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Stock Analysis: Stanley Black & Decker Inc. (SWK)

Linked here is a detailed quantitative analysis of Stanley Black & Decker Inc. (SWK). Below are some highlights from the above linked analysis:

Company Description: Stanley Black & Decker Inc. is a diversified global provider of hand tools, power tools and related accessories and systems resulted from the March 2010 merger of StanleyWorks and Black & Decker.

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

SWK is trading at a discount to only 3.) above. Since SWK's tangible book value is not meaningful, a Graham number can not be calculated. The stock is trading at a 86.9% premium to its calculated fair value of $38.04. SWK 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%

SWK 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 1877 and has increased its dividend payments for 44 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) or Treasury bond? 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 $123 is below the $500 target I look for in a stock that has increased dividends as long as SWK has. If SWK grows its dividend at 4.7% per year, it will take 8 years to equal a MMA yielding an estimated 20-year average rate of 3.1%.

Memberships and Peers: SWK 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: Danaher Corporation (DHR) with a 0.2% yield, Makita Corp. (MKTAY) with a 0.9% yield and Snap-On Incorporated (SNA) with a 2.6% yield.

Conclusion: SWK did not earn any Stars in the Fair Value section, earned two Stars in the Dividend Analytical Data section and did not earn any Stars in the Dividend Income vs. MMA section for a total of two Stars. This quantitatively ranks SWK as a 2-Star Weak stock.

Using my D4L-PreScreen.xls model, I determined the share price would need to decrease to $52.81 before SWK's NPV MMA Differential increased to the $500 minimum that I look for in a stock with 44 years of consecutive dividend increases. At that price the stock would yield 3.1%.

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 7.7%. This dividend growth rate is higher than the 4.7% used in this analysis, thus providing no margin of safety. SWK has a risk rating of 1.50 which classifies it as a Low risk stock.

The 2010 merger of Stanley and Black & Decker combined two of the most respected names in the industry. The combined company stands to benefit from significant synergies. When the economy recovers, the company is well positioned to gain market share. The company has a good debt and free cash flow payout positions. However its low relatively low yield and dividend growth rate combine produce a low NPV MMA Differential and a low fair value $38.04. For now, I will stay on the sidelines.

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 held no position in SWK (0.0% of my Dividend Growth Portfolio). See a list of all my dividend growth holdings here.

Related Articles:
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- AFLAC Incorporated (AFL) Dividend Stock Analysis
- Teco Energy, Inc. (TE) Dividend Stock Analysis
- McDonald's Corporation (MCD) Dividend Stock Analysis
- More Stock Analysis

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Weekend Reading Links - January 29, 2012

For your weekend reading pleasure, the articles listed below contain some of the best dividend and value investing insights found on the web. They were written by various members of the Dividend Investing and Value Network over the past week:

Articles From DIV-Net Members


    There are some really good articles here, please take time and read a few of them.


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    Procter & Gamble Stock Analysis

    The Procter & Gamble Company (PG) provides consumer packaged goods in the United States and internationally. This dividend aristocrat has paid uninterrupted dividends on its common stock since 1891 and increased payments to common shareholders every for 55 consecutive years. There are only eleven companies in the world which have managed to boost distributions over half a century. One of the largest shareholders is no other but Warren Buffett’s Berkshire Hathaway (BRK.B).

    The company’s last dividend increase was in April 2011 when the Board of Directors approved an 8.90% increase to 52.50 cents/share. Procter & Gamble’s largest competitors include Kimberly-Clark (KMB), Colgate-Palmolive (CL) and Clorox (CLX).


    Over the past decade this dividend growth stock has delivered an annualized total return of 7.60% to its shareholders.
    The company has managed to deliver an 11% annual increase in EPS since 2002. Analysts expect Procter & Gamble to earn $4.23 per share in 2012 and $4.57 per share in 2013. In comparison Procter & Gamble earned $3.93 /share in 2011.

    The company’s return on equity decreased in half when it acquired Gillette in 2005. This indicator has stabilized around 19% for the past four years. 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 11.10% per year since 2002, which is equal to the growth in EPS.
    An 11% growth in distributions translates into the dividend payment doubling every six and a half years. If we look at historical data, going as far back as 1975 we see that Procter & Gamble has actually managed to double its dividend every seven years on average.

    The dividend payout ratio has mostly remained between 40% and 50%. Currently, it is just a little bit over 50%, but it appears sustainable. 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 Procter & Gamble is attractively valued at 16.50 times earnings, has a sustainable dividend payout and yields 3.20%. I consider Procter & Gamble to have the qualities of a perfect dividend stock, that should be a core holding for any serious dividend investor. I would consider adding to my position in the stock on dips.

    Full Disclosure: Long CL, CLX, KMB, PG

    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].


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    Dividends In Railroads

    What do you think of when you think of railroad companies? You probably think of trains hauling coal, industrial goods or agriculture across vast distances of tracks. Although I share those thoughts, I also think of something else: dividends. And, not only do I think of dividends but I think of growing dividends. Let's take a look at a couple of major railroad companies that not only have strong and growing businesses, but are also committed to shareholders through dividend growth.

    Union Pacific Corporation (UNP)

    Per Morningstar:

    Omaha, Neb.-based Union Pacific is the largest public railroad in North America. Operating on 32,000 miles of track in the Western two thirds of the United States, UP's 43,000 employees generated $19.6 billion of revenue in 2011 by hauling coal, industrial products, intermodal containers, agriculture goods, chemicals, and automotive goods. UP owns about one fourth of Mexican railroad Ferromex and derives around $1 billion hauling freight to and from Mexico.

    Union Pacific is currently the railroad king. They are the largest railroad in our country and management has done a great job of growing earnings and revenue while maintaining a pretty solid balance sheet.  They are currently attractively priced with a P/E ratio of 16.89 and an entry yield of 2.11%. They have grown dividends for the last 6 years, making them a Dividend Challenger. The 5-year dividend growth rate is 26.3%, which is pretty strong. They have a pretty strong balance sheet, with a debt/equity ratio of 0.5. Although earnings and revenue growth have not been explosive over the last 5 years, due to the economic downturn of 2008-2009, as the general economy recovers so will the railroad business. I don't think UNP is the most attractively valued railroad play out there, but it's the biggest company in this business and the dividend growth is very strong.

    Norfolk Southern Corp. (NSC)

    Per Morningstar:

    Norfolk Southern is a $9.5 billion railroad operating in the Eastern United States. On 21,000 miles of track, Norfolk Southern hauls shipments of coal (29% of consolidated revenue), intermodal traffic (19%), and a diverse mix of automobile, agriculture, metal, chemical, and forest products (each 7%-14%).

    Norfolk Southern is a much smaller railroad company than UNP. But, I think the valuation is more attractive here. NSC has had recent weakness in the share price, and due to such I recently entered into a position with NSC. The current P/E ratio is 13.80 and has an entry yield of 2.5%. They have grown dividends for the last 10 years, with a 5-year DGR of 19.5%. Although earnings and revenues have been relatively flat over the last 5 years, much like UNP, I think the overall improvement in the economy will bode well for this company and industry as a whole. The balance sheet is decent, with a debt/equity ratio of 0.7. They have shown commitment to growing the dividend, raising it twice in the last year, recently raising it by 9.3%, from $0.43 quarterly to $0.47 quarterly. I think investors are seeing an opportunity with NSC, and it was down as much as 2.5% earlier today and compelled me to enter in to a position with this company.

    What about you? Own any railroad companies?

    Full Disclosure: I'm long NSC

    Thanks for reading.

    This article was written by Dividend Mantra. If you enjoyed this article, please consider subscribing to my feed.


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    Mirage Of Rimage's Cash

    Last year at this time, Rimage looked like an attractive stock. It had both a ton of cash relative to its market cap, and a steady source of cash flow such that it could generate a great return for shareholders. But as discussed here, what it lacked was a corporate structure conducive to creating wealth for shareholders. As a result, today the stock sits some 20% lower, and the value of the company has probably fallen by more than that.


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    Stock Analysis: 3M Company (MMM)

    Linked here is a detailed quantitative analysis of 3M Company (MMM). Below are some highlights from the above linked analysis:

    Company Description: 3M Co. is a diversified global company that provides enhanced product functionality in electronics, health care, industrial, consumer, office, telecommunications, safety & security and other markets via coatings, sealants, adhesives, and other chemical additives.

    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

    MMM is trading at a discount to only 3.) above. The stock is trading at a 34.4% premium to its calculated fair value of $62.19. MMM 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%

    MMM 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 1916 and has increased its dividend payments for 53 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) or Treasury bond? 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 $115 is below the $500 target I look for in a stock that has increased dividends as long as MMM has. If MMM grows its dividend at 3.3% per year, it will take 6 years to equal a MMA yielding an estimated 20-year average rate of 3.1%.

    Memberships and Peers: MMM 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: General Electric Co. (GE) with a 3.6% yield, Raven Industries Inc. (RAVN) with a 1.1% yield and Carlisle Companies Inc. (CSL) with a 1.5% yield.

    Conclusion: MMM did not earn any Stars in the Fair Value section, earned two Stars in the Dividend Analytical Data section and did not earn any Stars in the Dividend Income vs. MMA section for a total of two Stars. This quantitatively ranks MMM as a 2-Star Weak stock.

    Using my D4L-PreScreen.xls model, I determined the share price would need to decrease to $61.53 before MMM's NPV MMA Differential increased to the $500 minimum that I look for in a stock with 53 years of consecutive dividend increases. At that price the stock would yield 3.6%.

    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 6.4%. This dividend growth rate is higher than the 3.3% used in this analysis, thus providing no margin of safety. MMM has a risk rating of 1.50 which classifies it as a Low risk stock.

    MMM is the leader in many of the markets its serves with a culture that thrives on innovation. Its bottom-line focus and low-cost manufacturing have built a moat around its core businesses. The company has enjoyed strong historical earnings, dividend growth and free cash flow. In addition, the company has relatively low debt and a strong balance sheet. MMM’s has demonstrated the ability to generate strong returns on capital and free cash flows, and will likely continue to do so. MMM is a great company with an excellent future, but with a fair value of $62.19, it is not a great time to buy it.

    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 MMM (0.4% of my Dividend Growth Portfolio). See a list of all my dividend growth holdings here.

    Related Articles:
    - Teco Energy, Inc. (TE) Dividend Stock Analysis
    - McDonald's Corporation (MCD) Dividend Stock Analysis
    - J.M. Smucker Comp. (SJM) Dividend Stock Analysis
    - W.W. Grainger, Inc. (GWW) 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].


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    Weekend Reading Links - January 22, 2012

    For your weekend reading pleasure, the articles listed below contain some of the best dividend and value investing insights found on the web. They were written by various members of the Dividend Investing and Value Network over the past week:

    Articles From DIV-Net Members


      There are some really good articles here, please take time and read a few of them.


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      Diageo Stock Analysis

      Diageo plc (DEO) engages in producing, distilling, brewing, bottling, packaging, distributing, developing, and marketing spirits, beer, and wine products worldwide. This international dividend achiever has paid uninterrupted dividends on its common stock since 1988 and increased payments to common shareholders every year since 1998.

      Diageo’s largest competitors include Brown-Forman (BF-B), Constellation Brands (STZ) and SAB Miller (SBMRY).


      Over the past decade this dividend growth stock has delivered an annualized total return of 10.20% to its shareholders.


      The company has managed to deliver a 5.50% annual increase in EPS since 2001. Analysts expect Diageo to earn $5.77 per share in 2012 and $6.44 per share in 2013. In comparison Diageo earned $4.84 /share in 2011.
      The company has maintained a high return on equity of over 30% for the majority of the 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 in US Dollars has increased by 7.30% per year since 2001, which is higher than the growth in EPS. With international dividend achievers, it is important to look at the trend in distributions in their base currencies. Despite the fact that the annual dividend payment appears volatile in US dollars, the growth in distributions in UK pounds has shown a consistent upward trend in distributions.

      An 7% growth in distributions translates into the dividend payment doubling almost every ten years.

      The company pays dividends twice per year. The interim payment is typically almost 40% of the total annual amount and is paid in April. The Final payment is approximately 60% of the total dividend and is typically paid in October.

      The dividend payout ratio has mostly remained above 50%. It is just a tad above 50% currently, which means that the distributions are sustainable. 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 Diageo is attractively valued at 17.90 times earnings, has a sustainable dividend payout and yields 3.10%.

      Full Disclosure: Long BF-B and DEO

      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].


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      Opportunity In Philip Morris International Inc. (PM)

      Philip Morris International Inc. (PM) is one of my favorite dividend stocks. It manufactures and supplies an addictive product (cigarettes) with exceptional margins. It does business everywhere but the United States, which is where the domestic company Altria Group (MO) does business. This provides them with great exposure to emerging markets whose discretionary income is only set to rise over the next couple decades.

      Recent weakness in PM shares may provide a long-term investor a nice opportunity. It is down 5.25% over the last trading week, and down 3.48% today. This appears to mostly be due to some analyst downgrades amid reduced EPS expectations. I think if you look out over the next 10-20 years, PM will be a strong performer. It currently yields 4.20%, and pays a quarterly dividend of $0.77 per share. The debt load is a little concerning, but the strong cash flow provides PM ample opportunity to keep debt in check while still continuing to raise the dividend.

      Per Morningstar:

      Philip Morris International is the world's second-largest tobacco company, behind only China National Tobacco, and holds almost 16% of the non-U.S. market. The firm owns seven of the leading 15 international brands, including Marlboro, the company's flagship brand that accounted for more than one third of total volume in 2010. Other key brands include L&M, Philip Morris, Bond Street, Chesterfield, Parliament, and Lark. 

      I think the recent weakness in PM offers a long-term investor plenty of opportunity to initiate or add to an existing position. The current payout ratio is 65%, which is comfortable with the cash flow this company has. PM will likely continue to raise the dividend for years to come, after being split from MO in 2008. MO has a long history of raising its dividend, with a 43-year record of raising the dividend. The current P/E ratio for PM is 15.49 and has a debt/equity ratio of 6.0.

      What about you? Buying PM on the dips?

      Thanks for reading.

      This article was written by Dividend Mantra. If you enjoyed this article, please consider subscribing to my feed.


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      Be A Smart Pro

      SmartPros (SPRO) provides training solutions for various markets. As per Google Finance, "[i]ts customers include professional firms and companies of all sizes who purchase the courses for use by their employees, and individuals who purchase courses, programs or subscriptions on a retail basis." This is a small company that trades for just $10 million, but has $6 million of cash and no debt, and has generated $1-2 million of annual free cash over the last few years (excluding acquisitions).


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      Stock Analysis: Verizon Communications Inc. (VZ)

      Linked here is a detailed quantitative analysis of Verizon Communications Inc. (VZ). Below are some highlights from the above linked analysis:

      Company Description: Verizon Communications Inc. offers wireline, wireless and broadband services primarily in the northeastern United States. It acquired MCI in 2006 and has since sold or spun off non-core assets. Alltel was acquired in early 2009.

      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

      VZ is trading at a discount to only 3.) above. Since VZ's tangible book value is not meaningful, a Graham number can not be calculated. The stock is trading at a 41.1% premium to its calculated fair value of $27.17. VZ 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%

      VZ 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 1984 and has increased its dividend payments for 7 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) or Treasury bond? 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 $1,151 is below the $2,800 target I look for in a stock that has increased dividends as long as VZ has. The stock's current yield of 5.12% exceeds the 3.1% estimated 20-year average MMA rate.

      Memberships and Peers: VZ is a member of the S&P 500. The company’s peer group includes: AT&T Inc. (T) with a 5.8% yield, CenturyLink, Inc. (CTL) with a 7.8% yield and Sprint Nextel Corp. (S) with a 0.0%.

      Conclusion: VZ did not earn any Stars in the Fair Value section, earned two Stars in the Dividend Analytical Data section and did not earn any Stars in the Dividend Income vs. MMA section for a total of two Stars. This quantitatively ranks VZ as a 2-Star Weak stock.

      Using my D4L-PreScreen.xls model, I determined the share price would need to decrease to $26.60 before VZ's NPV MMA Differential decreased to the $2,800 minimum that I look for in a stock with 7 years of consecutive dividend increases. At that price the stock would yield 7.4%.

      Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the target $2,800 NPV MMA Differential, the calculated rate is 6.3%. This dividend growth rate is higher than the 2.6% used in this analysis, thus providing no margin of safety. VZ has a risk rating of 2.25 which classifies it as a Medium risk stock.

      As the Communication Services sector moves more toward wireless products, VZ is well-positioned to maintain its leadership position. With the addition of the iPhone, VZ captured roughly all customer growth in 2011. The company's next-generation network deployment and device sales are ramping up. The company enjoys strong cash flow generation, a low debt position, a perception of network quality and pricing power over its suppliers.

      VZ's low dividend growth rate of 2.6%, short history of consecutive dividend increases and valuation, keep me from adding the stock to my Dividend Growth Portfolio. However, I do hold the stock in my high-yield portfolio.

      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 VZ (6.0% of my High Yield Portfolio) and long in T and CTL in my Dividend Growth Portfolio. See a list of all my dividend growth holdings here.

      Related Articles:
      - J.M. Smucker Comp. (SJM) Dividend Stock Analysis
      - W.W. Grainger, Inc. (GWW) Dividend Stock Analysis
      - Cincinnati Financial Corp. (CINF) Dividend Stock Analysis
      - Procter & Gamble (PG) 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].


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      Weekend Reading Links - January 15, 2012

      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 »

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      Unilever Stock Analysis

      Unilever PLC (UL) provides fast-moving consumer goods in Asia, Africa, Europe, and the Americas. This international dividend achiever has paid uninterrupted dividends on its common stock since 1937 and increased payments to common shareholders every year since 1999.

      The most recent dividend increase was in June 2011, when the Board of Directors approved an 8.20 % increase in the quarterly dividend to 22.50 euro cents/share. Unilever’s largest competitors include Procter & Gamble (PG), Kraft (KFT) and Nestle (NSRGY).


      Over the past decade this dividend growth stock has delivered an annualized total return of 10.30% to its shareholders.

      The company has managed to deliver a 15.50% annual increase in EPS since 2001. Analysts expect Unilever to earn $2.20 per share in 2011 and $2.40 per share in 2012. In comparison Unilever earned $1.94 /share in 2010.

      The company’s Return on Equty has followed an upward trend from 20.30% in 2001 to 33.20% in 2010. Overall, despite volatility, this indicator has remained at high levels 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 11.20% per year since 2001, which is in line with the growth in EPS. With international dividend achievers, it is important to look at the trend in distributions in their base currencies. Despite the fact that the annual dividend payment appears volatile in US dollars, the growth in distributions in UK pounds has shown a consistent upward trend in distributions.

      An 11% growth in distributions translates into the dividend payment doubling almost every six and a half years. If we look at historical data, going as far back as 1988 we see that Unilever has actually managed to double its dividend almost every seven and a half years on average.

      The dividend payout ratio has been on the decline over the past decade. It fell from a high of 80% in 2001 to 57.60% in 2010. A lower payout is always a plus, since it leaves room for consistent dividend growth minimizing the impact of short-term fluctuations in earnings.

      Unilever is a company that is headquartered in the UK and the Netherlands. In this analysis I am concentrating on the British based, American Depositary Receipts. Unilever operates as a single business entity. However, there are two owners: Unilever (NV) and Unilever (PLC) which are the two parent companies of the Unilever Group, having separate legal identities and separate stock exchange listings for their shares. You can find Unilever shares trading on NYSE as (UN) or (UL) representing NV and PLC respectively. By investing in the UK shares, I am avoiding foreign withholding of my dividends.

      Currently Unilever is attractively valued at 15.90 times earnings, has a sustainable dividend payout and yields 3.60%. I would consider adding to my position in the stock on dips.

      Full Disclosure: Long UL, KFT, NSRGY and PG

      Relevant Articles:

      - Nestle (NSRGY) 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].


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      Stay Focused In 2012

      With a new year comes new opportunities, new ideas and new journeys. It's a fresh start! I look forward to the beginning of every year to sit down and review some of the things I accomplished over the last year and try to list a few things I'd like to accomplish over the next 52 weeks. I think that investing in dividend growth companies can be extremely rewarding, but one must stay patient and focused.

      I'd like to encourage all novice and expert dividend growth investors out there to stay focused on your plan, whatever that may be. For me, I plan on saving well over half my net income every single month in 2012 and investing those excess funds in attractive dividend growth companies. Every time I invest money with a quality company at an attractive price it provides me just one more cog in my dividend growth machine. If your plan involves adding to a certain sector, diversifying your portfolio further, adding to a certain position or investing a set dollar amount then stay focused and stick to your plan. If you fail to plan, you plan to fail.

      Three tips to help you stay focused in 2012:

      1. Put your goals down on paper. This forces you to realize your goals in a physical form and puts a commitment into place. If a goal only exists in your head, it's easy to forget.

      2. Set monthly targets, which all inch toward a yearly goal. I set monthly savings and investment goals, which then translate into yearly amounts. It's much easier to keep track of your progress in monthly tallies.

      3. Tell everyone you can about your goals. Tell the world! Shout it from the rooftops. It'll motivate you to save face and stick to your plan if everyone knows about what you're trying to accomplish. If only your pet cat knows about your plan, it'll be easy to let poor Cuddly down.

      Let's make 2012 a success!! 

      Thanks for reading.

      This article was written by Dividend Mantra. If you enjoyed this article, please consider subscribing to my feed.


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      hhgregg: Back in Value Territory

      Shares of hhgregg (HGG) fell off a cliff last week after the company reported preliminary numbers from its all-important holiday quarter that were below expectations. But is the company really only worth two thirds of what it was worth last month? It appears likely that hhgregg's price fluctuates to a far greater extent than its actual value, which could provide an opportunity for value investors.


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      Stock Analysis: AFLAC Incorporated (AFL)

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

      Company Description: Aflac Incorporated provides supplemental health and life insurance in the U.S. and Japan. Products are marketed at work sites and help fill gaps in primary insurance coverage. Approximately 80% of earnings comes from Japan and 20% from the U.S.

      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

      AFL is trading at a discount to 2.), 3.) and 4.) above. The stock is trading at a 25.7% discount to its calculated fair value of $58.24. AFL 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%

      AFL 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%. AFL 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 1973 and has increased its dividend payments for 29 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) or Treasury bond? 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

      AFL earned a Star in this section for its NPV MMA Diff. of the $6,341. This amount is in excess of the $600 target I look for in a stock that has increased dividends as long as AFL has. If AFL 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 3.6%. AFL earned a check for the Key Metric 'Years to >MMA' since its 2 years is less than the 5 year target.

      Memberships and Peers: AFL 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: Delphi Financial Group, Inc. (DFG) with a 1.1% yield, Unum Group (UNM) with a 2.0% yield and CNO Financial Group, Inc. (CNO) with a 0.0% yield.

      Conclusion: AFL 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 AFL as a 5-Star Very Strong stock.

      Using my D4L-PreScreen.xls model, I determined the share price would need to increase to $102.02 before AFL's NPV MMA Differential decreased to the $500 minimum that I look for in a stock with 29 years of consecutive dividend increases. At that price the stock would yield 1.2%.

      Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the target $600 NPV MMA Differential, the calculated rate is 7.1%. This dividend growth rate is lower than the 15.0% used in this analysis, thus providing a significant margin of safety. AFL has a risk rating of 1.50 which classifies it as a Low risk stock.

      Operating in the two largest insurance markets in the world (U.S. and Japan), AFL has built a tremendous low-cost distribution system. Focusing on supplemental insurance products, AFL consistently generate excess returns for shareholders. Concerns about AFLs investment portfolio, which holds European bank hybrid bonds and European sovereign debt, have eased. The recent earthquake in Japan could result in higher, but manageable, claims.

      AFL is currently trading at a steep discount versus its historical valuation. As a result, its forward yield is in excess of 3%, which is well above its long-term average. AFL is trading below my fair value price of $58.24 and below the $51.38 that I sold it for in 2010. At these levels, I will continue to add to my position as valuations and 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 AFL (0.7% of my Dividend Growth Portfolio). See a list of all my dividend growth holdings here.

      Related Articles:
      - Cincinnati Financial Corp. (CINF) Dividend Stock Analysis
      - Procter & Gamble (PG) Dividend Stock Analysis
      - The Clorox Company (CLX) Dividend Stock Analysis
      - Automatic Data Processing Inc. (ADP) 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].


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      Weekend Reading Links - January 8, 2012

      For your weekend reading pleasure, the articles listed below contain some of the best dividend and value investing insights found on the web. They were written by various members of the Dividend Investing and Value Network over the past week:

      Articles From DIV-Net Members

      There are some really good articles here, please take time and read a few of them.


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      General Dynamics (GD) Stock Analysis

      General Dynamics Corporation (GD) provides business aviation, combat vehicles, weapons systems and munitions, military and commercial shipbuilding, and communications and information technology products and services worldwide. This dividend achiever has paid uninterrupted dividends on its common stock since 1979 and increased payments to common shareholders every year for 20 consecutive years. Most recently, Warren Buffett's Berkshire Hathaway initiated a stake in General Dynamics.

      The most recent dividend increase was in March 2011, when the Board of Directors approved a 11.90 % increase in the quarterly dividend to 47 cents/share. General Dynamics’s largest competitors include Boeing (BA), Lockheed Martin (LMT) and Textron (TXT).


      Over the past decade this dividend growth stock has delivered an annualized total return of 4.40% to its shareholders.

      The company has managed to deliver a 12.70% annual increase in EPS since 2001. Analysts expect General Dynamics to earn $7.22 per share in 2011 and $7.59 per share in 2012. In comparison General Dynamics earned $6.82 /share in 2010. The company has been able to buyback 0.60% of its shares outstanding every year on average over the past decade.

      The company’s Return on Equty has remained in a tight range between 17.50% and 22.50% 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 12.90% per year since 2001, which is in line with the growth in EPS.

      A 13% growth in distributions translates into the dividend payment doubling almost every fie and a half years. If we look at historical data, going as far back as 1974 we see that General Dynamics has actually managed to double its dividend almost every six years on average.

      The dividend payout ratio has remained in arrange between 21% and 25%. 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 General Dynamics is attractively valued at 8.60 times earnings, has a sustainable dividend payout and yields 3.10%.

      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].


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      Hoping For A Correction

      One of my mantras is to purchase shares with quality and attractively valued dividend growth companies every single month when opportunities present themselves. Opportunities come in many varieties, and I generally look for 3-4% drops in the market to pounce on quality stocks. As a value investor, I'm strongly hoping for a strong correction in the markets. When stocks are cheaper, I can purchase more stocks for the same amount of capital. A high flying market looks good on a balance sheet, but can actually impede long-term performance.

      The S&P is up 13.64% over the last 3 months. Is there more strong performance ahead? It's impossible to say. I never try to predict the future, I simply react to circumstances presented to me. I am hoping for a correction, however, even a mild one. A correction is typically defined as a 10% drop in the markets, and although I don't necessarily think that's likely right now a 5% drop or more would be very welcome.

      Although the S&P 500 has been strong over the last quarter of 2011, the index was essentially flat over the year. That's something one should keep in mind. Purchasing stocks in January 2012 should present similar opportunities and prices to what one would have seen in January 2011. It seems a lot of your secular consumer stocks have performed very well, especially MCD, while cyclical stocks in industrial and tech industries still present some value. Health care presented some of the strongest values in early 2011, but with a strong run of late by companies like Abbott Laboratories (ABT) and Medtronic (MDT) there is less value to be had.

      Remember: price is what you pay, but value is what you get. That's true with anything and stocks are no different.

      What are you looking at? See any strong values out there?

      Full Disclosure: I'm long ABT, MDT

      Thanks for reading.

      This article was written by Dividend Mantra. If you enjoyed this article, please consider subscribing to my feed.


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      Bank Of...Internet?

      I generally stay away from banks, but for value investors who do dabble in the highly-leveraged financial companies, Bank Of Internet (BOFI) may be worth keeping an eye on.


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      Stock Analysis: McDonald's Corporation (MCD)

      Linked here is a detailed quantitative analysis of McDonald's Corporation (MCD). Below are some highlights from the above linked analysis:

      Company Description: McDonald's Corporation is the largest fast-food restaurant company in the world, with about 33,144 restaurants in 119 countries.

      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

      MCD is trading at a discount to only 2.) above. The stock is trading at a slight discount to its calculated fair value of $101.21. MCD 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%

      MCD 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. MCD 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 1976 and has increased its dividend payments for 35 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) or Treasury bond? 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

      MCD earned a Star in this section for its NPV MMA Diff. of the $4,791. This amount is in excess of the $500 target I look for in a stock that has increased dividends as long as MCD has. If MCD grows its dividend at 15.0% per year, it will take 3 years to equal a MMA yielding an estimated 20-year average rate of 3.6%. MCD earned a check for the Key Metric 'Years to >MMA' since its 3 years is less than the 5 year target.

      Memberships and Peers: MCD is a member of the S&P 500 and a member of the Broad Dividend Achievers™ Index and a Dividend Champion. Yum! Brands, Inc. (YUM) with a 2.0% yield, Starbucks Corp. (SBUX) with a 1.5% yield and Wendy's/Arby's Group, Inc. (WEN) with a 1.5% yield.

      Conclusion: MCD 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 MCD as a 4-Star Strong stock.

      Using my D4L-PreScreen.xls model, I determined the share price would need to increase to $220.90 before MCD's NPV MMA Differential decreased to the $500 minimum that I look for in a stock with 35 years of consecutive dividend increases. At that price the stock would yield 1.2%.

      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 7.6%. This dividend growth rate is lower than the 15.0% used in this analysis, thus providing a significant margin of safety. MCD has a risk rating of 1.25 which classifies it as a Low risk stock.

      MCD is the dominant brand in the global fast food industry. The company enjoys unrivaled scale advantages and substantial international growth opportunities. MCD is the largest position in my dividend growth portfolio. Its strong price appreciation has made it difficult to lower its overall allocation with purchases of other stocks. Even though MCD is trading below my fair value price of $101.21, my over-allocated position prevents me from buying additional shares at this time.

      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 MCD (6.3% of my Dividend Growth Portfolio). See a list of all my dividend growth holdings here.

      Related Articles:
      - The Clorox Company (CLX) Dividend Stock Analysis
      - Automatic Data Processing Inc. (ADP) Dividend Stock Analysis
      - Sysco Corporation (SYY) Dividend Stock Analysis
      - Abbott Laboratories (ABT) 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].


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      Weekend Reading Links - January 1, 2012

      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 »

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