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 (DIV-Net) over the past week:
Articles From DIV-Net Members
There are some really good articles here, please take time and read a few of them.
If you enjoyed this article, please vote for it by clicking the Buzz Up! button below.
OK, so I bought another bank stock. I guess I can't help myself but I recently purchased shares of Royal Bank of Canada (RY). Thanks to the large drop in the prices of financials, that sector of my portfolio is now very small and I can beef it up with another bank. I looked for one of the more conservative banks that has not had problems with bad CMO's on the books. Here is a run down on the bank.
Royal Bank of Canada is Canada's largest bank by both assets and market capitalization. The company has four business segments: Canadian Banking, Wealth Management, U.S. and International Banking, and Capital Markets.
Canadian Banking provides about 55% of total revenues through its personal banking, business financial services, cards and payment solutions, and insurance businesses. RY has the largest retail banking network in Canada, with over 1,100 branches and 3,900 automated banking machines.
Wealth Management is about 17% of total revenues and is largely comprised of RBC Dain Rauscher, the wealth management arm of RY in the U.S., which ranks seventh for full-service securities firm in the U.S. The wealth management group has a network of over 3,300 financial consultants. With C$13.1 billion mutual fund assets under management, RY is the largest mutual fund provider among Canadian banks. RY's focus in wealth management is on high net worth clients with more than C$1 million in investable assets.
U.S. and International Banking is around 8% of revenues and offers personal and business banking and retail brokerage services in the U.S., banking in the Caribbean, and private baking services internationally. RY's U.S. banking arm, RBC Centura, ranks among the top 15 in deposit market share in the southeastern U.S., and has a network of 350 branches and 395 ATMs.
RBC Capital Markets, 19% of revenue provides corporate and investment banking, sales and trading, and research to corporations and public sector and institutional clients in North America and select global markets. The segment consists of two main businesses, Global Markets and Global Investment Banking and Equity Markets, and has a 50% ownership in RBC Dexia Investor Services.
RY's central corporate strategy revolves around its "Client First" approach, which focuses on enhancing client satisfaction and loyalty. The company seeks to be the leader in financial service in Canada and to leverage its distribution capabilities across business lines. In the U.S., RY is focusing on its primary advisor strategy and on delivering a broader suite of wealth management products at RBC Dain Rauscher.
The company is combining its capital markets and wealth management operational activities to create an integrated investment bank. RY has recently taken steps to accelerate its expansion through both new branch openings and acquisitions. Outside North America, the global private banking business is increasing scale through target acquisitions, and building additional distribution capabilities.
The company is also interested in building on its strong position in Caribbean banking, expanding opportunistically in China where it sees competitive advantages.
Over the past five years, RY's return on equity rose from 15.0% to 24.6% in 2007 and currently 23.0%.
S&P has a BUY rating for the stock and a 12 Month Target Price of $33.00
Disclosure: The Div Guy owns shares of RY at the time of this post.
This article was written by The Div Guy. If you enjoyed this article, please vote for it by clicking the Buzz Up! button below.
Microsoft Corporation provides software products for computing devices worldwide. Relevant Articles:
Microsoft is a major component of the S&P 500, Dow Industrials and Nasdaq 100 indexes. Microsoft has been consistently increasing its dividends since 2003. From the end of 1998 up until December 2008 this dividend growth stock has delivered a negative annual average total return of 3.90 % to its shareholders.
At the same time company has managed to deliver a 11.30% average annual increase in its EPS since 1999.
The ROE has decreased from a high in 1999 at 36% to 12% in 2003, before recovering strongly to over 50% in 2008.
After a long history of technological innovation, Microsoft showed signs of maturing as a company when it initiated a dividend policy in 2003. Annual dividend payments have increased by an average of 41.60% annually since 2003, which is much higher than the growth in EPS. The past three years have shown annual increases of 12,11 and 15% respectively. I would expect MSFT to increase its dividends by 10% over the next five years, until it reaches a dividend achiever status.
An 10% growth in dividends translates into the dividend payment doubling almost every seven years. Since 2003 MSFT has actually managed to increase its dividend payment over five times. 
The dividend payout has remained below 30% for the majority of our study period. A lower payout is always a plus, since it leaves room for consistent dividend growth minimizing the impact of short-term fluctuations in earnings.
I think that MSFT is attractively valued with its low price/earnings multiple of 9.5, and a low DPR. However the current dividend yield is below the 3% minimum threshold that I have set. Another threshold would be to wait and see if MSFT could actually achieve a dividend achiever status. As a value holding MSFT is a buy on dips below $17. As a dividend growth stock, it might take several years to fully mature. Once it does however, MSFT will probably be the premiere tech holding for dedicated dividend investors.
- Dividend Aristocrats List for 2009
- Dividend Aristocrats
- Best Dividends Stocks for the Long Run
- Best High Yield Dividend Stocks for 2009
- Best CD Rates
This article was written by Dividend Growth Investor. If you enjoyed this article, please vote for it by clicking the Buzz Up! button below.
Last November, I published a list of Net Current Asset Value stocks to use as a starting point in doing research. So how have these stocks done since then? Good question. The theory, of course, is that these stocks will have less downside.
The average stock was down 4.5%, with Synthesis Energy (SYMX) the worst, down 73%. The best performing stock was Force Protection (FRPT), which was up 140.2%. Some other things to consider when looking at this update. The return does not include any dividends, and I did not check to see if any stock splits occurred for any of these names.
The S & P 500 closed at 968.75 on 10/31/2008, and is trading on January 28 at around 867, for a decline of 10.5%. Thank you Benjamin Graham!!!
This article was written by Stock Market Prognosticator. If you enjoyed this article, please vote for it by clicking the Buzz Up! button below.
As the economy falls off a cliff, the earnings reports of the economically sensitive railroads are an interesting lot to watch.
Canadian National Railway (CNR) reported earnings recently and beat expectations by posting a 24% rise in comparable earnings. The falling $CAD vs. the USD as well as lagging fuel surcharges helped. CNR also rewarded shareholders by raising the dividend by 10%. CNR now yields 2.3%.
Canadian Pacific Railway (CNR) reported earnings as well and beat expectations by posting a 4% drop in earnings after items. Revenues increased 9% while expenses increased 13%. Currency changes helped CP's results as well. CP now yields 2.6%.
Both companies are expecting a very rough 2009 and are trimming their capital budgets.
This article was written by the moneygardener. If you enjoyed this article, please vote for it by clicking the Buzz Up! button below.
With yesterday's announcement that Pfizer is cutting their dividend 50%, I am sure their are a lot of dividend investors unloading the stock from their portfolios. I did - you will see a post on this in the future over at my blog. It got me thinkin' - what steps should an investor undertake as a sort-of "post-mortem". Here is the results of a some research I did on the topic.
For each dividend growth stock that you bought that did not work out (i.e. you lost money), it is important to understand what didn't work so that you can learn from that and hopefully not make the same mistake next time. There are a few questions that an investor can ask themselves after a failed investment. Here they are in no particular order:
1. Was there any emotional influences on your decision to buy the stock?
2. What key items of information did you miss during the analysis that led you to buy the stock?
3. What sources of data did you use for your analysis, and did any of them steer you wrong?
4. Were there opportunities to sell sooner given the data that you were seeing about the company? What stopped you from acting on this information?
5. What do you need to do differently in your stock analysis process?
With the answers to these questions fresh in your mind, make sure you document them in your investment philosophy or personal investment statement so that you can refer to them and ensure you apply them consistently in the future.
As these questions are a work in progress, please use the comments to let me know what questions you use to analyze your performance on a sold stock.
This article was written by The Dividend Guy. You may email questions or comments to me at info@thedividendguyblog.com.
Company Description: Lowe's Companies, Inc. and its subsidiaries operate as a home improvement retailer in the United States and Canada. The company offers a range of products and services for home decoration, maintenance, repair, remodeling, and property maintenance.
Fair Value: I consider four calculations of fair value, see page 2 of the linked PDF for a detailed description:
LOW is trading at a discount to all four valuations above. If I exclude the high and low valuations and average the remaining two, LOW is trading at a 39.5% discount. LOW earned a Star in this section since it is trading at a fair value.
Dividend Analytical Data: In this section I consider five factors, see page 2 of the linked PDF for a detailed description:
LOW earned three Stars in this section for 1.), 2.) and 3.) above. Rolling 4-yr Div. > 15% means that dividends grew on average in excess of 15% for each consecutive 4 year period over the last 10 years (1999-2002, 2000-2003, 2001-2004, etc.) I consider this a key metric since dividends will double every 5 years if they grow by 15%. LOW has paid a cash dividend to shareholders every year since 1961 and has increased its dividend payments for 46 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:
LOW earned one Star in this section for 1.) above. The NPV MMA Diff. of the $19,636 is in excess of the $2,500 minimum I look for in a stock that has increased dividends as long as LOW has. If LOW grows its dividend at 20.0% per year, it will take 7 years to equal the cumulative earnings from a MMA yielding an estimated 20-year average rate of 3.45%.
Other: LOW is a member of the S&P 500, a Dividend Aristocrat and a member of the Broad Dividend Achievers™ Index. The the home improvement retail industry tends to be very cyclical and relies on economic growth. However, LOW is a strong player with opportunities for growth both domestically and abroad. Aging homes and relatively high home ownership rates are powerful long-term demographic drivers that should help mitigate the continued weakness in residential construction. Consumers viewing their homes as investments will continue to spend money on home improvement projects. Risks include a continued decline in the economy, a large rise in long term interest rates and failure by LOW to execute expansion strategy.
Conclusion: LOW 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 net total of five Stars. This quantitatively ranks LOW as a 5 Star-Strong Buy.
Using my D4L-PreScreen.xls model, I determined the share price could increase to $35.98 before LOW's NPV MMA Differential fell to the $3,000 that I like to see. At that price the stock would yield 0.92%.
Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the needed $3,000 NPV MMA Differential, the calculated rate is 13.6%. This dividend growth rate is substantially below the 20.0% used in this analysis, thus providing a margin of safety.
LOW has an S&P Quality Ranking of A+ from its consistent historical earnings and dividend growth. It has held up much better than its chief rival Home Depot (HD). I have followed LOW for some time, but have been hesitant to initiate a position in a cyclical company with such a low dividend yield. I calculate LOW's buy price at $33.11. For additional information, including LOW'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 held no position in LOW (0.0% of my Income Portfolio) .
What are your thoughts on LOW?
Recent Stock Analyses:
This article was written by Dividends4Life. If you enjoyed this article, please vote for it by clicking the Buzz Up! button below.
For your weekend reading pleasure, the articles listed below contain some of the best dividend and value investing insights found on the web. They were written by various members of the Dividend Investing and Value Network (DIV-Net) over the past week:
Articles From DIV-Net Members
There are some really good articles here, please take time and read a few of them.
If you enjoyed this article, please vote for it by clicking the Buzz Up! button below.
I purchased my first technology stock since 1999. I have followed Seagate Technology for a few years and finally purchased some shares late this week. I had been looking to purchase a technology stock that paid dividends as well. The company cut it's dividend earlier this week but the stock still yields over 3%.
Seagate Technology is one of the world's largest manufacturers of hard disc drives. This technology is used to store information in computers and other electronic devices, and almost all of the company's revenues are derived from the design, manufacture, and marketing of these hard disc drives. A limited amount of revenue (less than 1%) is generated by its wholly owned subsidiary, EVault Inc., which provides data storage services for small to medium-size businesses. The company's products are marketed under the Seagate Technology and Maxtor Corporation brand names.
The company has used acquisitions to strengthen its core business, while also expanding into newer, but potentially lucrative end-markets. In January 2007, the company acquired EVault Inc. for $187 million and expanded into the online data storage market. In May 2006, Seagate acquired a key competitor, Maxtor Corporation, for $1.9 billion.
I believe weak demand, along with some price deflation, will hurt STX margins and net income during the rest of 2009 which should then look to rebound some in 2010. I expect restructuring will help lower the company's high cost structure. I explect STX to continue free cash flow generation later this year and to maintain its leading market share position.
Disclosure: The Div Guy owns shares of STX at the time of this post.
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The Procter & Gamble Company (P&G), together with its subsidiaries, provides branded consumer goods products worldwide. The company operates in three global business units (GBU): Beauty, Health and Well-Being, and Household Care. At the same time company has managed to deliver a 12.10% average annual increase in its EPS since 1999. The ROE has decreased from 35-45% range in early 2000s to 18% by 2008. The severe drop in ROE seems to be mainly an effect of the Gillette acquisition. Annual dividend payments have increased by an average of 10.90% annually over the past 10 years, which is lower than the growth in EPS. If we invested $100,000 in PG on December 31, 1998 we would have bought 2190 shares (Adjusted for a 2:1 stock split in 2004). In March 1999 your quarterly dividend income would have been $312. If you kept reinvesting the dividends though instead of spending them, your quarterly dividend income would have risen to $1069 by October 2008. For a period of 10 years, your quarterly dividend income would have increased 181%. If you reinvested it however, your quarterly dividend income would have increased over 243%. The dividend payout has remained below 50% for the majority of our study period, with the exception of a brief spike in 1999 and 2000. A lower payout is always a plus, since it leaves room for consistent dividend growth minimizing the impact of short-term fluctuations in earnings. I think that PG is attractively valued with its low price/earnings multiple of 15, a not too high DPR. However the current dividend yield is below the 3% minimum threshold that I have set. Two of PG’s competitors, JNJ and KMB both trade at P/E multiples of 13 times earnings. JNJ currently spots a 3.20% dividend yield, while KMB has a 4.40% yield. I would consider adding to my PG holdings on dips below $53.30. Relevant Articles: This article was written by Dividend Growth Investor. If you enjoyed this article, please vote for it by clicking the Buzz Up! button below.
Procter & Gamble is a dividend aristocrat as well as a component of the S&P 500 index. One of its most prominent investors includes the legendary Warren Buffett. Procter & Gamble has been increasing its dividends for the past 52 consecutive years. From the end of 1998 up until December 2008 this dividend growth stock has delivered an annual average total return of 3.10 % to its shareholders.
An 11% growth in dividends translates into the dividend payment doubling almost every six and a half years. If we look at historical data, going as far back as 1973, PG has actually managed to double its dividend payment every seven years on average.
- Dividend Aristocrats List for 2009
- Dividend Aristocrats
- Best Dividends Stocks for the Long Run
- Best High Yield Dividend Stocks for 2009
- Best CD Rates
Last week, I posted on Henry Clews and a book he wrote called "The Wall Street Point of View." He would appear to be one of the earliest Value Investors. Here are some quotes that struck me while reading.
"How is a person to be absolutely certain that a given stock is cheap or dear at a given time ? You say, by comparison ? But if he compares the price with what it was at any past period, he must also be able to state all the facts that existed at that period having any bearing on this stock."
Beware a Value trap. Cheap doesn't mean buy it without thinking.
"After a careful and exhaustive search into all the materials at hand, he buys shares at, say, 60 per cent. of par, as being cheap at the price, and really worth more money, and next day they may be offered at 50. He then has really lost $10 on each share; but if he holds the purchase, and it ultimately advances to par, he has gained $40 per share."
Be a long term investor
"The careless and superficial public, coming in too late as bulls, found themselves at last compelled to become unwilling sellers at greater or less losses, in some cases so severe as to shatter households and drive citizens to ruin."
Beware momentum investing, or the greater fool theory.
"Thus the person who studies real values must not be content with that alone. He must also study the facts that in times of stress and storm make real values fluctuate as wildly in manner, if not in amount, as those of the most fanciful securities.."
Take advantage of other investors who panic.
This article was written by Stock Market Prognosticator. If you enjoyed this article, please vote for it by clicking the Buzz Up! button below.
Global agricultural products supplier Monsanto (MON) has hiked it's dividend by 10% from $0.24 to $0.265 per share.
The fourty billion dollar agricultural firm is currently yielding 1.4%, and the stock is up 420% over the last five years. Agricultural suppliers are certainly an interesting investment area going forward as the amount of arable land is not increasing, therefore inputs and technology must improve yields for an ever-growing population.
Here is a glance at Monsanto's recent dividend activity:
2005 = $0.340
2006 = $0.400
2007 = $0.505
2008 = $0.830
2009 = $1.035
This represents a compound annual growth rate of the dividend of 32%.
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Let's face it, there are some companies in our portfolio where we bought without completing our due diligence. Maybe Cramer was too convincing or your friend's rationale was logical at the time, but ultimately, it's our money and we only have ourselves to blame if something goes wrong.
To start remedying this situation, here is a list of red flags from Business Journalism that should raise concerns should you find your company following these points.
Many of these points have been raised in the book The Art of Short Selling which I wrote about here.Red Flags for Investors
View the full PDF here which also includes examples.
This article was written by Old School Value. If you enjoyed this article, please vote for it by clicking the Buzz Up! button below.
Not all value stocks are created equal - even if they offer strong dividend growth characteristics. I have been doing some research lately on stock screens to identify potential investment candidates and was reminded of a scoring methodology called the Piotroski scoring method. The premise is that of the large number of value stocks available to investors at any one time, only a few of them really provide the good returns that make value investing seem worthwhile. The trick is to screen out the bottom of the barrel of the value stocks and select only those companies that truly have a strong chance at survival. Here is the criteria that make up the Piotroski test.
1. Return on assets greater than zero.
2. Cash flow from operations greater than zero.
3. Return on assets in the most recent year higher than the year before.
4. Cash flow from operations greater than income.
5. The ratio of long-term debt to assets has decreased in the last year.
6. The current ratio -- current assets divided by current liabilities -- has increased in the past year.
7. The firm did not issue shares in the past year.
8. Gross margins have improved in the past year.
9. Asset turnover -- revenue divided by total assets -- has improved in the past year.
Again, these criteria are designed to weed out the bottom of the barrel of the value stocks. Of the stocks that pass, the notion is that the investor can be assured that they are al least strong enough to survive and in fact may be set up for future success. The data shows strong support for this, and the screen run over at the members section of the AAII shows very good performance. My approach with this screen is to use it as a further tool to analyze my stocks as opposed to a buy list.
If you have used this method successfully in the past, please let me know.
This article was written by The Dividend Guy. You may email questions or comments to me at info@thedividendguyblog.com.
Company Description: Legg Mason, Inc. is a diversified investment manager serving individual and institutional investors through offices around the United States.
Fair Value: I consider four calculations of fair value, see page 2 of the linked PDF for a detailed description:
LM is trading at a discount to 1.) and 2.) above. Since LM's tangible book value is not meaningful, a Graham number can not be calculated. If I exclude the high and low valuations and average the remaining two, LM is trading at a 22.8% discount. LM earned a Star in this section since it is trading at a fair value.
Dividend Analytical Data: In this section I consider five factors, see page 2 of the linked PDF for a detailed description:
LM earned three Stars in this section for 1.), 2.) and 3.) above. Rolling 4-yr Div. > 15% means that dividends grew on average in excess of 15% for each consecutive 4 year period over the last 10 years (1999-2002, 2000-2003, 2001-2004, etc.) I consider this a key metric since dividends will double every 5 years if they grow by 15%. LM has paid a cash dividend to shareholders every year since 1983 and has increased its dividend payments for 27 consecutive years. Last year's dividend payout was 44%, up from 15% in 2007. Since the increase was in excess of 15 points, a Star is deducted, leaving a net of two Stars in this section.
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:
LM earned both of the available Stars in this section. The NPV MMA Diff. of the $239,028 is in excess of the $2,500 minimum I look for in a stock that has increased dividends as long as LM has. LM's current yield of 4.64% exceeds the 3.45% estimated 20-year average MMA rate.
Other: LM is a member of the S&P 500, a Dividend Aristocrat and a member of the Broad Dividend Achievers™ Index. The company has a strong market share and boasts an impressive historic investment performance. However, recent under performance in some of LM's flagship funds may have resulted in increased client redemptions. That combined with struggling equity markets, have resulted in sharply lower asset balances. Risks include industry cyclicality, acquisition integration further market declines and poor investment performance.
Conclusion: LM earned one Star in the Fair Value section, earned two Stars in the Dividend Analytical Data section and earned two Stars in the Dividend Income vs. MMA section for a net total of five Stars. This quantitatively ranks LM as a 5 Star-Strong Buy.
Using my D4L-PreScreen.xls model, I determined the share price could increase to $85.88 before CFR's NPV MMA Differential fell to the $3,000 that I like to see. At that price the stock would yield 1.12%.
Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the needed $3,000 NPV MMA Differential, the calculated rate is 0.5%. This dividend growth rate is substantially below the 20.0% used in this analysis.
LM has not increased its dividend since June 2007 and runs the risk of losing its status as a Dividend Aristocrat. Before initiating a position, I would wait and determine LM's dividend policy going forward. LM's buy price is $27.26. For additional information, including LM'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 held no position in LM (0.0% of my Income Portfolio) .
What are your thoughts on LM?
Recent Stock Analyses:
This article was written by Dividends4Life. If you enjoyed this article, please vote for it by clicking the Buzz Up! button below.
For your weekend reading pleasure, the articles listed below contain some of the best dividend and value investing insights found on the web. They were written by various members of the Dividend Investing and Value Network (DIV-Net) over the past week:
Articles From DIV-Net Members
There are some really good articles here, please take time and read a few of them.
If you enjoyed this article, please vote for it by clicking the Buzz Up! button below.
I often get asked for assistance in finding the best information on dividends out there. I have compiled a list of helpful links for your reference.
No matter if you are a new or a seasoned dividend investor, there are several lists containing high quality dividend stocks which could provide a good start in your research. Such lists include the Dividend Aristocrats and the Dividend Achievers. I have mentioned previously what I liked about the Dividend Aristocrats and the Dividend Achievers as well.
Here’s a list of current dividend aristocrats. Here’s a list of the current members of the dividend achievers index.
Financial Information for detailed stock research
Morningstar - It provides ten year trend information for balance sheets, income statements and cash flow statements, which could be really useful for any fundamental investors.
Value Line- The best features of this service that I like are the historical Dow Jones charts along with dividends and earnings going back to 1920. Another extremely useful glimpse of Value Line’s services is the complementary list of free stock reports covering all 30 Dow Jones industrials companies.
SEC – The Securities and Exchange Commission website is where you could find a variety of filings, including but not limited to financial statements filed by public companies. Other filings include ownership changes by major investors such as Warren Buffett.
ADVFN – This site also provides useful historical financial information on US and foreign stocks. One thing that I like ADVFN better than Morningstar is that it offers free financial statement historical data for up to 15 years.
Google Finance – I enjoy checking recent quarterly or annual financial statements at Google Finance, as they seem to be updated more often than other sites offering similar services. This site is still in a Beta Version, so I would expect Google to add more functions to this service.
Yahoo Finance – I use Yahoo Finance for historical prices and dividends on the stocks I am researching. You could also create portfolios after you register, and track news related to the stocks that interest you. You should always try to check your information with other sites however, as I have found on several occasions missing data pertaining to stocks going ex-dividend. One another thing that I like about Yahoo Finance is the ability to check the holdings of various indexes, including the various Dividend Achievers Indexes.
If you are looking to learn more about dividend investing, then I would recommend starting out with The Div-Net, which has many members. The site is updated at least once a day with useful information pertaining to value and dividend investing.
Which are your favorite resources? Are there any other resources that I should add to this list?
Relevant Articles:
- Dividend Aristocrats List for 2009
- Best Dividends Stocks for the Long Run
- Best High Yield Dividend Stocks for 2009
- Best CD Rates
This article was written by Dividend Growth Investor . If you enjoyed this article, please vote for it by clicking the Buzz Up! button below.
Henry Clews lived in the nineteenth and early twentieth centuries and wrote several books on Wall Street. One that I read recently was called "The Wall Street Point of View" and had a few quotes that would seem to be the early nuggets of Value Investing.
"One invariable rule there is...Buy only what you can pay for; buy when cheap and sell when dear. The veriest financial infants can see the force of this."
The above quote is one of the basic tenants of Value Investing - buy when others are selling, and sell when they are buying. He also warns against excessive leverage.
"People have preconceived notions. They are not willing to clear their minds of existing theories and bring themselves down to close dealing with facts.- They are apt to base their conclusions on the opinions of others."
His attempt at the behavioral psychology of the market.
"People are usually unwilling to act on conclusions that conflict with their desires, and that involve the acceptance of immediate losses."
Here he warns about loss aversion, one of the most common investor mistakes, and one that we all have trouble dealing with.
More next Thursday.
This article was written by Stock Market Prognosticator. If you enjoyed this article, please vote for it by clicking the Buzz Up! button below.
In every crisis therein lies opportunity. The Financial Crisis of 2007-2009, as it is defined by Wikipedia has yielded many, many losers including Lehman Brothers, Bear Stearns, and Countrywide Financial. As these giants crumble, with jobs and fortunes lost, somewhere people will benefit from these events.
Canadian bank, Bank of Montreal scooped up the Canadian life insurance assets of American International Group (AIG) for about $305 million USD. "Here you've got a bank that is selling an 8.5 percent dividend yield, reflecting concern about its outlook, concern about its capital, and yet it can go ahead and buy something for C$375 million cash." said one analyst. Whether BMO will benefit from this transaction long term remains to be seen, but one could argue that BMO is making a opportunistic acquisition at a good price.
There are several other examples of companies and individuals setting themselves up to profit from some aspect of the financial crisis, and there will be many more to come.
This article was written by the moneygardener. If you enjoyed this article, please vote for it by clicking the Buzz Up! button below.
The American Association of Individual Investors is a group that puts together a wealth of materials for, as their name implies, individual investors. Although I am not a member of the full subscription plan, I do peruse their material from time to time and came across the link above. In this artcile, the AAII presents some basic truths about portfolio management that I thought were worth mentioning here. What follows are not all the details so I encourage you to check the full article out.
Portfolio management is a large topic covering many different topics. Here are a few of my favorites from the article:
I skipped a couple as I did not totally agree with them - have a look to see which ones those were and let me know ifyou disagree with me leaving them out!
This article was written by The Dividend Guy. You may email questions or comments to me at info@thedividendguyblog.com.
Company Description: Cullen/Frost Bankers, Inc., through its subsidiaries, provides banking and financial services primarily in Texas.
Fair Value: I consider four calculations of fair value, see page 2 of the linked PDF for a detailed description:
CFR is trading at a discount to 1.) and 3.) above. If I exclude the high and low valuations and average the remaining two, CFR is trading at a 9.8% discount. CFR earned a Star in this section since it is trading at a fair value.
Dividend Analytical Data: In this section I consider five factors, see page 2 of the linked PDF for a detailed description:
CFR earned one Star in this section for 3.) above. CFR has paid a cash dividend to shareholders every year since 1993 and has increased its dividend payments for 14 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:
CFR earned both of the available Stars in this section. The NPV MMA Diff. of the $7,820 is in excess of the $7,500 minimum I look for in a stock that has increased dividends as long as CFR has. CFR's current yield of 3.75% exceeds the 3.54% estimated 20-year average MMA rate.
Other: CFR is a member of the Broad Dividend Achievers™ Index. While other financial institutions are lining up for a cash infusion from the Troubled Assets Relief Program (TARP), CFR took a line from Nancy Reagan and, ‘Just said no.’
“Cullen/Frost is well capitalized now and for the foreseeable future, with sufficient capital to grow our business and take advantage of acquisition opportunities," said Dick Evans, Cullen/Frost's chairman and CEO in a 2008 statement. Operating in a robust and growing Texas economy, CFR exhibits strong credit quality in its loan portfolio and tends to produce relatively stable financial results. Trading at a discount to it historical P/E, some view CFR as an attractive takeover candidate. Risks include unfavorable changes in the slope of the yield curve, operational performance and additional deterioration of the credit market.
Conclusion: CFR earned one Star in the Fair Value section, earned one Star in the Dividend Analytical Data section and earned two Stars in the Dividend Income vs. MMA section for a net total of four Stars. This quantitatively ranks CFR as a 4 Star-Buy.
Using my D4L-PreScreen.xls model, I determined the share price could increase to $44.95 before CFR's NPV MMA Differential fell to the $7,500 that I like to see. At that price the stock would yield 3.69%.
Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the needed $7,500 NPV MMA Differential, the calculated rate is 7.6%. This dividend growth rate is virtually the same as the the 7.8% used in this analysis.
By not accepting TARP funds CFR is in a position to continue to raise its dividend. With a risk rating of 1.25 (low), it is a stock that I will consider adding to my portfolio below its buy price of $44.95. For additional information, including CFR'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 held no position in CFR (0.0% of my Income Portfolio) .
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After much searching I found a stock screener for Canadian stocks (more on this in another post). I was able to assemble a Graham style screener with the following criteria:
Up popped two companies one of which is Methanex (MX-T). Showing up on the screener is not sufficient to merit my investment. So here is the abridged version of my analysis. Before diving in though I am compelled to say that I never analyze a company with the intent of buying and selling it within a few months. Also please, please this is my analysis any investment you make should supplement what I present here and possibly involve consulting your own investment consultant.Company Intro
Methanex is in the business of extracting and shipping methane (surprise). Methane is the central component in natural gas (about 87% by volume). Its principal use therefore is in heating and energy production in addition to a number of industrial uses.Company Fundamentals
Analysis of General Market
As Methanex essentially trades in a commodity it is worthwhile to look at the overall health of the industry:
We see then that generally last year was a good year for the sales of methane with an average strike price of $1.65 compared to the year before of $1.42. There is some cause for concern though with the January prices receding back to $.70, a price not seen since December 2003.Understanding How the Company Came to be Cheap
Other Opinions on Methanex
President Lincoln believed in surrounding himself with people who did not necessarily agree with his opinion. I believe this is one of the best ways to test your research. I would encourage you to read the following, please keep in mind that some of these links refer to the American stock, not the Canadian so prices targets will differ:Summary Comments
Negative
Positive
Disclosure
At the time of writing the author is in the process of purchasing MX at $13.50
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For your weekend reading pleasure, the articles listed below contain some of the best dividend and value investing insights found on the web. They were written by various members of the Dividend Investing and Value Network (DIV-Net) 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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In a previous article, I discussed that when your dividend stock cuts or eliminates its dividend, it would be a good decision to admit that you were wrong on this decision and sell immediately. I understand that selling and admitting that one is wrong is a very difficult decision from a psychological standpoint. But it is essential to cut your losses on some investments that you would not otherwise consider buying in order to protect your capital and stay in the game.
Admitting that you are wrong and taking a decisive action, instead of hoping that the things would turn out for the better works both ways. When companies cut their dividends, I sell their stock immediately. My recent experience with ACAS is an example of that. However when a company that has cut or eliminated their dividends announces that it would start increasing its dividends again or its initiating a dividend payment I would definitely consider initiating a position. Dollar cost averaging my way into this position could be an ideal way to get a feel of how your investment might perform. Another entry signal that one could look for is for the company to increase its dividends for at least ten years, before buying back their shares in the stock.
Relevant Articles:
- Dividend Aristocrats List for 2009
- Dividend Aristocrats
- Best Dividends Stocks for the Long Run
- Best High Yield Dividend Stocks for 2009
- Best CD Rates
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Some more words of wisdom from the dusty annals of Wall Street courtesy of Google books. Those of you who feel a little beat up by the investing results of last year, read the words of William Worthington Fowler, author of "Ten Years in Wall Street; Or, Revelations of Inside Life and Experience on 'change."
"Men come into Wall Street with fortune, credit, reputation, hope, strength unbruised, confidence in their fellow-men unworn, they leave it without money, credit, or reputation; with shattered nerves, a blunted sensibility, a conscience seared, a faith in mankind destroyed, and hopes crushed by a Giant Despair. They lose everywhere, buying stocks, selling stocks; by failures of their brokers, by frauds of their contractors, by panics, by corners, by tricks and stratagems of the market. They use their reason, their reason fails them and they lose. Then they abandon reason, and trusting to luck, plunge blindly into the vortex which swallows them up speedily and beyond rescue. If they emerge at last, it is to wander on with little relish or power for active, honest toil, and haunted still by the phantoms of their old life."
And then here's the part that fit in right with today's market:
"The field of speculation was never more dangerous than now. The market is full of stocks watered to five times the amount represented eight years since. Men in Wall Street are treading upon the hardly cooled lava crust which covers a financial volcano; an eruption may whelm them any day in one common ruin."
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As another new year is now upon us many of us turn to goals and resolutions for the upcoming year. Losing weight is probably the big one; notice how busy the gym gets this time of year. I personally feel that growing dividend income is a really solid goal to go after in 2009.
If you are currently pulling in money in the form of dividends, why not set a goal now to grow dividend income by a certain amount by New Years 2010? We all like obtaining raises in employment income, and this is a worthwhile pursuit, but the road to growing dividend income is certainly more straightforward.
So how do we go about this? Save more money. Where can you chop expenses, what can you avoid purchasing to instead grow your dividend income. At current stock valuations, 2009 might just be a good year to build on your portfolio and grow your dividend income. I am betting that you will not regret this action if you invest in high quality firms that tend to raise their dividends regularly. Invest in your future and feed your dividend income in 2009!
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If you have been reading this blog, or other dividend blogs, then you know all about the Mergent Dividend Achievers and the S&P Dividend Aristocrats. However, these are not the only games in town for identifying stocks with super-strong histories of dividend growth. There is another one available at a site called the DRiP Investing Resource Center.
At the site, webmaster George Smyth maintains a list of stocks called the U.S. Dividend Champions. The criteria for a stock to make it on this list is explained as part of the report:The initial goal was to identify companies that had increased their dividend for at least 25 consecutive years, but, as explained below, the definition was broadened to include additional companies that had paid higher dividends without having increased the quarterly payout in every calendar year. I also decided to follow companies that had increased their dividend for 20-24 straight years, since they are likely to join the 25-year "Champions" soon.
I like this list because it is more inclusive to ensure companies that should be on the list are. In addition, the contributors also keep an eye out for companies that are very close to achieving the U.S. Dividend Champion designation. So, if you are looking for a list of dividend growth stocks to invest in, this is an excellent resource. It is available in both Excel and PDF.
This article was written by The Dividend Guy. You may email questions or comments to me at info@thedividendguyblog.com.
Linked here is a detailed quantitative analysis of Procter & Gamble Co. (PG) (alt.1, alt.2). Below are some highlights from the above linked analysis:
Company Description: The Procter & Gamble Company (P&G) is focused on providing branded consumer goods products. The Company markets its products in more than 180 countries.
Fair Value: I consider four calculations of fair value, see page 2 of the linked PDF for a detailed description:
PG is trading at a discount to 1.) and 3.) above. Since PG's tangible book value is not meaningful, a Graham number can not be calculated. If I exclude the high and low valuations and average the remaining two, PG is trading at a slight discount. PG earned a Star in this section since it is trading at a fair value.
Dividend Analytical Data: In this section I consider five factors, see page 2 of the linked PDF for a detailed description:
PG earned two Stars in this section for 3.) and 4.) above. PG has paid a cash dividend to shareholders every year since 1891 and has increased its dividend payments for 52 consecutive years. It's one year dividend growth rate exceeded its 5-year growth rate. This could indicate the growth rate is accelerating.
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:
PG earned one Star in this section for 1.) above. The NPV MMA Diff. of the $5,179 is in excess of the $2,500 minimum I look for in a stock that has increased dividends as long as PG has. If PG grows its dividend at 10.7% per year, it will take 7 years to equal the cumulative earnings from a MMA yielding an estimated 20-year average rate of 3.54%.
Other: PG is a member of the S&P 500, a Dividend Aristocrat and a member of the Broad Dividend Achievers™ Index. Product demand for household and personal care products is generally stable and not affected by changes in the economy or geopolitical factors. PG has historically delivered consistent sales and earnings growth near the high end of its peer group, and I see no reason for this to change over the next several years. The company continues to benefit from the Gillette acquisition and from growth prospects in new markets and categories. PG is well positioned to benefit from growth of household and personal care products in developing countries. Risks include heightened competition, unfavorable currency translation, higher commodity costs, higher promotional spending and low consumer acceptance of new products.
Conclusion: PG 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 net total of four Stars. This quantitatively ranks PG as a 4 Star-Buy.
Using my D4L-PreScreen.xls model, I determined the share price could increase to $66.10 before PG's NPV MMA Differential fell to the $3,000 that I like to see. At that price the stock would yield 2.19%.
Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the needed $3,000 NPV MMA Differential, the calculated rate is 8.9%. This dividend growth rate is below the 10.7% used in this analysis, providing a margin of safety.
PG is one of the true quality blue chip dividend stocks. I will continue to add to my position below my buy price of $66.10. For additional information, including PG's dividend history, please refer to its data page.
Disclaimer: Material presented here is for informational purposes only. The above quantitative stock analysis, including the Star rating, is mechanically calculated and is based on historical information. The analysis assumes the stock will perform in the future as it has in the past. This is generally never true. Before buying or selling any stock you should do your own research and reach your own conclusion. See my Disclaimer for more information.
Full Disclosure: At the time of this writing, I was long in PG (2.4% of my Income Portfolio) .
What are your thoughts on PG?
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