Stock Analysis: The Clorox Company (CLX)

Linked here is a detailed quantitative analysis of The Clorox Company (CLX). Below are some highlights from the above linked analysis:

Company Description: The Clorox Company is a diversified producer of household cleaning, grocery, and specialty food products is also a leading producer of natural personal care products.

Fair Value: In calculating fair value, I consider the NPV MMA Differential Fair Value along with these four calculations of fair value, see page 2 of the linked PDF for a detailed description:

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

CLX is trading at a discount to only 1.) above. Since CLX's tangible book value is not meaningful, a Graham number can not be calculated. The stock is trading at a 7.5% discount to its calculated fair value of $74.92. CLX 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%

CLX 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. CLX earned a Star for having an acceptable score in at least two of the four Key Metrics measured. The company has paid a cash dividend to shareholders every year since 1968 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

CLX earned a Star in this section for its NPV MMA Diff. of the $1,441. This amount is in excess of the $500 target I look for in a stock that has increased dividends as long as CLX has. If CLX grows its dividend at 9.3% per year, it will take 3 years to equal a MMA yielding an estimated 20-year average rate of 4.%. CLX earned a check for the Key Metric 'Years to >MMA' since its 3 years is less than the 5 year target.

Memberships and Peers: CLX is a member of the S&P 500, a Dividend Aristocrat and a member of the Broad Dividend Achievers™ Index and a Dividend Champion. The company’s peer group includes: Procter & Gamble Co. (PG) with a 3.2% yield, Colgate-Palmolive Co. (CL) with a 2.7% yield, and Kimberly-Clark Corporation (KMB) with a 4.1% yield.

Conclusion: CLX 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 CLX as a 4 Star-Buy.

Using my D4L-PreScreen.xls model, I determined the share price would need to increase to $96.07 before CLX'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 1.24%.

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 6.2%. This dividend growth rate is below the 9.3% used in this analysis, thus providing a margin of safety. CLX has a risk rating of 1.25 which classifies it as a Low risk stock.

As a consumer goods company, CLX sells products with a stable demand that are generally not affected by changes in the economy. Its products are well known and include these popular brands: Fresh Step, Brita, Glad, Pine-Sol, Hidden Valley, Scoop Away, K C Masterpiece, S.O.S., Kingsford, Tilex, Formula 409, Liquid-Plumr, and, of coarse, its namesake product, Clorox. The company's presence in the natural home/personal care products arena through Burt's Bees and GreenWorks is viewed positively by environmentalists. 

Although the stock is trading below my calculated fair value of $74.92, I am hesitant to add to my position due to its Debt To Total Capital of 103%. I would like to see this number come down some before buying.

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 CLX (0.4% of my Income Portfolio); in addition, I held positions in PG, CL and KMB. See a list of all my income holdings my income holdings here.

Related Articles:
- Community Trust Bank Corp. (CTBI) Dividend Stock Analysis
- Abbott Laboratories (ABT) Dividend Stock Analysis
- Colgate-Palmolive (CL) Dividend Stock Analysis
- Intel Corporation (INTC) 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].

Weekend Reading Links - May 29, 2011

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

Articles From DIV-Net Members
There are some really good articles here, please take time and read a few of them.

Stock Analysis: Chevron Corporation

Chevron Corporation (CVX), through its subsidiaries, engages in petroleum, chemicals, mining, power generation, and energy operations worldwide. It operates in two segments, Upstream and Downstream. Chevron is a component of the Dow Jones Industrials and the dividend achievers indexes. Chevron has paid uninterrupted dividends on its common stock since 1912 and increased payments to common shareholders every year for 17 years.

The most recent dividend increase was in April 2010, when the Board of Directors approved a 5.90% increase to 72 cents/share. The major competitors of Chevron include Exxon-Mobil (XOM), British Petroleum (BP) and Total (TOT).

Over the past decade this dividend growth stock has delivered an annualized total return of 13.10% to its loyal shareholders.

The company has managed to deliver an increase in EPS of 19.90% per year since 2001. Analysts expect Chevron to earn $12.19 per share in 2011 and $12.94 per share in 2012. This would be a nice increase from the $9.48/share the company earned in 2010. On average the company has managed to repurchase 0.76% of its stock annually over the past decade.

New field developments are expected to generate 1%-2% annual production growth over the next five years. Most of the capital spending on exploration and production would go into the Australia LNG, Gulf of Mexico and deepwater projects. Higher oil prices would also result in high earnings per share. The company is working on acquiring and developing assets which would provide strong results in the future and also add to its reserves. Chevron’s recent acquisition of Atlas Energy is just one example of this strategy. The company is also disposing of assets which generate lower margins. One example is the disposition of a refinery in the UK for $1.7 billion dollars.

On the negative side, there is a court ruling in Ecuador against Chevron for a potential $8.60 billion, which amounts to $4.30/share. The likelihood of CVX having to pay this entire amount however is pretty slim to none however.

Over the past decade, the return on equity increased from 10% in 2001 to 20% by 2010. 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 8.80% per year since 2001, which is higher than the growth in EPS.

A 9% growth in distributions translates into the dividend payment doubling every eight years. If we look at historical data, going as far back as 1990, we see that Chevron has actually managed to double its dividend every ten and a half years on average.


Over the past decade the dividend payout ratio has increased, and remained mostly under 50%. This indicator spiked up on a few occasions mainly due to short term weakness in EPS caused by declines in oil and gas prices. 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 Chevron is trading at 11.40 times earnings, yields 2.70% and has a sustainable dividend payout. The stock is attractively valued, and if the high oil prices are here to stay Chevron would certainly be able to enjoy high earnings per share in the foreseeable future. Despite the fact that Chevron fits my entry criteria, the massive run up in its share price since I last reviewed the stock in 2010 is makes me uneasy about committing additional capital in the stock. This being said, as long as the share price is below $115 the stock is a buy. Ideally, if the price dropped below $96, which provides an entry yield of 3%, I would probably be more bullish on the stock.

Full Disclosure: Long CVX

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].

Stock Analysis: W.W. Grainger, Inc. (GWW)

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

Company Description: Grainger Inc. is the largest global distributor of industrial and commercial supplies, such as hand tools, electric motors, light bulbs and janitorial items.

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

GWW is trading at a premium to all four valuations above. The stock is trading at a 8.8% premium to its calculated fair value of $138.61. GWW 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%

GWW 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%. GWW 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.) The company has paid a cash dividend to shareholders every year since 1965 and has increased its dividend payments for 40 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

GWW earned a Star in this section for its NPV MMA Diff. of the $1,354. This amount is in excess of the $500 target I look for in a stock that has increased dividends as long as GWW has. If GWW grows its dividend at 15.0% per year, it will take 7 years to equal a MMA yielding an estimated 20-year average rate of 4.%.

Memberships and Peers: GWW is a member of the S&P 500, a Dividend Aristocrat, a member of the Broad Dividend Achievers™ Index and a Dividend Champion. The company’s peer group includes: Fastenal Co. (FAST) with a 1.6% yield, GATX Corp. (GMT) with a 3.0% yield, and Applied Industrial Technologies, Inc. (AIT) with a 2.2% yield.

Conclusion: GWW did not earn any Stars in the Fair Value section, earned three Stars in the Dividend Analytical Data section and earned one Star in the Dividend Income vs. MMA section for a total of four Stars. This quantitatively ranks GWW as a 4 Star-Buy.

Using my D4L-PreScreen.xls model, I determined the share price would need to increase to $203.99 before GWW's NPV MMA Differential decreased to the $500 minimum that I look for in a stock with 40 years of consecutive dividend increases. At that price the stock would yield 1.24%.

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 12.3%. This dividend growth rate is below the 15.0% used in this analysis, thus providing a margin of safety. GWW has a risk rating of 1.00 which classifies it as a Low risk stock.

GWW has a excellent record of growing both earnings and dividends. The company's enjoys competitive advantages from its diverse product line, localized products and scale. Improving economic conditions in its global markets will continue to benefit GWW. In spite of its exceptional dividend fundamentals, GWW's valuation (8.8% premium) and low yield (1.7%) prevent me from giving the stock serious consideration 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 held no position in GWW (0.0% of my Income Portfolio). See a list of all my income holdings here.

Related Articles:
- Abbott Laboratories (ABT) Dividend Stock Analysis
- Colgate-Palmolive (CL) Dividend Stock Analysis
- Intel Corporation (INTC) Dividend Stock Analysis
- Wal-Mart Stores, Inc. (WMT) Dividend Stock Analysis
- More Stock Analysis

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

Weekend Reading Links - May 22, 2011

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

Articles From DIV-Net Members
There are some really good articles here, please take time and read a few of them.

Stock Analysis: United Technologies

United Technologies Corporation (UTX) provides technology products and services to the building systems and aerospace industries worldwide. The company operates in six segments: Pratt & Whitney, Otis, Carrier, Sikorsky, UTC Fire & Security and Hamilton Sundstrand. United Technologies is a component of the Dow Jones Industrials and the dividend achievers indexes. United Technologies has paid uninterrupted dividends on its common stock since 1936 and increased payments to common shareholders every year for 17 years.

The most recent dividend increase was in April, when the Board of Directors approved a 12.90% increase to 48 cents/share. The major competitors of United Technologies include Honeywell (HON), General Electric (GE) and Boeing (BA).

Over the past decade this dividend growth stock has delivered an annualized total return of 10.70% to its loyal shareholders.

The company has managed to deliver an increase in EPS of 10.60% per year since 2001. Analysts expect United Technologies to earn $5.36 per share in 2011 and $6.08 per share in 2012. This would be a nice increase from the $4.74/share the company earned in 2010.

Over the past decade, the return on equity has consistently remained above 20%. 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 15.90% per year since 2001, which is higher than the growth in EPS.

A 16% growth in distributions translates into the dividend payment doubling every four and a half years. If we look at historical data, going as far back as 1977, we see that United Technologies has actually managed to double its dividend every eight and a half years on average.

Over the past decade the dividend payout ratio has steadily increased, as dividends increased at much higher rate than earnings. While this indicator is at 36%, there is still more room for high dividend growth. 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 United Technologies is trading at 18.40 times earnings, yields 2.30% and has a sustainable dividend payout. The stock is close to my entry criteria, and could be a buying opportunity on dips below $77.

Full Disclosure: Long UTX

Relevant Articles:

  • High Yield Stocks Raising Dividends
  • My Entry Criteria for Dividend Stocks
  • Seven Dividend Aristocrats to buy on dips
  • Dividend Achievers Offer Income Growth and Capital Appreciation

    • 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].

    Cincinnati Financial Corp. (CINF) Dividend Stock Analysis

    Cincinnati Financial Corporation is a property and casualty insurance company operating in 39 states. Through its subsidiary, The Cincinnati Life Insurance Company, it also provides life insurance. The company was formed in 1950 and is a Dividend Aristocrat. That's quite a track record since at least 25 of the 61 years of operation, the company has increased their dividends to shareholders. In fact, the company proudly mentions on their site that they have increased dividends for 50 years consecutively.

    Quick Facts

    • Stock Ticker: CINF
    • Market Cap.: 5.08B$
    • P/E: 13.67
    • Forward P/E: 20.61
    • P/B: 0.99
    • EPS: $2.28
    • Beta: 0.662
    • Liabilities to Equity Ratio: 2.00
    • Quarterly Dividends: $0.40
    • Dividend Yield: 5.14%
    • Dividend Payout Ratio: 68.53%
    • ROE: 9.64%
    • 5 Year EPS Growth Average: 25.26%
    • 5 Year Dividend Growth Average: 4.44%
    • 52-Week Low: $25.25
    • 52-Week High: $34.33
    • 52-Week Range: 64.87%
    It has been 2 years now since the financial crisis hit the markets and while the banks have recovered, namely most of the Canadian banks, the insurance companies are starting to show signs of recovery. CINF was impacted in their stock price and followed the markets but their business was would have been shielded from the mortgage crisis compared with many Canadian life insurance companies as they were exposed to many financial products.

    Here are the 1 year and 5 year charts. I like to see how it has been performing over the past year and how it did before the market crash.

    CINF Dividend Stock Analysis

    CINF Dividend Stock Analysis

     


    Dividend Growth

    As a dividend aristocrat, you wouldn't expect anything else in terms of dividend growth. Clearly the growth slowed down during the financial crisis. I would expect 2011 to show better growth or at least show signs through other metrics if not dividends.

    CINF Dividend Growth


    Dividend Payout Ratio

    The payout ratio had significantly improved over the past decade and I am glad to see it did not go as high as it has in the past. A 60% payout is decent considering the financial market situation over the past 2 years. I'd like to see it go back down now for a sign of recovery.

    CINF EPS Growth

    EPS Growth

    CINF shows it wasn't immune to the market crisis even if it wasn't exposed to the mortgage sub-prime as Manulife and other insurance companies were. Clearly, the financial struggles of individuals affected their point of sale performance for lower earnings. I am surprised that 2010 wasn't higher than 2009. Earnings for the first quarter of 2011 are currently lower than the 1st quarter of 2010.

    CINF Dividend Payout Ratio


    Thoughts

    One aspect of the company I like is its business focus. It is relatively small compared with the major Canadian insurance companies I am familiar with and it continues to focus on what they are good at. They have strong fundamentals and I can't overlook 50 years of dividend increase. Analysts tend to be bearish on the stock at the moment and it could make it a contrarian investment. Casualty and property insurance may actually take slightly longer to recover.

    As a Canadian investor, the value of the dollar provides us with opportunity to invest in solid US companies and CINF may just fit the bill and the timing may be appropriate.

    Interestingly enough, Sun Life and Great West LifeCo both have a similar yields with a good history of dividend growth. Comparing them to each other, GWO would be the winner from a growth perspective over the past 10 years.

    Insurance Investment

    Full Disclosure: No positions in CINF, GWO as of writing. Long SLF
    Disclaimer: The material presented should not be considered a recommendation. You should always do your own research and reach your own conclusion.

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

    Crown Holdings Stock Analysis

    Packaging companies design and manufacture the containers and bottles for consumer goods. This packaging company is responsible for manufacturing approximately 20% of the beverage cans used globally. This packaging company is the largest producer of aerosol and food cans in the world. This packaging company is well positioned to profit off of rising growth trends in foreign markets.

    Crown Holdings (CCK) is one of the largest packaging companies in the world. The company designs packages for food products, drinks, beauty supplies, and household products. Crown Holdings is a Fortune 500 company with 139 plants in 41 different countries and has been in business since 1892.

    Crown Holdings booked $8.3 billion in sales last year. Half of Crown’s revenue comes from the company’s sales of beverage cans alone. Crown is projected to earn $8.57 billion for the current year and $9.12 billion dollars in 2012. This would represent an increase in sales of 4% with the 5 year projected growth rate at 9.4%.

    Crown will likely exceed these projections as the company has a history of guiding down to lower Wall Street expectations.

    Crown Holdings has done an excellent job of generating cash with over $615 million in free cash flow this year. Operating margins are high at over 10.4%. Management has done a solid job of becoming leaner by decreasing costs. Crown has lowered its interest expense from $61 million to $47 million dollars by paying off outstanding debt and lowering its borrowing costs. The net effect has been an increase in profitability over the last two years with Crown Holdings.

    Crown currently trades a 14 times this year’s earnings and 12.5 times next year’s estimates. That’s right in line with the industry average. The stock is not cheap at $40 a share but would be attractive in the mid $30’s.
    This article was written by [Buy Like Buffett]. If you enjoyed this article, please consider subscribing to my feed at [RSS].

    Stock Analysis: Community Trust Bank Corp. (CTBI)

    Linked here is a detailed quantitative analysis of Community Trust Bank Corp. (CTBI). Below are some highlights from the above linked analysis:

    Company Description: Community Trust Bank Corp. owns and operates Community Trust Bank, Inc. of Pikeville, KY, which provides commercial banking services in Kentucky and West Virginia; and a trust company.

    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

    CTBI is trading at a discount to only 3.) above. The stock is trading at a 5.4% premium to its calculated fair value of $25.55. CTBI 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%

    CTBI 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%. CTBI earned a Star for having an acceptable score in at least two of the four Key Metrics measured. The company has paid a cash dividend to shareholders every year since 1988 and has increased its dividend payments for 31 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 $244 is below the $500 target I look for in a stock that has increased dividends as long as CTBI has. The stock's current yield of 4.53% exceeds the 4.0% estimated 20-year average MMA rate.

    Memberships and Peers: CTBI is and a member of the Broad Dividend Achievers™ Index and a Dividend Champion. The company’s peer group includes: IberiaBank Corp. (IBKC) with a 2.3% yield, Hancock Holding Co. (HBHC) with a 3.0% yield, and Capital City Bank Group Inc. (CCBG) with a 3.6% yield.

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

    Using my D4L-PreScreen.xls model, I determined the share price would need to decrease to $23.19 before CTBI's NPV MMA Differential increased to the $500 minimum that I look for in a stock with 31 years of consecutive dividend increases. At that price the stock would yield 4.53%.

    Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the target $500 NPV MMA Differential, the calculated rate is 2.5%. This dividend growth rate is well above the 0.8% used in this analysis, thus providing no margin of safety. CTBI has a risk rating of 1.00 which classifies it as a Low risk stock.

    CTBI is an interesting stock. Its debt position and cash flow are excellent. Dividend growth is my one concern. The stock's dividend was flat from December 2008 to September 2010, then it raised its dividend 1.7%. At its curent yield, I would like to see a sustained 3-5% dividend growth rate. I will wait for CTBI’s next dividend increase before deciding to buy or not.

    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 CTBI (0.0% of my Income Portfolio). See a list of all my income holdings here.

    Related Articles:
    - Colgate-Palmolive (CL) Dividend Stock Analysis
    - Intel Corporation (INTC) Dividend Stock Analysis
    - Wal-Mart Stores, Inc. (WMT) Dividend Stock Analysis
    - ConocoPhillips (COP) 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].

    Weekend Reading Links - May 15, 2011

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

    Articles From DIV-Net Members
    There are some really good articles here, please take time and read a few of them.

    Stock Analysis: 3M

    3M Company (MMM), together with subsidiaries, operates as a diversified technology company worldwide. The company is member of the S&P 500 and the S&P Dividend Aristocrats indexes. 3M has paid uninterrupted dividends on its common stock since 1916 and increased payments to common shareholders every year for 53 years.The most recent dividend increase was in February, when the Board of Directors approved a 4.80% increase to 55 cents/share. The major competitors of 3M include General Electric (GE), Carlisle (CSL) and Raven Industries (RAVN).


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

    The company has managed to deliver an increase in EPS of 13.60% per year since 2001. Analysts expect 3M to earn $6.21 per share in 2011 and $6.95 per share in 2012. This would be a nice increase from the $5.63/share the company earned in 2010.


    Growth in EPS would come from higher revenues due to the global economic rebound from the 2007 – 2009 recession, as well as synergies realized from recent acquisitions of companies such as Cogent. Growth in developing countries such as China should also add to future profitability. The real growth kick factor behind 3M however is the company’s innovative products. 3M has spent approximately six percent of its revenues on innovation in the form of R&D over the past decade. 3M’s culture, where business units are encouraged to generate more revenues by introducing new products should bolster the company’s future profitability.

    Over the past decade, the return on equity has consistently remained above 27%. Rather than focus on absolute values for this indicator, I generally want to see at least a stable return on equity over time.

    The annual dividend payment has increased by 6.40% per year since 2001, which is lower than the growth in EPS.

    A 6.40% growth in distributions translates into the dividend payment doubling every 11 years. If we look at historical data, going as far back as 1973, we see that 3M has actually managed to double its dividend every nine and a half years on average.

    Over the past decade the dividend payout ratio has steadily decreased, as EPS growth easily outstripped dividend growth 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 3M is trading at 16.70 times earnings, yields 2.40% and has a sustainable dividend payout. The stock is close to my entry criteria, and could be a buying dips below $88. The slow dividend growth as of recently however has stopped me from adding to this position as of lately.

    Full Disclosure: Long MMM



    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].

    A Closer Look At PepsiCo Inc.

    There are a number of large cap stocks that are turning into good dividend stock for investors that are looking for income. Small cap stocks have had a much larger run up compared to large caps which has led to some large cap stocks becoming the place that investors can look to for safety during market swing. Today, I want to take a look at a large cap stock that is growing it earnings and increasing its dividend.

    PepsiCo Inc. (PEP) is the second largest soft drink company in the United States right behind Coca Cola. Pepsi is far more than just drinks as the company manufactures a number of food and snack products around the world. The company is responsible for popular products like Gatorade, Doritos, Cheetos, Quaker, and Frito Lay brands.

    Pepsi has been a long time market favorite as the company has done a great job of increasing revenues and profitability over time. The manufacturer has been able to grow earnings 6.3% over the last five years and 9% so far this year. Pepsi generates massive amounts of free cash flow and generously returns it back to shareholders. The company had $8.5 billion dollars in cash flow from operations last year.

    The company recently raised its quarterly distribution by 7.3% to $2.06 cents per share for the year. The company’s shares are now yielding 3% making Pepsi a decent dividend play. The recent increase marks the sixth consecutive annual dividend raise for the company. The dividend is easily sustainable with the current payout rate representing 45.6% of Pepsi’s earnings.

    Although I think that the dividend is solid, the stock is not cheap. Investors have to pay 15 times this year’s earnings in order to buy Pepsi’s shares. That is not cheap for a company that can conservatively grow earnings at an 8 to 9% clip for this year. Pepsi is cheaper than Coke however which has a slighter higher earnings growth rate but a higher P/E ratio attached as well.

    Investors that are looking for a company that should continue to thrive over the next few years and that has a dividend with staying power can do a lot worse than investing in Pepsi.

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

    Stock Analysis: Abbott Laboratories (ABT)

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

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

    Fair Value: 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

    ABT is trading at a discount to 1.) and 3.) above. Since ABT's tangible book value is not meaningful, a Graham number can not be calculated. The stock is trading at a 23.7% discount to its calculated fair value of $68.81. ABT earned a Star in this section since it is trading at a fair value.

    Dividend Analytical Data: In this section there are three possible Stars and three key metrics, see page 2 of the linked PDF for a detailed description:

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

    ABT earned two Stars in this section for 1.) and 3.) above. A Star was earned since the Free Cash Flow payout ratio was less than 60% and there were no negative Free Cash Flows over the last 10 years. ABT earned a Star for having an acceptable score in at least two of the four Key Metrics measured. The company has paid a cash dividend to shareholders every year since 1926 and has increased its dividend payments for 39 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

    ABT earned a Star in this section for its NPV MMA Diff. of the $1,533. This amount is in excess of the $500 target I look for in a stock that has increased dividends as long as ABT has. If ABT grows its dividend at 8.4% per year, it will take 2 years to equal a MMA yielding an estimated 20-year average rate of 4.0%. ABT earned a check for the Key Metric 'Years to >MMA' since its 2 years is less than the 5 year target.

    Memberships and Peers: ABT is a member of the S&P 500, a Dividend Aristocrat, a member of the Broad Dividend Achievers™ Index and a Dividend Champion. The company’s peer group includes: Bristol-Myers Squibb Company (BMY) with a 4.6% yield, Johnson & Johnson (JNJ) with a 3.5% yield, and Eli Lilly & Co. (LLY) with a 5.1% yield.

    Conclusion: ABT earned one Star in the Fair Value section, earned two Stars in the Dividend Analytical Data section and earned one Star in the Dividend Income vs. MMA section for a total of four Stars. This quantitatively ranks ABT as a 4 Star-Buy.

    Using my D4L-PreScreen.xls model, I determined the share price could increase to $74.47 before ABT's NPV MMA Differential decreased to the $500 minimum that I look for in a stock with 39 years of consecutive dividend increases. At that price the stock would yield 2.52%.

    Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the target $500 NPV MMA Differential, the calculated rate is 5.0%. This dividend growth rate is below the 8.4% used in this analysis, thus providing a margin of safety. ABT has a risk rating of 1.75 which classifies it as a Medium risk stock.

    All pharmaceutical companies face the inevitable patent expirations and the ensuing generic competition. However, ABT has a strong product pipeline including potential significant launches in the medical device and pharmaceutical areas. In addition to pharmaceutical, ABT will also rely on its diagnostics business, nutritional division, and an emerging vascular group to generate future earnings. With its strong financials and excellent management team, ABT is in a position to continue its growth (internal, acquisitions and through strategic partnerships) and to generate strong returns. I will continue to add to my position while it is trading below my buy price of $68.81 and as my allocation allows.

    Disclaimer: Material presented here is for informational purposes only. The above quantitative stock analysis, including the Star rating, is mechanically calculated and is based on historical information. The analysis assumes the stock will perform in the future as it has in the past. This is generally never true. Before buying or selling any stock you should do your own research and reach your own conclusion. See my Disclaimer for more information.

    Full Disclosure: At the time of this writing, I was long in ABT (4.9% of my Income Portfolio) and also held a positions in JNJ. See a list of all my income holdings here.

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    - 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].

    Weekend Reading Links - May 8, 2011

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

    Articles From DIV-Net Members
    There are some really good articles here, please take time and read a few of them.

    Stock Analysis: Bemis Company

    Bemis Company, Inc. (BMS) manufactures and sells flexible packaging products and pressure sensitive materials in the United States, Canada, Mexico, South America, Europe, and Asia. The company operates in two segments, Flexible Packaging and Pressure Sensitive Materials. The company is member of the S&P 500 and the S&P Dividend Aristocrats indexes. Bemis has paid uninterrupted dividends on its common stock since 1922 and increased payments to common shareholders every year for 28 years.


    The most recent dividend increase was in February, when the Board of Directors approved a 4.40% increase to 24 cents/share. The major competitors of Bemis Company include Sonoco Company (SON), Sealed Air (SEE) and Temple-Inland (TIN).

    Over the past decade this dividend growth stock has delivered an annualized total return of 10.10% to its loyal shareholders. The company has managed to deliver an increase in EPS of 3.70% per year since 2001. Analysts expect Bemis to earn $2.40 per share in 2011 and $2.68 per share in 2012. This would be a nice increase from the $1.83/share the company earned in 2010.


    Over the past decade, the return on equity has been in a steady decline. 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 7% per year since 2001, which is higher than the growth in EPS. A 7% growth in distributions translates into the dividend payment doubling every 10 years. If we look at historical data, going as far back as 1984, we see that Bemis has actually managed to double its dividend every seven years on average.


    Over the past decade the dividend payout ratio has steadily increased. 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 Bemis is trading at 17.60 times earnings, yields 2.90% and has a sustainable dividend payout. Despite the fact that the stock meets my entry criteria, the sluggish earnings growth coupled with high payout ratio make this otherwise fine dividend stock a hold.

    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].

    Sun Life Financial (SLF) Dividend Stock Analysis

    Sun life is primarily a life insurance company but like many of its peers, it operates in the financial sector by providing other services such as retirement and wealth management in many countries.

    Their primary goal is your financial well being.

    Quick Facts

    • Stock Ticker: SLF on both TSX and NYSE
    • Market Cap.: 17.66B$
    • P/E: 11.15
    • Forward P/E: 10.27
    • P/B: 1.08
    • EPS: $2.76
    • Beta: 1.16
    • Liabilities to Equity Ratio: 10.43
    • Quarterly Dividends: $0.36
    • Dividend Yield: 4.69%
    • Dividend Payout Ratio: 51.25%
    • ROE: 9.64%
    • 5 Year EPS Growth Average: 30.63%
    • 5 Year Dividend Growth Average: 5.80%
    • 52-Week Low: $23.58
    • 52-Week High: $34.39
    • 52-Week Range: 66.14%
    The insurance sector has certainly not recovered yet when you look at the 5 year chart. The one year chart is looking at moving up and based on the numbers above, it may be time to start looking into the insurance companies and more specifically Sun Life Financial.

    [caption id="" align="aligncenter" width="400" caption="1 Year Stock Chart"]SLF Dividend Stock Analysis[/caption]

    [caption id="" align="aligncenter" width="400" caption="5 Year Stock Chart"]SLF Dividend Stock Analysis[/caption]

     


    Dividend Growth

    Sun Life is showing a nice trend in its dividend growth. It's 5 year dividend growth average isn't stellar with 5.80% but you need to realized that they did not really reduce their dividends in the financial crisis unlike some other competitors.

    SLF Dividend Growth

    Dividend Payout Ratio

    The historical dividend payout ratio is amazingly flat when you factor out the financial crisis timeline. I am actually quite impressed with that. It's a 32% payout on average and 2010 moved closer to that ratio with 51%.

    SLF Dividend Payout Ratio

    EPS Growth

    Historical growth was nice and allowed Sun Life to grow their dividend and maintain a relatively fixed dividend growth.

    SLF EPS Growth

    Thoughts

    Management seem to execute quite well. No major dividend cuts during the financial crisis. They weathered the storm and rewarded the investors by maintaining their dividends and 2010 is showing promise that the company is back on track. They are not overlay diversified in too many sectors which should allow them to streamline their different businesses to optimize their profits.

    They aren't the major players and that's probably why they weathered the storm better than Manulife, which lost big. The major competitors in Canada are Great West LifeCo and Manulife.

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

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

    A Look At RadioShack (RSH)

    For the last few months, RadioShack (RSH) has been trading with a P/E in the mid-to-high single digits, potentially putting it in value territory. One of the appealing factors of RadioShack from a value standpoint is its strong financial position. But that may change, as management appears willing to make a significant bet that the company's share price is too low.

    Management has reduced the company's share count by 15% in just the last 9 months. Obviously, it eats up a lot of cash to execute such a significant buyback, which has contributed to a large reduction in the company's cash surplus. But management appears undeterred, as it now appears poised to borrow money to further its buyback agenda.

    Yesterday, RadioShack announced that it is has issued $325 million of debt. Since the firm already has more than enough cash to fund its anticipated capital programs, it's quite likely that this money will be used to buy back shares. The following statement from the company a couple of weeks ago hinted at this further:

    "RadioShack intends to use net proceeds from the offering for general corporate purposes, which may include the funding of share repurchase programs."

    At the current share price, $325 million would enable the company to buy back around 20% of its outstanding shares! But this buyback comes at a price, however, as the company would likely no longer be in a rock solid financial position. The new $325 million of debt would be in addition to the company's $550 million of lease commitments.

    Traditionally, this may not have been a problem, as RadioShack has been a stable generator of cash, which should allow it to safely carry some debt. However, the company does face some challenges in the future that could jeopardize this position. Consumer purchases continue to migrate online at the expense of bricks and mortar operations such as those of RadioShack. But even in the bricks and mortar space, strong competitor Best Buy (BBY) has decided to move into smaller-format stores, which could directly impact RadioShack in a way that Best Buy's big-box stores never have.

    On the other hand, however, the secular growth of electronic products appears poised to continue. If RadioShack can continue to ride the wave, share prices today are likely undervalued. Management appears to be signalling its opinion of RadioShack's stability with these buybacks, but there is no doubt that the company's risk level has increased along with the potential for out-sized returns.

    Disclosure: Author has a long position in shares of RSHThis article was written by Saj Karsan of Barel Karsan. If you enjoyed this article, please consider subscribing to the feed.

    Stock Analysis: Colgate-Palmolive (CL)

    Linked here is a detailed quantitative analysis of Colgate-Palmolive (CL). Below are some highlights from the above linked analysis:

    Company Description: Colgate-Palmolive Company (Colgate) is a major consumer products company that markets oral, personal and household care, and pet nutrition products in more than 200 countries and territories.

    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

    CL is trading at a discount to 1.) and 3.) above. Since CL's tangible book value is not meaningful, a Graham number can not be calculated. The stock is trading at a 11.3% discount to its calculated fair value of $95.1. CL 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%

    CL 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. CL earned a Star for having an acceptable score in at least two of the four Key Metrics measured. The company has paid a cash dividend to shareholders every year since 1895 and has increased its dividend payments for 48 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

    CL earned a Star in this section for its NPV MMA Diff. of the $1,912. This amount is in excess of the $500 target I look for in a stock that has increased dividends as long as CL has. If CL grows its dividend at 11.8% per year, it will take 4 years to equal a MMA yielding an estimated 20-year average rate of 4.%. CL earned a check for the Key Metric 'Years to >MMA' since its 4 years is less than the 5 year target.

    Memberships and Peers: CL 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: Procter & Gamble Co. (PG) with a 3.3% yield, Kimberly-Clark Corporation (KMB) with a 4.3% yield and Clorox Corporation (CLX) with a 3.2% yield.

    Conclusion: CL 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 CL as a 4 Star-Buy.

    Using my D4L-PreScreen.xls model, I determined the share price could increase to $129.27 before CL's NPV MMA Differential decreased to the $500 minimum that I look for in a stock with 48 years of consecutive dividend increases. At that price the stock would yield 1.76%.

    Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the target $500 NPV MMA Differential, the calculated rate is 7.8%. This dividend growth rate is below the 11.8% used in this analysis, thus providing a margin of safety. CL has a risk rating of 1.50 which classifies it as a Low risk stock.

    Demand for household and personal care products is generally stable and not affected by changes in the economy. Within personal care products, CL has focused the oral care category and has a worldwide toothpaste market share of approximately 45%. The company is also adept in utilizing sophisticated promotional tools. I plan to add to my position while the stock is trading below my fair value price of $95.10 and as my allocation allows.

    Disclaimer: Material presented here is for informational purposes only. The above quantitative stock analysis, including the Star rating, is mechanically calculated and is based on historical information. The analysis assumes the stock will perform in the future as it has in the past. This is generally never true. Before buying or selling any stock you should do your own research and reach your own conclusion. See my Disclaimer for more information.

    Full Disclosure: At the time of this writing, I was long in CL (1.9% of my Income Portfolio) and also held positions in PG, KMB and CLX. See a list of all my income holdings here.

    Related Articles:
    - Wal-Mart Stores, Inc. (WMT) Dividend Stock Analysis
    - ConocoPhillips (COP) Dividend Stock Analysis
    - Genuine Parts Company (GPC) Dividend Stock Analysis
    - Microsoft Corporation (MSFT) 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].

    Weekend Reading Links - May 1, 2011

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

    Articles From DIV-Net Members
    There are some really good articles here, please take time and read a few of them.