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The Magic Commtouch

As discussed at ShadowStock, Commtouch (CTCH) has all the makings of a stock trading at a discount to its intrinsic value. The company trades for $65 million despite net cash of $22 million and net earnings of $16 million over just the last four years, resulting in an average ROE of about 20% over this period. Commtouch remains profitable, having earned another $1.2 million in its latest quarter.


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Stock Analysis: Hasbro, Inc. (HAS)

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

Company Description: Hasbro, Inc. holds a broad portfolio of toys, games and entertainment offerings including brands such as Transformers, Playskool, Monopoly and My Little Pony.

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

HAS is trading at a discount to 1.) and 3.) above. The stock is trading at a 21.5% discount to its calculated fair value of $43.64. HAS 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%

HAS 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. HAS 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 (2002-2005, 2003-2006, 2004-2007, etc.) I consider this a key metric since dividends will double every 5 years if they grow by 15%. The company has paid a cash dividend to shareholders every year since 1981 and has increased its dividend payments for 10 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

HAS earned a Star in this section for its NPV MMA Diff. of the $41,127. This amount is in excess of the $2,500 target I look for in a stock that has increased dividends as long as HAS has. The stock's current yield of 4.03% exceeds the 3.1% estimated 20-year average MMA rate.

Memberships and Peers: HAS is a member of the S&P 500. The company's peer group includes: Mattel, Inc. (MAT) with a 3.9% yield, LeapFrog Enterprises Inc. (LF) with a 0.0% yield and JAKKS Pacific, Inc. (JAKK) with a 2.2% yield.

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

Using my D4L-PreScreen.xls model, I determined the share price would need to increase to $89.72 before HAS's NPV MMA Differential decreased to the $2,500 minimum that I look for in a stock with 10 years of consecutive dividend increases. At that price the stock would yield 1.5%.

Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the target $2,500 NPV MMA Differential, the calculated rate is 8.7%. This dividend growth rate is lower than the 16.8% used in this analysis, thus providing a significant margin of safety. HAS has a risk rating of 2.00 which classifies it as a Medium risk stock.

HAS has a healthy lead in its exposure to the digital and entertainment segment. The company's relationships Electronic Arts EA, Activision ATVI and The Hub, its joint venture with Discovery, positions its brands consistently to connect with a lager and more diverse audience. In 2012, it should see benefits in the preschool category from the addition of Sesame Street characters. The ongoing updating of My Little Pony and Furreal Friends should provide a boost in the girls category.

In addition, HAS dominates in the movie licensing businesses (Star Wars, Marvel, etc.) which generates new streams of revenue. HAS should enjoy positive momentum with boys driven by 2012's new movie releases. Recent weakness has the left the stock trading well below my calculated fair value price of $43.64.

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 HAS (0.0% of my Dividend Growth Portfolio). See a list of all my dividend growth holdings here.

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


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Weekend Reading Links - May 27, 2012

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

Articles From DIV-Net Members

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


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Stock Analysis of Nestle

Nestlé S.A. (NSRGY), together with its subsidiaries, provides nutrition, health, and wellness products worldwide. This international dividend achiever has paid uninterrupted dividends on its common stock since for 16 years in a row.

The company’s last dividend increase was in 2012 when the Board of Directors approved a 5.40% increase 1.95 CHF/share. Nestle ‘s largest competitors include Kraft Foods (KFT), Danone (Danoy) and General Mills (GIS).

Over the past decade this dividend growth stock has delivered an annualized total return of 13.40% to its shareholders in US dollars. A large portion of the gain came from the appreciation of the Swiss franc from $0.60 in early 2002 to $1.10 in early 2012.
A large spike in earnings per share in 2010 was caused by the sale of Alcon to Roche. I did not account for these one-time effects in this analysis.

The company has enjoyed a return on equity in the low to medium teens. Rather than focus on absolute values for this indicator, I generally want to see at least a stable return on equity over time.

The annual dividend payment has increased by 12.50% per year over the past decade, which is higher than to the growth in EPS.

A 12% growth in distributions translates into the dividend payment doubling every six years. If we look at historical data, going as far back as 1995 we see that Nestle has managed to double its dividend every five and a half years on average. The company pays dividends once per year. US shareholders typically get paid about one month after the company distributes the dividend to domestic investors, and also have 15% withheld at source. However, income investors can get a tax credit on their US tax returns at tax time. This is one reason why holding ADR’s in a taxable account makes sense.

Over the past decade, the dividend payout ratio has increased from 37% in 2001 to 56% in 2011. This was caused by the fact that dividend growth was faster than earnings 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 Nestle is attractively valued at 19.20 times earnings, has a sustainable dividend payout and yields 3.50%. I would consider adding to my position subject to availability of funds.

Full Disclosure: Long NSRGY and KFT

Relevant Articles:

- How to invest in dividend stocks

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


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Transat A.T.

The idea that airlines make for lousy investments has been broached a number of times on this site. But what about a tour operator that trades for far less than its cash balance? Transat AT (TRZ) will be of interest to many value investors, thanks to its $190 million market cap versus its cash balance of $640 million. In addition, the company has more than $75 million (after write-downs) in ABCP! Furthermore, the company is generally profitable and free cash flow positive (though last year was an exception).


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Stock Analysis: Intel Corporation (INTC)

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

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

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

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

INTC is trading at a premium to all four valuations above. The stock is trading at a slight discount to its calculated fair value of $28.30. INTC earned a Star in this section since it is trading at a fair value.

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

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

INTC earned two Stars in this section for 1.) and 2.) above. A Star was earned since the Free Cash Flow payout ratio was less than 60% and there were no negative Free Cash Flows over the last 10 years. The stock earned a Star as a result of its most recent Debt to Total Capital being less than 45%. The company has paid a cash dividend to shareholders every year since 1992 and has increased its dividend payments for 9 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

INTC earned a Star in this section for its NPV MMA Diff. of the $3,107. This amount is in excess of the $2,600 target I look for in a stock that has increased dividends as long as INTC has. The stock's current yield of 3.15% exceeds the 3.1% estimated 20-year average MMA rate.

Memberships and Peers: INTC is a member of the S&P 500. The company's peer group includes: Advanced Micro Devices, Inc. (AMD) with a 0.0% yield, Texas Instruments Inc. (TXN) with a 2.2% yield and STMicroelectronics NV (STM) with a 6.5% yield.

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

Using my D4L-PreScreen.xls model, I determined the share price would need to increase to $29.71 before INTC's NPV MMA Differential decreased to the $2,600 minimum that I look for in a stock with 9 years of consecutive dividend increases. At that price the stock would yield 2.9%.

Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the target $2,600 NPV MMA Differential, the calculated rate is 10.6%. This dividend growth rate is lower than the 11.3% used in this analysis, thus providing a margin of safety. INTC has a risk rating of 1.50 which classifies it as a Low risk stock.

INTC’s results are tied to the cyclical nature of the semiconductor industry and demand trends for personal computers. PC growth in 2012 is expected to slow, but this will be offset to some extent by the introduction of new products in the marketplace (servers, ultra books, mobile and 22nm). Some observers have speculated that INTC will have trouble competing against the design firm ARM ARMH.

However, the company is in the best competitive position within the the semiconductor industry and its large size provides scale advantage over smaller rivals. INTC has a strong balance sheet including low debt levels compared to peers and generates substantial free cash flow. I will continue share accumulation when INTC is trading below my calculated fair value of $28.30 and as my allocation allows.

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

Full Disclosure: At the time of this writing, I was long in INTC (3.8% of my Dividend Growth Portfolio). See a list of all my dividend growth holdings here.

Related Articles:
- Meredith Corp. (MDP) Dividend Stock Analysis
- Coca-Cola Company (KO) Dividend Stock Analysis
- Becton, Dickinson and Co. (BDX) 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].


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Weekend Reading Links - May 20, 2012

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

Articles From DIV-Net Members

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


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Stock Analysis of Emerson Electric

Emerson Electric Co. (EMR) operates as a diversified technology company worldwide. It engages in designing and supplying products and technology, and delivering engineering services and solutions to industrial, commercial, and consumer markets. This dividend aristocrat has paid uninterrupted dividends on its common stock since 1947 and increased payments to common shareholders every for 55 consecutive years. There are only twelve companies which have managed to raise distributions for over 50 years in a row.

The company’s last dividend increase was in November 2011 when the Board of Directors approved a 15.90% increase to 40 cents/share. Emerson Electric ‘s largest competitors include Roper Industries (ROP), Cooper Industries (CBE) and Ametek (AME).

Over the past decade this dividend growth stock has delivered an annualized total return of 8% to its shareholders.

The company has managed to deliver 11.10% in annual EPS growth since 2002. Analysts expect Emerson Electric to earn $3.49 per share in 2012 and $3.98 per share in 2013. In comparison Emerson Electric earned $3.24/share in 2011.

The company has managed to maintain a consistently high return on equity over the past decade. Rather than focus on absolute values for this indicator, I generally want to see at least a stable return on equity over time.

The annual dividend payment has increased by 6.60% per year over the past decade, which is lower than to the growth in EPS.

A 7% growth in distributions translates into the dividend payment doubling almost every six ten years. If we look at historical data, going as far back as 1983 we see that Emerson Electric has managed to double its dividend every nine years on average.

Over the past decade, the dividend payout ratio has been on the decline, falling from a high of 65% in 2003 to 42.60% in 2011. A lower payout is always a plus, since it leaves room for consistent dividend growth minimizing the impact of short-term fluctuations in earnings.

Currently Emerson Electric is attractively valued at 16.60 times earnings, has a sustainable dividend payout and yields 3.10%. I would consider adding to my position subject to availability of funds.

Full Disclosure: Long EMR
Relevant Articles:


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


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Harbinger, Spectrum Back In Spotlight

In late 2010, Harbinger Group was discussed on this site as a potential value play because its holdings in Spectrum Brands exceeded its market cap! The discount did converge somewhat in late 2011, but it has now widened to even higher levels; since that article in November of 2010, Spectrum's stock is up almost 20% while Harbinger has been practically flat.


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Stock Analysis: Pepsico, Inc. (PEP)

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

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

Fair Value: 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

PEP is trading at a discount to only 3.) above. Since PEP's tangible book value is not meaningful, a Graham number can not be calculated. The stock is trading at a slight premium to its calculated fair value of $62.86. PEP 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%

PEP earned one Star in this section for 3.) above and earned a Star for having an acceptable score in at least two of the four Key Metrics measured. The company has paid a cash dividend to shareholders every year since 1952 and has increased its dividend payments for 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

PEP earned a Star in this section for its NPV MMA Diff. of the $628. This amount is in excess of the $500 target I look for in a stock that has increased dividends as long as PEP has. The stock's current yield of 3.23% exceeds the 3.1% estimated 20-year average MMA rate.

Memberships and Peers: PEP 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: The Coca-Cola Company (KO) with a 2.6% yield, Dr Pepper Snapple Group, Inc. (DPS) with a 3.3% yield and Fomento Econ (FMX) with a 1.7% yield.

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

Using my D4L-PreScreen.xls model, I determined the share price would need to increase to $70.90 before PEP'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 3.0%.

Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the target $500 NPV MMA Differential, the calculated rate is 4.3%. This dividend growth rate is below the 5.1% used in this analysis, thus providing a margin of safety. PEP has a risk rating of 1.25 which classifies it as a Low risk stock.

PEP enjoys stable end markets, predictible cash flows and leading global market positions. With soft drink consumption declining is the U.S., PEP has turned to international markets. The company's diverse portfolio can mitigate the impact of poor conditions in any one of its markets. PEP's direct store delivery system allows it to leverage its impressive portfolio of brands.

My concerns are PEP's debt as a percent of total capital and its free cash flow payout. Both have grown since I last reviewed PEP. Debt as a percent of total capital grew from 53% in September 2011 to its current 55%, while free cash flow payout grew from 65% to 71% over the same periods. Each of these are outside of my acceptable level. In addition, PEP is trading above my calculated fair value of $62.86, so I will not add to my position bit will continue to monitor the stock.

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

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

Related Articles:
- Becton, Dickinson and Co. (BDX) Dividend Stock Analysis
- Wal-Mart Stores, Inc. (WMT) Dividend Stock Analysis
- Teco Energy, Inc.(TE) Dividend Stock Analysis
- Genuine Parts Company (GPC) Dividend Stock Analysis
- More Stock Analysis

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


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Weekend Reading Links - May 13, 2012

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

Articles From DIV-Net Members

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


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Stock Analysis: Clorox

The Clorox Company (CLX) manufactures and markets consumer and institutional products worldwide. The company operates in four segments: Cleaning, Lifestyle, Household, and International. This dividend champion has paid uninterrupted dividends on its common stock since 1968 and increased payments to common shareholders every for 34 consecutive years.

The company’s last dividend increase was in February 2011 when the Board of Directors approved a 9.10% increase to 60 cents/share. Clorox ‘s largest competitors include Procter & Gamble (PG), Colgate Palmolive (CL) and Kimberly-Clark (KMB).

Over the past decade this dividend growth stock has delivered an annualized total return of 8% to its shareholders.

The company has managed to deliver 4.70% in annual EPS growth since 2002. Analysts expect Clorox to earn $4.08 per share in 2012 and $4.41 per share in 2013. In comparison Clorox earned $2.07/share in 2011. The low earnings in 2011 were caused by a $1.85/share one-time non- cash Goodwill Impairment charge related to Burt’s Bee’s business. The EPS growth comes out to 12.40% per year if the effects of this goodwill impairment are excluded.

The company has managed to maintain a consistently high return on assets except for 2002 and 2011. Rather than focus on absolute values for this indicator, I generally want to see at least a stable return on equity over time.
The annual dividend payment has increased by 11.30% per year over the past decade, which is lower than to the growth in EPS.

An 11% growth in distributions translates into the dividend payment doubling almost every six and a half years. If we look at historical data, going as far back as 1983 we see that Clorox has managed to double its dividend every seven years on average.

Over the past decade, the dividend payout ratio has remained below 50%, with the exception of 2002 and 2011. Excluding the goodwill impairment, the payout ratio for 2011 would have been 56%. A lower payout is always a plus, since it leaves room for consistent dividend growth minimizing the impact of short-term fluctuations in earnings.

Currently Clorox is attractively valued at 16.60 times earnings, has a sustainable dividend payout and yields 3.50%. I would consider adding to my position subject to availability of funds.

Full Disclosure: Long CLX, CL, KMB, PG
Relevant Articles:


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


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Stock Analysis: Johnson & Johnson (JNJ)

inked here is a detailed quantitative analysis of Johnson & Johnson (JNJ). Below are some highlights from the above linked analysis:

Company Description: Johnson & Johnson is a leader in the pharmaceutical, medical device and consumer products industries.

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

JNJ is trading at a discount to only 1.) above. The stock is trading at a 12.8% premium to its calculated fair value of $57.5. JNJ 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%

JNJ 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%. JNJ 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 1944 and has increased its dividend payments for 50 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

JNJ earned a Star in this section for its NPV MMA Diff. of the $1,389. This amount is in excess of the $500 target I look for in a stock that has increased dividends as long as JNJ has. The stock's current yield of 3.7% exceeds the 3.1% estimated 20-year average MMA rate.

Memberships and Peers: JNJ 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: The Abbott Laboratories (ABT) with a 3.3% yield, Eli Lilly & Co. (LLY) with a 4.8% yield and Bristol-Myers Squibb Company (BMY) with a 4.0% yield.

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

Using my D4L-PreScreen.xls model, I determined the share price would need to increase to $93.86 before JNJ's NPV MMA Differential decreased to the $500 minimum that I look for in a stock with 50 years of consecutive dividend increases. At that price the stock would yield 2.6%.

Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the target $500 NPV MMA Differential, the calculated rate is 2.9%. This dividend growth rate is below the 6.7% used in this analysis, thus providing a margin of safety. JNJ has a risk rating of 1.25 which classifies it as a Low risk stock.

JNJ enjoys a diverse revenue base, an excellent research pipeline, a pristine balance sheet and exceptional free cash-flows to cover its dividend. The company's many advantages include: products that are largely immune from economic cycles, minimal reliance on any single product category, substantial financial resources and a significant global business scale.

Its pharma segment should benefit from a number of new products such as Edurant, Xarelto and Zytiga. In addition, the proposed acquisition of Synthes should provide significant synergies. I will continue to add to my position as my allocation allows and when JNJ is trading near or below my calculated fair value price of $57.50.

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 JNJ (3.7% of my Dividend Growth Portfolio) and long in ABT. See a list of all my dividend growth holdings here.

Related Articles:
- Teco Energy, Inc.(TE) Dividend Stock Analysis
- Genuine Parts Company (GPC) Dividend Stock Analysis
- Microsoft Corporation (MSFT) Dividend Stock Analysis
- Norfolk Southern Corp. (NSC) Dividend Stock Analysis
- More Stock Analysis

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


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Weekend Reading Links - May 6, 2012

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

Articles From DIV-Net Members

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


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T. Rowe Price Group, Inc. Stock Analysis

T. Rowe Price Group, Inc. (TROW) is a publicly owned asset management holding company. The firm primarily provides its services to individual and institutional investors, retirement plans, and financial intermediaries. This dividend champion has paid uninterrupted dividends on its common stock since 1986 and increased payments to common shareholders every for 25consecutive years.

The company’s last dividend increase was in February 2012 when the Board of Directors approved a 9.70% increase to 34 cents/share. T. Rowe Price ‘s largest competitors include Blackrock (BLK), Franklin Resources (BEN) and Eaton Vance (EV).

Over the past decade this dividend growth stock has delivered an annualized total return of 14.70% to its shareholders.

The company has managed to deliver 16.10% in annual EPS growth since 2002. Analysts expect T. Rowe Price to earn $3.19 per share in 2012 and $3.64 per share in 2013. In comparison T. Rowe Price earned $2.92/share in 2011.

The company has managed to maintain a high return on equity in the high teens to low twenties. 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 15.80% per year over the past decade, which is higher than to the growth in EPS.

An 15.80% growth in distributions translates into the dividend payment doubling almost every four and a half years. If we look at historical data, going as far back as 1990 we see that T. Rowe Price has managed to double its dividend every four and a half years on average.

The dividend payout ratio has remained below 45% , with the exception of 2008 - 2009. A lower payout is always a plus, since it leaves room for consistent dividend growth minimizing the impact of short-term fluctuations in earnings.

Currently T. Rowe Price is overvalued at 22.20 times earnings, has a sustainable dividend payout and yields 2.10%. I would consider initiating position in the stock on dips below $55.

Full Disclosure: Long EV
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