Friday, April 29, 2011

Stock analysis: Air Products and Chemicals

Air Products and Chemicals, Inc. (APD) provides atmospheric gases, process and specialty gases, performance materials, equipment, and services worldwide. The company operates through five segments: Merchant Gases, Tonnage Gases, Electronics and Performance Materials and Equipment and Energy,. The company is member of the S&P 500 and the S&P Dividend Aristocrats indexes. Air Products and Chemicals has paid uninterrupted dividends on its common stock since 1954 and increased payments to common shareholders every year for 29 years. The most recent dividend increase was in March, when the Board of Directors approved an 18.40% increase to 38 cents/share. The major competitors of Air Products and Chemicals include Praxair (PX), Airgas (ARG) and Air Liquide (AIQUY).

Over the past decade this dividend growth stock has delivered an annualized total return of 10.60% to its loyal shareholders.



The company has managed to deliver an impressive increase in EPS of 9% per year since 2001. Analysts expect Air Products and Chemicals to earn $5.67 per share in 2011 and $6.32 per share in 2012. This would be a nice increase from the $4.74/share the company earned in 2010.


Over the past decade, the return on equity has mostly ranged between 15% and 21%, with the exception of 2003 and 2009. 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 10.40% per year since 2001, which is higher than the growth in EPS. A 10% growth in distributions translates into the dividend payment doubling every 7 years. If we look at historical data, going as far back as 1983, we see that Air Products and Chemicals has indeed managed to double its dividend every seven years on average.


Over the past decade the dividend payout ratio has mostly remained below 50%, with the exception of a brief spike 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 Air Products and Chemicals is trading at 18.80 times earnings, yields 2.60% and has a sustainable dividend payout. The stock meets my entry criteria and I would add to my position in it subject to availability of funds.

Full Disclosure: Long APD

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 »

Thursday, April 28, 2011

Bell Aliant (TSE:BA) Dividend Stock Analysis

Bell Aliant was previously an income trust prior to January 1st, 2011 to leverage the tax benefits from the income trust structure in Canada. With the income trust tax changes coming into effect on the first day of 2011, Bell Alliant converted back to a corporation like many other income trusts.

Bell Allian is a telecommunication provider in eastern Canada from Ontario to Nova Scotia. It currently serves 5.3 million customers with an annual revenue of $2.8 billion. Bell Canada (BCE) is a major shareholders with 44% ownership in Bell Aliant which in turn owns a number of other smaller telecom companies. Its focus is on high speed internet and fiber optic development.

I will warn you up front that the numbers and graphs don't represent a solid blue chip company. Part of the reason is the change to a corporation from an income trust. As an income trust, it was partly distributing cash while it is now distributing dividends. It also went from paying dividends monthly to paying quarterly during that change. It would also appear to be focused on broadband and retaining customers as opposed to seek growth in new ventures.

Quick Facts

  • Stock Ticker: BA on TSX
  • Market Cap.: 16.16B$
  • P/E: -
  • Forward P/E: 18.22
  • EPS: $-3.20
  • Beta: 0.265
  • Liabilities to Equity Ratio: 0.01
  • Quarterly Dividends: $0.475
  • Dividend Yield: 7.04%
  • Dividend Payout Ratio: 100%
  • ROE: -
  • 5 Year EPS Growth Average: -40.43%
  • 5 Year Dividend Growth Average: 1.91%
  • 52-Week Low: $24.74
  • 52-Week High: $28.40
  • 52-Week Range: 61.20%
The 1 year chart is showing a relatively flat trend whereas the 5 year chart shows a decline. From a technical analysis perspective, Bell Aliant may have bottom out at this point. However, if interest rates go up, we may see investors moving out if it doesn't show growth.

[caption id="" align="aligncenter" width="400" caption="Bell Aliant 1 year graph"]BA Stock[/caption]

 



[caption id="" align="aligncenter" width="400" caption="Bell Aliant 5 year graph"]BA Dividend Stock[/caption]

Dividend Growth

Bell Aliant prides itself on being a high payout company for income-oriented investors. It's written in white on blue on their latest annual report. When they were an income trust, they used to have a yield above 10% whereas now as a corporation, they have a yield of 7%. Dividend growth is relatively flat with the exception of the spike in 2006. For 2011, the target dividend is at $1.90 below its past dividends which is in line with its change as a corporation since it now pays dividends as opposed to distributable cash.

BA Dividend Growth

Dividend Payout Ratio

The high payout ratio was due to their status as an income trust in the past. I am missing their target ratio now that they are a corporation so it's something to look out for to understand what their target will be. I would like to see it get back to under 80% and later on to 60% possibly. However, since they consider themselves a high payout company, it may stay relatively high with limited growth. If the yield is what you are looking for, it may work for you.

BA Dividend Growth

EPS Growth

EPS have been flat to growing slightly over the past 10 years with the exception of 2010. It reiterates that the company is not necessarily a growth company. Competition and company expenditure were mentioned as reasons for the poor 2010 performances. Indeed, competition is fierce in the telecom industry to the point where Telus and BCE partnered on infrastructure development.

BA EPS Growth

Thoughts

I wasn't really familiar with Bell Aliant and I wanted to understand the company better as it has a really nice yield and I wanted to see if it is sustainable. The 44% ownership by BCE is very interesting as they could always turn it into full ownership or cut bait ... While Bell Canana seem to operate in the large centers, Bell Aliant operates in more rural areas which allows them to grow their businesses without competing directly.

I see Bell Aliant as a sidekick to BCE. Recently, Bell Aliant sold its Xwave assets to BCE which may not have been to difficult to approve. Even though BCE doesn't have a controlling 50%, it's probably able to have some influence in the decisions. As such, BA can be a good income only investment without major growth forecast.

Full Disclosure: No position at the time of writing.

This article was written by The Passive Income Earner. If you enjoyed this article, please consider subscribing to my feed.


Continue Reading »

Wednesday, April 27, 2011

Revenue Per KLIC

Value investors are always on the lookout for companies which show strong revenue and earnings growth that trade at low earnings multiples. The identification of and subsequent investment in such companies can generate excellent returns for shareholders. But investors must be careful not to be fooled into thinking a company is growing its revenue and earnings when it is instead simply benefiting from cyclical trends.

For example, consider Kulicke and Soffa Industries (KLIC), which provides capital equipment to semiconductor manufacturers. As a leader in this space, the company has a lot going for it. Revenue and earnings rose through the roof this year, as customers expanded and modernized their manufacturing capabilities. As KLIC is in the process of moving facilities from the US to Asia, it stands to benefit from cost reductions that could increase profits even more.

The company is also a technology leader among its peers; for example, KLIC's R&D efforts have resulted in a commercially viable bonding process using copper wire instead of gold, which reduces customer costs. (Though I suppose this might disappoint some end-users who would like to be able to use their semiconductor chips as currency when the apocalypse arrives.)

But while this is a strong company in a growing field, KLIC trades for a P/E of just 5, despite having more cash than it does debt! As such, on the surface this company looks like an absolute steal. But investors shouldn't ignore just how cyclical this business is. Consider the company's revenue and operating profit numbers over the last ten years ($ millions):


The cycles in this industry are obviously very intense and rather short, as revenue can double or half over the course of just one or two years, and it can do so several times in a single business cycle! This is because of KLIC's dominant "Equipment" segment, which derives its revenues from the capital expenditures of semiconductor manufacturers. These expenditures, in turn, are based on whether there is a need for industry expansion; if there isn't, demand for new equipment understandably plunges.

So while KLIC's recent and forward-looking numbers look great, its operating income has actually been negative over the period depicted in the chart above. Is that really "growth" the company is experiencing right now, or is the company just in a very favourable point in the cycle? Investors should be sure they know the difference before investing in this cheap-looking stock.

Disclosure: None

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


Continue Reading »

Monday, April 25, 2011

Stock Analysis: Intel Corporation (INTC)

Linked here is a detailed quantitative analysis of Intel Corporation (INTC). Below are some highlights from the above linked analysis:

Company Description: Intel Corporation is the world's largest manufacturer of microprocessors, the central processing units of PCs, and also produces other semiconductor products.

Fair Value: In calculating fair value, I consider the NPV MMA Differential Fair Value along with these 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

INTC is trading at a discount to 2.) and 3.) above. The stock is trading at a 7.2% discount to its calculated fair value of $23.12. INTC 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%

INTC earned two Stars in this section for 1.) and 2.) 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 company has paid a cash dividend to shareholders every year since 1992 and has increased its dividend payments for 8 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

INTC earned a Star in this section for its NPV MMA Diff. of the $3,265. This amount is in excess of the $2,700 target I look for in a stock that has increased dividends as long as INTC has. If INTC grows its dividend at 11.6% per year, it will take 2 years to equal a MMA yielding an estimated 20-year average rate of 4.0%. INTC earned a check for the Key Metric 'Years to >MMA' since its 2 years is less than the 5 year target.

Memberships and Peers: INTC is a member of the S&P 500. The company's peer group includes: Advanced Micro Devices, Inc. (AMD) with a 0.0% yield, Texas Instruments Inc. (TXN) with a 1.5% yield and STMicroelectronics NV (STM) with a 3.0% yield.

Conclusion: INTC 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 INTC as a 4 Star-Buy.

Using my D4L-PreScreen.xls model, I determined the share price could increase to $23.03 before INTC's NPV MMA Differential decreased to the $2,700 minimum that I look for in a stock with 8 years of consecutive dividend increases. At that price the stock would yield 3.14%.

Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the target $2,700 NPV MMA Differential, the calculated rate is 10.2%. This dividend growth rate is below the 11.6% used in this analysis, thus providing a slight margin of safety. INTC has a risk rating of 1.50 which classifies it as a Low risk stock.

INTC’s results reflect the cyclical nature of the semiconductor industry and demand trends for personal computers. The company is in the best competitive position within the the semiconductor industry and its large size provides scale advantage over smaller rivals. INTC has a strong balance sheet including low debt levels compared to peers and generates substantial free cash flow. The stock recently went green on my dashboard and I have resumed share accumulation when it is trading below my calculated fair value of $23.12 and as my allocation allows.

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 INTC (1.8% of my Income Portfolio). See a list of all my income holdings here.

Related Articles:
- ConocoPhillips (COP) Dividend Stock Analysis
- Genuine Parts Company (GPC) Dividend Stock Analysis
- Microsoft Corporation (MSFT) Dividend Stock Analysis
- Cardinal Health,Inc. (CAH) 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 »

Sunday, April 24, 2011

Weekend Reading Links - April 24, 2011

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 »

Friday, April 22, 2011

Emerson Electric (EMR) Stock Analysis

Emerson Electric Co. (EMR), a diversified global technology company, engages in designing and supplying product technology and delivering engineering services to various industrial and commercial, and consumer markets worldwide. The company operates through five segments: Process Management, Industrial Automation, Network Power, Climate Technologies, and Appliance and Tools. The company is member of the S&P 500 and the S&P Dividend Aristocrats indexes. Emerson Electric Co. has paid uninterrupted dividends on its common stock since 1947 and increased payments to common shareholders every year for 54 years. Only a handful of companies have managed to raise distributions for over 50 consecutive years. The most recent dividend increase was in November, when the Board of Directors approved a 3% increase to 34.50 cents/share.




Over the past decade this dividend growth stock has delivered an annualized total return of 6.60% to its loyal shareholders. The company has managed to deliver an impressive increase in EPS of 9% per year since 2001. Analysts expect Emerson Electric to earn $3.28 per share in 2011 and $3.85 per share in 2012. This would be a nice increase from the $2.61/share the company earned in 2010.


The return on equity has mostly remained above 20 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 annual dividend payment has increased by 6.30% per year since 2001, which is lower than the growth in EPS. A 6% growth in distributions translates into the dividend payment doubling every 12 years. If we look at historical data, going as far back as 1983, we see that Emerson electric has actually managed to double its dividend every nine years on average. As the world economy rebounds, I expect Emerson to start growing distributions at a higher rate.


Over the past decade the dividend payout ratio has been in decline until the 2007-2009 recession, when it briefly hit 50%. 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 Emerson Electric is trading at 20 times earnings, yields 2.40% and has a sustainable dividend payout. The stock would meet my entry criteria if it falls under $55.


Full Disclosure: Long EMR

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 »

Thursday, April 21, 2011

Telus Corporation (T) Dividend Stock Analysis

Telus is the 3rd largest telecom in Canada after Bell Canada and Rogers Communications. It is also over 100 years old. I was quite surprised by this fact to be honest.  Back in 1885, it made the first phone call between Fort Edmonton and St. Albert in Alberta. Telus went on to become the phone company for Alberta with provincial ownership at first. Over the years, it became a fully publicly traded company with no provincial ties and it merged with BC Tel. In 2001, Telus started buying assets in Quebec by capturing Quebec Tel and other assets.

I am unsure of their plans for growth in Quebec. Videotron would have been a nice catch but it was snatched up by Quebecor Media.

Wireless revenu represents 52% of their overall revenue with wireless voice at 40% and wireless data at 12%. Their long distance is now at 5% while their internet (wireline data) is at 23%. Leaving 20% for regular phone business and others.

Quick Facts

  • Stock Ticker: T on TSX and TU on NYSE
  • Market Cap.: 16.16B$
  • P/E: 15.48
  • Forward P/E: 12.69
  • EPS: $3.22
  • Beta: 0.18
  • Liabilities to Equity Ratio: 1.40
  • Quarterly Dividends: $0.525
  • Dividend Yield: 4.21%
  • Dividend Payout Ratio: 61.92%
  • ROE: 14.74%
  • 5 Year EPS Growth Average: 27.15%
  • 5 Year Dividend Growth Average: 19.32%
  • 52-Week Low: $36.93
  • 52-Week High: $50.28
  • 52-Week Range: 9.15%
Telus has had a nice run this past year. I am not sure how much longer this run can keep on going. At some point, the price point will move above its value. For now, it's P/E is is slightly above average within its peers. Only Shaw and Manitoba Telecom trade at a higher premium so far.

It's free cash flow was hurt in 2008 and dropped to $368 millions from $1.3 billions but it is recovering as 2010 had a free cash flow of $947 millions.  On the other hand, it's customer base continues to grow year after year proving they have a solid acquisition strategy.

Telus Stock Chart

For the past 5 year, Telus had a pull back like the rest of the stock market back in 2008 and it stil has not reach its pre-2008 high. I am not sure when looking at the sales graph and the current P/E that a price above $50.00 consists of a value play.

Telus Stock ChartTelus Sales Growth

Dividend Growth

Dividends were hurt for a while and it definitely doesn't look like the type of historical dividends a dividend investor is looking for. However, I have to take into consideration how the telecoms have had to change over the past 5 years and the role they now play in our day-to-day life.

Telus Dividend Growth

Dividend Payout Ratio

Same story here, as the company re-invented itself with stronger infrastructure, the payout ratio was higher and it is now within a good range for the payout ratio. Investment in technology and infrastructure to stay competitive should see the ratio go up but it should also translate in retained customers and business. What I would like to see is a continued growth in wireless network improvements and fiberoptic lines where spending is gradual to keep up with growth.

Telus Payout Ratio

EPS Growth

Not the most consistent but not the worst either. So far, I have not seen a Canadian telecom with consistent EPS growth. The competition amongst them is probably doing a bit of a tug of war.

However, If you were to take a look for 2003 forward, the picture looks really nice across the board and shows a lot of promise and confidence in the execution of the management team.

Telus EPS Growth

Thoughts

One thing I have learned about the telecommunication companies is that wireless and internet are the new business and mainstream media are being redirected. It's changing the landscape for advertisement revenue and we are in a situation where developed countries are developing habits where they need to be connected at all time. Who is profiting?

I am not a big fan of Telus and their long contracts but they have made an amazing entry into the cable business with their cable over internet. That phone line sure is carrying a lot of data. I also hear amazing thing from the condo owners who have fiber optic lines with Telus in their building. It feels like Telus has one-up Shaw Communications on the west coast for now.

Full Disclosure: Long T, BCE, RCI.B, AT&T

Disclaimer: The material presented should not be considered a recommendation. You should always do your own research and reach your own conclusion.

 

This article was written by The Passive Income Earner. If you enjoyed this article, please consider subscribing to my feed.


Continue Reading »

Wednesday, April 20, 2011

Hounding Bassett Furniture

Bassett Furniture (BSET) is a vertically integrated furniture company, as it imports, manufactures, wholesales and distributes a range of furniture. The company was profitable during the housing bubble, lost money for a while following the housing crash, and is now operating pretty close to break-even. But for value investors, it's not the earnings that are interesting, but the catalyst events surrounding some of the company's assets.

Bassett trades for $95 million, but has a deal in place (that is expected to close by the end of this month) to sell a company in which it has a minority interest for $74 million! This sale will produce a gain, which is subject to tax, but the company notes that it has "net operating loss carryforwards of [$18 million] that can be utilized to offset the taxes on the gain." In addition, the buyer will place $7 million in an escrow account that Bassett could receive over the next three years if no unexpected contingencies arise out of the company being sold.

In addition, Bassett has current assets of $83 million, long-term investments (money market and bonds) of $15 million, another minority investment carried at $5 million (equity method), and many tens of millions of dollars of retail real estate (including its own locations and locations it leases to licensees who are wholesale customers of Bassett), versus total liabilities of $83 million.

Of course, there are some risks with this type of investment. The most obvious is that the proposed deal may not close. But even if it doesn't, investors have a pretty good idea of what that minority investment is worth, which should act as a margin of safety.

But perhaps the biggest risk is what the company will do with all that money. Management didn't exactly narrow it down for shareholders when it stated it may use the money for "the retirement of debt and certain other long-term obligations, the settlement of various obligations related to closed stores and idle facilities, restructuring licensee debt, paying a dividend, judiciously funding expansion of our Company-owned store network, and/or funding stock buybacks and/or funding any potential future working capital needs."

While such a wide range of possibilities may be a bit scary for value investors, the company does have a history of paying out special dividends and buying back shares when it has extra cash. Unfortunately, management may only have done this because it had a gun to its head, thanks to activist shareholders who challenged the company's capital allocation. Management would probably rather grow the company than serve shareholders, as the company's CEO owns less than a million dollars worth of Bassett shares, but got paid almost half a million dollars last year.

On the other hand, management has not been taking wanton risks as of late to grow the company at the risk of profitability; the company has been closing the least profitable stores, and capex has been consistently below depreciation as the company has limited spending to store upgrades/refreshes rather than unjustified expansion. But management does appear to be pleased with the results of some new-concept stores it has been testing, so the possibility is there that management will use the bulk of this cash inflow to fund a growth program with uncertain results.

As Bassett shrinks down to its most profitable stores, it may be on the verge of returning to profitability. At the same time, it is likely to receive a major cash injection that the company may use to benefit shareholders. Value investors who believe this management team to be prudent may find this a stock worthy of investment, but those who don't will want to stay away.

Disclosure: None

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


Continue Reading »

Tuesday, April 19, 2011

Intel's Solid Yield

[Intel has fallen back into the ranks of a high yielder again. The stock is back below $20 a share and is paying investors a 3.7% return via the dividend alone. Intel is one of those stocks that has struggled to break out over the past decade. Investors can at least benefit from the high yield while waiting for the company's strong revenue growth and free cash flows to bee reflected in the stock price.]
[Intel Corporation is one of the larges designers, manufacturers, and sellers of computer chips in the world. The company specializes in creating integrated circuits for personal and business computers. Intel is the dominant player in the microprocessing space with the company's main competition being AMD. Intel's microprocessor products are used in notebooks, netbooks, desktops, servers, workstations, and tablets. Intel has a long history of treating its shareholders right.
The company has done everything possible to maximize value and the returns of shareholders. Intel just announced a $10 billion dollar buyback plan and increased its dividend again. Intel increased its annual dividend to 72 cents per share. The stock trades at just 9 times earnings despite the company's past 3 year growth rate of 19%. Intel trades at 2 times book value and 2.5 times the company's sales. All of these metrics show that the company is a real value play.
Intel is a very attractive dividend play with its huge yield and the company's history for increasing dividends. The large amount of free cash flow that the company generates and the fantastic balance sheet make the company a must own for any fixed income investor looking for safe income in a turbulent market. ] If you enjoyed this article, please consider subscribing to my feed at [RSS].


Continue Reading »

Monday, April 18, 2011

Stock Analysis: Wal-Mart Stores, Inc. (WMT)

Linked here is a detailed quantitative analysis of Wal-Mart Stores, Inc. (WMT). Below are some highlights from the above linked analysis:

Company Description: Wal-Mart Stores, Inc. is the largest retailer in North America and operates a chain of discount department stores, wholesale clubs, and combination discount stores and supermarkets.

Fair Value: In calculating fair value, I consider the NPV MMA Differential Fair Value along with these 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

WMT is trading at a discount to 1.) and 2.) above. The stock is trading at a 24.3% discount to its calculated fair value of $70.69. WMT 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%

WMT 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%. WMT 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 1973 and has increased its dividend payments for 37 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

WMT earned a Star in this section for its NPV MMA Diff. of the $3,195. This amount is in excess of the $500 target I look for in a stock that has increased dividends as long as WMT has. If WMT grows its dividend at 13.3% per year, it will take 4 years to equal a MMA yielding an estimated 20-year average rate of 3.9%. WMT earned a check for the Key Metric 'Years to >MMA' since its 4 years is less than the 5 year target.

Memberships and Peers: WMT is a member of the S&P 500, a Dividend Aristocrat and a member of the Broad Dividend Achievers™ Index and a Dividend Champion. The company's peer group includes: Costco Wholesale Corporation (COST) with a 1.1% yield, Target Corp. (TGT) with a 2.0% yield and PriceSmart Inc. (PSMT) with a 1.6% yield.

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

Using my D4L-PreScreen.xls model, I determined the share price could increase to $100.04 before WMT's NPV MMA Differential decreased to the $500 minimum that I look for in a stock with 37 years of consecutive dividend increases. At that price the stock would yield 1.46%.

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 7.5%. This dividend growth rate is well below the 13.3% used in this analysis, thus providing no margin of safety. WMT has a risk rating of 1.50 which classifies it as a Low risk stock.

WMT enjoys dominant positions in most markets where it competes. The company continues to gain market share aided by a slow economic recovery that continues to see consumers choosing WMT over higher-cost competitors. Its unmatched scale leads to favorable terms on everything from the products it sells to store leases and distribution agreements. I plan to continue adding to my position as my allocation allows and while the stock is trading below my fair value price of $70.69.

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 WMT (3.9% of my Income Portfolio). See a list of all my income holdings here.

Related Articles:
- Genuine Parts Company (GPC) Dividend Stock Analysis
- Microsoft Corporation (MSFT) Dividend Stock Analysis
- Cardinal Health,Inc. (CAH) Dividend Stock Analysis
- Walgreen Co. (WAG) 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 »

Sunday, April 17, 2011

Weekend Reading Links - April 17, 2011

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 »

Friday, April 15, 2011

Philip Morris International Stock Analysis

Philip Morris International Inc. (PM), through its subsidiaries, engages in the manufacture and sale of cigarettes and other tobacco products in markets outside of the United States. The company was spun off from Altria Group (MO) in 2008, in an effort to separate the international operations of the tobacco conglomerate from potential harmful litigation in the US. I own shares in both companies. Check my analysis of Altria Group here.


PMI has not raised distributions for over a decade, like other stocks I focus on. I do however like the fact that the dividend raising culture of Altria Group has been closely followed since the 2008 spin off. The company has managed to raise distributions every year since 2008.

I like the economics of the tobacco business immensely. First, the company has a strong brand name for its quality products. A large portion of what consumers pay for cigarettes goes to pay excise taxes, and only a small portion goes to the tobacco company. Whiles taxes are raised every year, the level of profits always tends to increase at a higher rate than the drop in tobacco consumption. This supports higher earnings, which translates into higher distributions and increased amounts for stock buybacks. Tobacco products are highly regulated, which means that there is little competition in the form of new companies coming to the market. In addition, most companies cannot freely advertise products, which translate into higher cash flow amounts being freely available for distributions.


Another positive for PMI Group is that legislation in the rest of the world is not as severe as it is in the US, although it could be getting there. Big tobacco companies like Philip Morris face similar restrictions in the EU, just like they do in the US. However, given the fact that tobacco companies fill in government coffers with billions in taxes each year, it is highly unlikely that governments would allow cigarette companies to lose money because of lawsuits. It would be fairly difficult for governments to replace the lost taxes from abolishing tobacco products.

Growth for Philip Morris International (PM) should come from several sources. The first source includes generating cost efficiencies in its cost reduction programs. A second source of growth includes growth through acquisitions. The company has been active in the acquisition front since striking out on its own by purchasing Rothmans in 2008 and Swedish Match South Africa in 2009 to name a few. The third source of growth for PMI includes strategic product innovations in growing markets, in order to position itself in specific country’s markets. Last but not least, tapping into the growth of emerging markets such as China and India, where it has a low presence could provide another opportunity for future growth.


There are several risks behind Philip Morris International that investors should be aware of. First, while it has operations throughout the world, almost half of revenues come from the EU, which is a mature market with declining demand. The market in EU is similar to that in the US with its constraints on marketing and public smoking. A second risk factor is potential proposed legislation that would require plain packaging by cigarette manufacturers, which would be harmful for tobacco brands like Marlboro, Parliament, L&M etc. Another risk for Philip Morris is tobacco smuggling. In some emerging markets it is “relatively easy” for third parties to sell smuggled products at lower prices or to sell “counterfeit” products. Such products erode tobacco conglomerates market shares and could lead to further increases in taxes.

Overall analysts expect Philip Morris International to increase its earnings per share to $4.42 in FY 2011 and $4.90 by FY 2012. This would be a nice increase from the 2010 EPS of $3.92. Future EPS growth would also be aided by share repurchases. Unlike most other companies, PMI maintained its stock buyback program even during the most recent bear market.

Currently, Philip Morris International is attractively valued at a P/E of 16.60, yield of 4% and a dividend payout ratio of 65%. The stock fits my entry criteria and I will be adding to my position in it when cash is available and provided my asset allocation allows me to do so.
Full Disclosure: Long PM and MO


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 »

Monday, April 11, 2011

Stock Analysis: ConocoPhillips (COP)

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

Company Description: ConocoPhillips Co. was formed in 2002 when Phillips Petroleum and Conoco merged and is now is the fourth largest integrated oil company in the world

Fair Value: In calculating fair value, I consider the NPV MMA Differential Fair Value along with these 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

COP is trading at a premium to all four valuations above. The stock is trading at a 12.0% premium to its calculated fair value of $72.12. COP 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:

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%

COP 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%. COP 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 (2001-2004, 2002-2005, 2003-2006, 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 1934 and has increased its dividend payments for 11 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

COP earned a Star in this section for its NPV MMA Diff. of the $8,898. This amount is in excess of the $2,400 target I look for in a stock that has increased dividends as long as COP has. If COP grows its dividend at 15.0% per year, it will take 2 years to equal a MMA yielding an estimated 20-year average rate of 3.9%. COP earned a check for the Key Metric 'Years to >MMA' since its 2 years is less than the 5 year target.

Memberships and Peers: COP is a member of the S&P 500 a member of the Broad Dividend Achievers™ Index. The company's peer group includes: BP plc (BP) with a 3.6% yield, Chevron Corp. (CVX) with a 2.7% yield and Exxon Mobil Corporation (XOM) with a 2.1% yield.

Conclusion: COP 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 COP as a 4 Star-Buy.

Using my D4L-PreScreen.xls model, I determined the share price could increase to $129.79 before COP's NPV MMA Differential decreased to the $2,400 minimum that I look for in a stock with 11 years of consecutive dividend increases. At that price the stock would yield 2.03%.

Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the target $2,400 NPV MMA Differential, the calculated rate is 10.7%. This dividend growth rate is well below the 15.0% used in this analysis, thus providing no margin of safety. COP has a risk rating of 1.75 which classifies it as a Medium risk stock.

COP made significant acquisitions over the past few years to increase its reserves and production capacity. The company is reevaluating its holdings with a focus on growth and upstream assets. It is selling under-performing assets to raise returns and reduce debt. In 2010, COP sold its Lukoil shares for $8.3 billion and recognized $7.1 billion from other asset sales. The stock recently added to the Dividend Achievers list after raising its dividend for 10 consecutive years. Though COP is trading above my calculated fair value (currently $72.12), I will continue look for opportunities to add to my position.

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 COP (1.7% of my Income Portfolio) and CVX. See a list of all my income holdings here.

Related Articles:
- Microsoft Corporation (MSFT) Dividend Stock Analysis
- Cardinal Health,Inc. (CAH) Dividend Stock Analysis
- Walgreen Co. (WAG) Dividend Stock Analysis
- Medtronic Inc. (MDT) 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 »

Sunday, April 10, 2011

Weekend Reading Links - April 10, 2011

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 »

Friday, April 8, 2011

Nestle Stock Analysis

Nestle S.A. (NSRGY) provides nutrition, health, and wellness products worldwide. The company is a member of the international dividend achievers index, as it has managed to increase dividends every year since 1996. In addition to that, Nestle recently sold its majority stake in Alcon (ACL), which has enabled it to pursue a massive stock buyback strategy.


Main competitors behind Nestle include Kraft Foods (KFT) and General Mills (GIS). US investors can purchase the ADR’s of Nestle, which are traded on the pink sheets under symbol NSRGY. (or NSRGY.PK at yahoo finance). The fact that this company is traded on the pink sheets, rather than NYSE, NASDAQ or AMEX should not scare potential investors. Nestle is a global blue chip, based in Switzerland, which has not only managed to increase earnings over the past decade, but also to share the wealth with shareholders in the form of increased dividends and consistent share buybacks. Over the past decade this dividend stock has delivered a total return of 8.60% per year.
Since 2001, Nestle has managed to increase earnings per share in Swiss Franks by 7.60% per year. The consistent stock buybacks, where the company has spent 39 billion CHF since 2005, have also aided EPS growth.
Dividends per share in local currency have increased by 12.50% per year since 2001, which was higher than the growth in EPS. The main reason behind this faster growth in distributions was the expansion of the dividend payout ratio. The dividend is paid annually, as opposed to the quarterly schedule that US companies tend to follow for distribution payments. The latest dividend increase was announced in February 2011, when distributions were increased to $1.85 CHF ($1.96/share).
Over the past decade the dividend payout ratio has expanded to over 50%. A lower payout is always a plus, since it leaves room for consistent dividend growth minimizing the impact of short-term fluctuations in earnings.
The company has been able to generate strong organic growth in key areas such as North America, Europe and Asia through several factors. Some of them include product innovation, leveraging the company’s global scale, investing in building and maintaining the company’s strong brand positions worldwide. Nestle has 29 billionaire brands, which have delivered strong organic growth over the past few years as well. Nestle’s long term goal is to generate 5% - 6% in annual organic sales growth, achieve sustainable improvement in EBIT and improving the trend in return on investment capital. I own shares of Nestle. I would much rather own Nestle than Kraft (KFT) for example. I like the strong brands in the company's portfolio ( Purina is one of them). The food business is not a sexy growth business, but with the right strategy focusing on squeezing efficiencies across your value chain, expanding through innovation and strategic acquisitions, and buying back stock the company should be on track to meet its goals. The company fits my entry criteria with its P/E of 10.90, yield of 3.20%, and with its sustainable distribution. I have recently added to my position in the stock.

Full disclosure: Long NSRGY

Relevant Articles:

- Unilever (UL) Dividend Stock Analysis

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 »

Thursday, April 7, 2011

Bell Canada (BCE) Dividend Stock Analysis

Dating back to 1876 when Alexander Graham Bell assigns 75% of its patent to his father Melville Bell to startup a Canadian telephone business. Bell Canada was born and 135 years later, Bell is still a thriving business.

Nowadays, BCE generates $18 billions in revenue through 3 different segments:

  1. Bell Wireline with 57%
  2. Bell Wireless with 27%
  3. Bell Alliant with 16% (A public subsidiary)
Bell Alliant is actually an income trust trading under BA for anyone more interested in the telecommunication service industry. It has a dividend yield of 7.05% compared with BCE's yield of 5.29%.

BCE is a company committed to rewarding investors as you can see from one of their statement:
"BCE is setting a clear dividend policy with a target dividend payout of 65% to 75% of Adjusted EPS that provides sufficient financial flexibility to continue investing in the business while growing returns to shareholders,"

Quick Facts

  • Stock Ticker: BCE on TSX and NYSE
  • Market Cap.: 27.89B$
  • P/E: 15.45
  • Forward P/E: 10.35
  • EPS: $2.40
  • Beta: 0.98
  • Liabilities to Equity Ratio: 1.28
  • Quarterly Dividends: $0.49
  • Dividend Yield: 5.29%%
  • Dividend Payout Ratio: 60.70%
  • ROE: 14.97%
  • 5 Year EPS Growth Average: 55.39%
  • 5 Year Dividend Growth Average: 17.00%
  • 52-Week Low: $28.10
  • 52-Week High: $37.14
  • 52-Week Range: 99.12%
BCE has practically recovered from the financial market crash as you can see in the 5 year graph below. It's currently trading near the top of its 52-week chart but it still has room to match its high of 2007.

BCE Dividend Stock Analysis

 



BCE Dividend Stock Analysis

 

Dividend Growth

BCE's dividend graphs isn't a dividend aristocrat graph by no means.  Aside from the 2008 trouble, it's relatively flat. It's a very different graph when compared with Rogers Communications or Shaw Communications. The main difference is that BCE has paid dividends since 1949. That's 62 years of dividend history. Such consistency in paying dividends for that long shows the commitment from the management team to its shareholders.

BCE Stock Dividend Analysis

Dividend Payout Ratio

The payout ratio is relatively in line with their guidance of paying between 65%-75% of their earnings. 2008 was above target and they also reduced the number of payments during that time. You can see in the 5 year graph above that they only had 2 payments. In the dividend growth graph above, the drop represents their missed quarterly dividends. A bump in the road can be overlooked as long as it doesn't turn into a bumpy ride. We can see 2 bumps over the past 2 years.

BCE Dividend Stock Analysis

EPS Growth

The EPS growth below doesn't really show any growth. Another interesting view... I also noticed that from their revenues flatlining between $17 and $19 billions over the past years. They increased their profits by reducing costs but it would be nice to see more customer acquisitions. The 2010 Olympics did help them but they need to be able to retain them for the long term.

BCE Stock Dividend Analysis

Thoughts

Over the past 10 years, BCE has seen its profit increase while their revenues have been relatively flat bouncing between $17 and $19 billions. The transformation in the wireless sector may impact them more than the other telecoms as they still earn a significant amount of revenu from their land line business. They are upgrading internet infrastructure to leverage fiber optic but it is costly. I don't believe we are going to see any major upswing in their stock but a healthy dividend along with a steady growth should reward investors. They are strong in both Ontario and Quebec which is where most of the population is giving them access to more customers without needing to expend too far.

AT&T may be a better holdings if you don't mind having a US holdings. It is a true dividend aristocrates with 25 years of dividend growth and a yield of 5.64%.

Full Disclosure: Long BCE, RCI.B, AT&T

Disclaimer: The material presented should not be considered a recommendation. You should always do your own research and reach your own conclusion.

This article was written by The Passive Income Earner. If you enjoyed this article, please consider subscribing to my feed.


Continue Reading »

Tuesday, April 5, 2011

An Industrial Stock With A Solid Yield

[General Electric is offering investors a pretty solid yield and a decent yield. General Electric is one of the giant blue chips in the marketplace and an American institution. The company has its hand in just about every sector of the United States. General Electric is finally back on the right track after years of trouble.] [GE had been a dividend favorite of income investors for years until two years ago. The company cut its dividend for the first time in its history and lots of investors abandoned the stock. The 68% dividend cut was a major hit as the firm only paid out 10 cents a quarter to investors. GE recently raised its dividend back up to 14 cents a quarter. It’s a far cry from the 31 cents per quarter paid back in 2008 but it is a start.

GE has made my dividends list because of its 2.9% yield. I have been saying that the stock is attractive for awhile now and I still believe so. The current dividend payout represents just 42% of this year’s earnings and just 34% of next year’s earnings.The dividend has substantial room for growth.

I am a fan of the company’s new direction and return to its core businesses. GE Capital had become too bloated in recent years and saddled the company with lots of bad loans.  I have to give CEO Jeffrey Immelt credit. He has done a good job of slowly divesting these assets. In the past I have been a harsh critic of Immelt. I refused to buy the stock for years because GE had no growth. Those days are finally over.]

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


Continue Reading »

Monday, April 4, 2011

Stock Analysis: Genuine Parts Company (GPC)

Linked here is a detailed quantitative analysis of Genuine Parts Company (GPC). Below are some highlights from the above linked analysis:

Company Description: Genuine Parts Co is a leading wholesale distributor of automotive replacement parts, industrial parts and supplies, and office products.

Fair Value: In calculating fair value, I consider the NPV MMA Differential Fair Value along with these 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

GPC is trading at a premium to all four valuations above. The stock is trading at a 14.6% premium to its calculated fair value of $46.81. GPC 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:

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%

GPC 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%. GPC 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 1948 and has increased its dividend payments for 55 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

The NPV MMA Diff. of the $386 is below the $500 target I look for in a stock that has increased dividends as long as GPC has. If GPC grows its dividend at 4.8% per year, it will take 4 years to equal a MMA yielding an estimated 20-year average rate of 3.9%. GPC earned a check for the Key Metric 'Years to >MMA' since its 4 years is less than the 5 year target.

Memberships and Peers: GPC is a member of the S&P 500 and a member of the Broad Dividend Achievers™ Index and a Dividend Champion. The company's peer group includes: Advance Auto Parts Inc. (AAP) with a 0.4% yield, AutoZone Inc. (AZO) with a 0.0% yield and W.W. Grainger, Inc. (GWW) with a 1.6% yield.

Conclusion: GPC did not earn any Stars in the Fair Value section, earned three Stars in the Dividend Analytical Data section and did not earn any Stars in the Dividend Income vs. MMA section for a total of three Stars. This quantitatively ranks GPC as a 3 Star-Hold.

Using my D4L-PreScreen.xls model, I determined the share price would need to decrease to $50.39 before GPC's NPV MMA Differential increased to the $500 minimum that I look for in a stock with 55 years of consecutive dividend increases. At that price the stock would yield 3.57%.

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 5.4%. This dividend growth rate is slightly above the 4.8% used in this analysis, thus providing no margin of safety. GPC has a risk rating of 1.25 which classifies it as a Low risk stock.

GPC’s long string of dividend increases are supported by its strong underlying fundamentals of sales, earnings and free cash flow growth. The company exhibits excellent financial leadership as evidenced perseverance through the recent downturn. From an operating standpoint, GPC has an extensive distribution network and it has built a loyal customer following over the years. Since the company is trading well above my buy price of $46.81 and slightly above the $50.39 maximum price supported by its dividend fundamentals, I will wait for a pullback before adding to my position. 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 GPC (2.2% of my Income Portfolio). See a list of all my income holdings here.

Related Articles:
- Cardinal Health,Inc. (CAH) Dividend Stock Analysis
- Walgreen Co. (WAG) Dividend Stock Analysis
- Medtronic Inc. (MDT) Dividend Stock Analysis
- Weyco Group, Inc. (WEYS) 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 »

Sunday, April 3, 2011

Weekend Reading Links - April 3, 2011

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 »

Friday, April 1, 2011

Stock Analysis: Clorox (CLX)

The Clorox Company (CLX) engages in the production, marketing, and sales of consumer products in the United States and internationally. The company operates through four segments: Cleaning, Lifestyle, Household, and International. The company is a dividend aristocrat which has increased distributions for 33 years in a row. The most recent dividend increase was in January, when the Board of Directors approved a 6.40% increase to 25 cents/share. The major competitors of Clorox include Procter & Gamble (PG), Colgate-Palmolive (CL) and Church & Dwight (CHD).

Over the past decade this dividend stock has delivered an annualized total return of 8.60% to its loyal shareholders.

The company has managed to deliver an impressive increase in EPS of 13.50% per year since 2001. Analysts expect Clorox to earn $3.95 per share in 2011 and $4.43 per share in 2012. This would be a nice increase from the $4.24/share the company earned in 2010. The company has managed to decrease the number of shares outstanding by 6.70% per year over the past decade through share buybacks, which has aided earnings per share growth.

The return on assets has largely remained above 11% since 2003. I used return on assets, since the stockholders equity portion of the balance sheet was negative after in 2004 Clorox exchanged its ownership in a subsidiary for approximately 29% of the company’s outstanding shares at the time of this transaction.

The annual dividend payment has increased by 10.10% per year since 2001, which is lower than the growth in EPS.


A 10% growth in distributions translates into the dividend payment doubling every 7 years. If we look at historical data, going as far back as 1983, we see that Clorox has indeed managed to double its dividend every seven years on average.
Over the past decade the dividend payout ratio has remained below 50% for a majority of the time with the exception of a brief period in 2001 and 2002. 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 Clorox is trading at 16.80 times earnings, yields 3.20% and has a sustainable dividend payout. The stock meets my entry criteria, and I will look forward to adding to my existing position in it.

Full Disclosure: Long CLX

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].


Relevant Articles:

- Kimberly-Clark (KMB) Dividend Stock Analysis
- My Entry Criteria for Dividend Stocks
- The case for dividend investing in retirement
- Dividend Aristocrats list for 2011


Continue Reading »

Recent Posts From DIV-Net Members