as they are strongly correlated with new construction. Indeed, Integrated Electrical has seen its revenues drop 30% from year-ago levels as the recession has put construction projects on hold.

But considering the types of services the company renders, one would expect the company to be able to cut costs to adapt to a lower revenue environment. Providing electrical services should require a great deal in the way of variable costs such as labour and supplies, but likely doesn't require fixed costs such as factories and specialized equipment. True to form, the company only has $20 million of property and equipment (versus quarterly revenue of $120 million).

Despite this, the company has been unable to reduce costs in line with demand. In its last quarter, the company lost $6 million, following losses of $12 million the quarter before. Part of these losses are due to bad debt and restructuring charges, but the majority of these charges are cash losses. This is despite the fact that the company has cut costs, as administrative expenses are down 20% from the year-ago period.

So what gives? Why can't the company match its variable costs with its revenues to at least break-even, like other companies we have seen with variable cost structures? The answer may be that the company's operations are spread too thin.

The company serves 48 states from 89 locations. Closing locations would reduce revenues further. It would appear that the company has made a choice to keep capacity high, even though demand is presently weak. This is confirmed by the fact that management stated on its last conference call that operating leverage is significant as the market recovers.

While Integrated Electrical looks cheap based on its net current assets, investors have to allow for the fact that further significant losses may occur before the company returns to profitability. As new construction demand remains relatively weak, there is an oversupply of electrical service providers, resulting in competition that is lowering margins. Integrated Electrical's decision to remain in most of its markets and battle it out for business rather than shrink and focus on profitability increases the chances of further losses, which reduces the appeal of the company at its current price.

Disclosure:None

This article was written by Saj Karsan of Barel Karsan. If you enjoyed this article, please consider subscribing to my feed.


Continue Reading »

Labels:

Stock Analysis: Abbott Laboratories (ABT)

Linked here is a detailed quantitative analysis of Abbott Laboratories (ABT). Below are some highlights from the above linked analysis:

Company Description: Abbott Laboratories is a diversified life science company and is a leading maker of drugs, nutritional products, diabetes monitoring devices, and diagnostics.

Fair Value: I consider four calculations of fair value, see page 2 of the linked PDF for a detailed description:

1. Avg. High Yield Price
2. 20-Year DCF Price
3. Avg. P/E Price
4. Graham Number

ABT is trading at a discount to only 1.) above. The stock is trading at a 7.4% discount to its calculated fair value of $55.42. ABT 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:

1. Free Cash Flow Payout
2. Debt To Total Capital
3. Key Metrics
4. Dividend Growth Rate
5. Years of Div. Growth
6. Rolling 4-yr Div. > 15%

ABT earned two Stars in this section for 1.) 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. ABT 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 1926 and has increased its dividend payments for 38 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:

1. NPV MMA Diff.
2. Years to > MMA

ABT earned a Star in this section for its NPV MMA Diff. of the $1,500. This amount is in excess of the $500 target I look for in a stock that has increased dividends as long as ABT has. If ABT grows its dividend at 8.3% per year, it will take 1 years to equal a MMA yielding an estimated 20-year average rate of 3.4%. ABT earned a check for the Key Metric 'Years to >MMA' since its 1 years is less than the 5 year target.

Memberships and Peers: ABT is a member of the S&P 500, a Dividend Aristocrat and a member of the Broad Dividend Achievers™ Index. The company's peer group includes: Bristol-Myers Squibb Company (BMY) with a 4.8% yield, Johnson & Johnson (JNJ) with a 3.4% yield, and Eli Lilly & Co. (LLY) with a 5.6% yield.

Conclusion: ABT earned one Star in the Fair Value section, earned two 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 ABT as a 4 Star-Buy.

Using my D4L-PreScreen.xls model, I determined the share price would need to increase to $74.95 before ABT's NPV MMA Differential decreased to the $500 minimum that I look for in a stock with 38 years of consecutive dividend increases. At that price the stock would yield 2.29%.

Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the target $500 NPV MMA Differential, the calculated rate is 4.5%. This dividend growth rate is well below the 8.3% used in this analysis, thus providing a margin of safety. ABT has a risk rating of 1.25 which classifies it as a low risk stock.

All pharmaceutical companies face the inevitable patent expirations and the ensuing generic competition. However, ABT has a strong product pipeline including potential significant launches in the medical device and pharmaceutical areas. In addition to pharmaceutical, ABT will also rely on its diagnostics business, nutritional division, and an emerging vascular group to generate future earnings. With its strong financials and excellent management team, ABT is in a position to continue its growth and to generate strong returns. I will continue to add to my position while it is trading below my buy price of $55.42 and as my allocation allows. 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.


Full Disclosure: At the time of this writing, I was long in ABT (4.4% of my Income Portfolio). See a list of all my income holdings here.

Related Articles:
- Wal-Mart Stores, Inc. (WMT) Dividend Stock Analysis
- Leggett & Platt, Inc. (LEG) Dividend Stock Analysis
- The Clorox Company (CLX) Dividend Stock Analysis
- HCC Insurance Holdings Inc. (HCC) Dividend Stock Analysis
- More Stock Analysis

This article was written by Dividends4Life. If you enjoyed this article, please subscribe to my feed [RSS], or have future articles emailed to you [Email] or follow me on Twitter [Twitter].


Continue Reading »

Labels:
Subscribe to: Posts (Atom)