Stock Analysis: Sysco Corporation (SYY)

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

Company Description: Sysco Corporation is a large distributor of food and related products, primarily to the foodservice or food-away-from-home industry.

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Weekend Reading Links - December 30, 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:

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Companies With A Wide Economic Moat

We as investors routinely refer the term "economic moat" when describing strengths of a business. What exactly is an economic moat and why does it matter? This is an important term to fully understand and incorporate into your investment research.

In a nutshell, an economic moat is a competitive advantage that a business has that prevents other businesses from infringing on its market share.

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Stock Analysis of Becton Dickinson

Becton, Dickinson and Company (BDX), a medical technology company, develops, manufactures, and sells medical devices, instrument systems, and reagents worldwide. The company is a member of the dividend champions list, and has been able to boost distributions for 42 years in a row.

The company’s last dividend increase was in November 2012 when the Board of Directors approved a 10% increase to 49.50 cents/share. The company’s peer group includes Medtronic (MDT), Baxter International (BAX) and St. Jude Medical (STJ).

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Income Focus: COP and PSX

The spinoff of Phillips 66 by ConocoPhillips has been a strong shower for dividend investors who held onto their holdings through the process.

COP Dividend Yield: 4.45%
PSX Dividend Yield: 1.91%
Seven Year Dividend Growth Rate: 13.5%
Balance Sheets: Fairly Strong for Both

Currently, I view COP as a reasonable income holding at a price of $60, but not with any significant margin of safety. PSX appears to be reasonably valued despite the price-run up, but is subject to volatility. Rather than buying the stock outright, selling puts to enter PSX at a lower cost basis may be a more prudent investment decision for 2013.

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The Fiscal Cliff...Opportunity Or Doomsday?

I wasn't sure I was going to even write about the upcoming potential "fiscal cliff" on this blog. Frankly, I'm not following any of  the latest news out of Washington, as I don't really care about politics or anything else that comes out our dysfunctional and argumentative headquarters USA. I always focus on the long-term. Changes in taxes and government spending levels have been almost as common as changes in Presidency. I'm investing in long-term opportunities, and my favorite holding period is forever. 4-year or 8-year changes in government taxation and spending levels are just blips on my radar. They can be pretty large blips, don't get me wrong...but they're still blips. 

What I'm going to do is to give my quick take on things, and provide you some excellent links on this matter.  

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Union Pacific Corporation (UNP): Decent Value at $123/Share

Union Pacific Corporation operates the largest rail network in the United States, with track throughout the western half of the country.

-Seven Year Revenue Growth Rate: 6.3%
-Seven Year EPS Growth Rate: 22.6%
-Seven Year Dividend Growth Rate: 21.9%
-Current Dividend Yield: 2.24%
-Balance Sheet Strength: Moderately Strong

While not a particularly high-yielding or consistentdividend stock, Union Pacific has a robust competitive advantage, a moderate yield, and appears to be approximately fairly valued for a target of 10% annualized returns at the current price in the $120′s.

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Holding Vs. Deploying Cash

I'm just another young guy, at 30 years and counting, trying to achieve financial independence at a young age. My main mission with this blog is to chronicle my journey from a negative net worth to retirement in 12 years. As such, this being my real life, it's of the utmost importance to me that I do everything in my power to maximize the possibility of this goal actually being achieved. As many of you already know, my strategy is to invest fresh capital on a monthly basis in attractively priced high quality dividend growth stocks and to keep most of my net worth there, eventually living off the dividend income my portfolio will provide.

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The Best Use of Corporate Profit (cash)

Introduction

I have recently authored two articles showing that, all other things being equal, a stock that pays its shareholders a dividend generates a higher total return than a stock with similar growth characteristics that doesn’t. This is based on the reality that stock prices follow earnings in the long run, and it is this relationship that generates the capital gain component of total return.  Therefore, if there is a dividend it will provide the shareholder the additional return from the income component (dividends).  Links to the articles can be found here and here.

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Stock Analysis: Procter & Gamble (PG)

Linked here is a detailed quantitative analysis of Procter & Gamble (PG). Below are some highlights from the above linked analysis:

Company Description: The Procter & Gamble Company is a leading consumer products company markets household and personal care products in more than 180 countries.

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Weekend Reading Links - December 23, 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:

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When To Sell A Dividend Growth Stock

There are many articles out there explaining the best ways to purchase dividend growth stocks. You can read all about buying based on dividend growth history, valuation, debt load, economic moat and many other criteria. But, there aren't many times you'll hear about selling dividend growth stocks. There is a good reason for this. The main reason is that most dividend growth investors are long-term investors for the most part. When we, as dividend growth investors, purchase shares in a company we do so because we believe in the long-term health and fundamentals of the company. However, things change over time and it's in your best interest to monitor your positions and adapt to the changing business world. That occasionally means selling a position, if warranted.

In my opinion, there are three main reasons one would want to sell a dividend growth stock:

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Stock Analysis of Intel

Intel Corporation (INTC) designs, manufactures, and sells integrated digital technology platforms primarily in the Asia-Pacific, the Americas, Europe, and Japan. This dividend achiever has paid dividends since 1992 an increased them for 10 years in a row.

The company’s last dividend increase was in July 2012 when the Board of Directors approved a 7.10% increase to 22.50 cents/share. The company’s peer group includes Altera (ALTR), Xilinx (XLNX) and Advanced Micro Devices (AMD).

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If You Must Value The Market

I don't engage in market timing. I have been purchasing shares in high quality companies that have a history of paying and raising dividends almost every single month since early 2010. This means I've been sticking to a strategy of valuing individual stocks, rather than trying to value the overall market. I've purchased equities when the Dow Jones Industrial Average has been below 10,000 points and I've also purchased equities when the DJIA has been above 13,000 points, as it is now. I buy monthly because it's a fairly holistic approach to investing, ensuring that I'm not trying to time purchases. I don't let the market really guide me, rather I let individual securities and their pricing guide my purchasing habits.

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Time: It's Everything

I realized a few years ago what I truly value in life: time. Time is the only commodity that one can buy, but cannot truly purchase. I plan on buying mine by continuing to save large portions of my income, thereby having freedom to then "spend" this time however I'd like for the rest of my life once I'm financially independent. 

Time provides so much. It provides opportunity, flexibility, freedom, chance. Some people say money is everything. I beg to differ. While money certainly has value (you have to buy food and pay rent), I could be afforded unlimited money, but with no time it won't matter very much at all. Conversely, give me unlimited time and no money and I think I'd be a very happy soul indeed.

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CSX Corporation Appears Cheap at Under $20

CSX Corporation operates a large railroad system that serves most of the eastern United States.

-Seven Year Revenue Growth Rate: 4.6%
-Seven Year EPS Growth Rate: 11.4%
-Seven Year Dividend Growth Rate: 33.1%
-Current Dividend Yield: 2.85%
-Balance Sheet Strength: Leveraged, Fair

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The Unbridled Truth About Dividends Contribution to Shareholder Profitability

The Two Components of Total Return

There have been many recent published articles and discussions that indicate that dividends have become the Rodney Dangerfield of the investing world.  In short, dividends get no respect, as many believe that dividends do not add to a shareholder’s profitability.  We believe that dividends represent a return bonus.  This article is written to provide evidence of our thesis.

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Microsoft Has Been A Better Business Than It Has A Stock

Currently Microsoft (MSFT) is attracting a lot of attention thanks to its launch of Windows 8 and many exciting new products based on this important upgrade. However, within all this attention there is a lot of negative bias applied to this blue-chip technology behemoth.  Consequently, the goal of this article is to provide the truth about Microsoft, the company and the stock. 

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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 that is planning to split into two publicly traded companies, one in diversified medical products and the other in research-based pharmaceuticals.

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Weekend Reading Links - December 16, 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:

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My Second Job Isn't A Job At All

It's a tough economy right now. The unemployment rate is currently at ~9.1%. I feel lucky to have a full-time job and I put in 50+ hours a week, working as hard as I possibly can to create value for my employer. But, as someone who wants to become financially independent at a young age, diversifying my income has become paramount. However with jobs scarce and my time limited, I don't see a second job in my immediate future. That's why I have a second source of income from my main job that's completely passive. This source of income will hopefully one day outpace the earnings I receive from my main job and exceed my expenses. 

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Recent Buy by Dividend Mantra

The "Fiscal Cliff". You can't watch television or read a newspaper without hearing or seeing news on the recent developments in regards to the cliff. Washington appears to be dysfunctional, and appears to enjoy it as individual lawmakers try to leverage partisan policy. This is evident on both sides of the aisle. I'm personally not someone who follows Washington very closely. As such, I couldn't care less what happens with regards to whatever mania/news comes piping out from headquarters U.S.A.

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Abbott Laboratories Stock Analysis

Abbott Laboratories (ABT) engages in the discovery, development, manufacture, and sale of health care products worldwide. This dividend champion has boosted distributions for 40 years in a row. The company’s last dividend increase was in February 2012 when the Board of Directors approved a 6.30% increase to 51 cents/share. The company’s peer group includes Johnson & Johnson (JNJ), Bristol Myers Squibb (BMY) and Merck (MRK). Over the past decade this dividend growth stock has delivered an annualized total return of 8.30% to its shareholders.

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Railroad Stocks Appear Attractively Valued Across the Country

The Class I operators in the United States appear to be reasonably valued for long-term returns. The balance sheets are in solid condition, they all have competitive advantages against new competitors entering the market, and some of them pay decent dividend yields.

The Rail Renaissance

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Norfolk Southern (NSC): Interesting Value

Norfolk Southern operates a large railroad system that serves most of the eastern United States.

-Seven Year Revenue Growth Rate: 3.9%
-Seven Year EPS Growth Rate: 8.7%
-Seven Year Dividend Growth Rate: 21.4%
-Current Dividend Yield: 3.31%
-Balance Sheet Strength: Fair

The intrinsic fair value of this company has a large window due to the uncertain nature of their declining coal segment. I estimate that the current price of $60 falls within this reasonable window, and that writing options to potentially enter at a cost basis in the low $50′s through 2013 presents a larger margin of safety.

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Cisco: Switch To This Undervalued Dividend Growth Stock

We don’t believe that anyone will argue against, or should argue against, the idea that the Internet will continue to grow for many years to come.  Cisco Systems (CSCO) is the world’s largest supplier of high performance Internet networking systems and solutions.  According to research from Standard & Poor’s Corp., Cisco’s product families are comprised of four segments.  Switches represent 32% of fiscal product sales, routers represent 18%, new products (the biggest segment) representing 48%, and the final category is other representing 2% of fiscal sales.

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TFSA Limit Increase

I was very pleased to hear the announcement from Ottawa that they will be increasing the limit on the TFSA to $5500 starting January 1st, 2013. Why did it increase you ask? Well when the TFSA was first introduced back in 2009, the government said that the contribution limit will be indexed with inflation. The limit was supposed to be increased in 2012 but hey, when has the government ever been known for efficiency? I’m just glad they actual went through with the increase!

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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.

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If Apple Were Not A Tech Stock It Would Be Trading at $1000/share

Introduction: The Current Mispricing of Technology

At the risk of jumping on the everybody’s-writing-articles-on-Apple-bandwagon, this article is offered at the request of a loyal reader.  Our objective is to put not only Apple’s valuation into perspective, but also what we believe to be the current undervaluation of technology stocks in general. 

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Weekend Reading Links - December 9, 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:

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Considering The Downside To Early Retirement

In all facets of my life, I always try to calculate my potential upside and downside to any decision I make. This is never more of a truism than when I consider investing. If you invest $2,000 in a company, the worst thing that can happen is that you lose that $2,000 investment if the company goes bankrupt and you're last in line after assets are sold. That's your downside: $2,000. What's the upside? Well, the upside is that the company can become phenomenally successful and you make a ton of money. In theory, your upside is infinite. That's why I love investing in the stock market.

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J. M. Smucker Company Stock Analysis

The J. M. Smucker Company (SJM) engages in manufacturing and marketing branded food products primarily in the United States, Canada, and internationally. The company is a member of the dividend achievers index, and has boosted distributions for fifteen years in a row. The company’s last dividend increase was in July 2012 when the Board of Directors approved an 8.30% increase to 52 cents/share. The company’s largest competitors include Conagra (CAG), Kraft (KFT) and Hershey (HSY). Over the past decade this dividend growth stock has delivered an annualized total return of 11.60% to its shareholders.

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What Are You Buying?

As we end the month of November, and move into the full swing of the holiday season, I thought now would be a great time to ask you readers what equities are on your shopping list. I look forward to receiving a healthy chunk of fresh capital from my day job early next month. I plan on continuing to scan the market for attractively priced entry points to quality dividend growth stocks for the long-term.

For now, I do have a few stocks that are pretty high on my shopping list. If Santa has a "naughty or nice" list, the following stocks are definitely "nice" for my portfolio.

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Texas Instruments (TXN): Estimated Fair Value $32

Texas Instruments is the world’s third largest semiconductor company, and has the largest market share of analog components.

-Seven Year Revenue Growth Rate: 0%
-Seven Year EPS Growth Rate: 1.6%
-Seven Year Dividend Growth Rate: 30%
-Most Recent Dividend Increase: 23.5%
-Current Dividend Yield: 2.80%
-Balance Sheet Strength: Moderately Strong

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Compass Minerals: Appears Fair Under $80/Share

Compass Minerals is a large producer of salt and specialty fertilizer.

-Seven Year Revenue Growth Rate: 4.0%
-Seven Year EPS Growth Rate is Erratic.
-Seven Year Dividend Growth Rate: 8.9%
-Current Dividend Yield: 2.55%
-Balance Sheet Strength: Leveraged but Stable

At the current price in the high $70′s, Compass appears poised to offer 10% long-term returns, weather-permitting.

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Retirees Beware Of The Many Dangers of Holding Overvalued Stocks

We often write about valuation because we believe it is one of the most misunderstood aspects of investing in common stocks.  This causes many people to hold what we consider to be unjustified biases that are based primarily on price action.  For example, the concept of the lost decade, which many almost gleefully point to as evidence validating that stocks are poor investments, fail to recognize that the true culprit was overvaluation during the appropriately labeled “irrational exuberance” days.

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Life Changes: Re-writing A Retirement Plan

When life happens you either adapt to the changes or risk a lifetime of headaches. That’s why it’s important to remain flexable when making any plan in life, whether it be financial or not.

I’ll be honest, I’ve never had a real plan for retirement until my late twenties. Once I developed a realistic plan, it never really occured to me that it would ever change. Now that I have a new career with different retirement options, I had to re-write my retirement plan to integrate some important changes.

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Stock Analysis: Automatic Data Processing Inc. (ADP)

Linked here is a detailed quantitative analysis of Automatic Data Processing Inc. (ADP). Below are some highlights from the above linked analysis:

Company Description: Automatic Data Processing Inc., one of the world's largest independent computing services companies, provides a broad range of data processing services.

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Kinder Morgan Energy Partners LP Fairly Valued with a 6% Dividend Yield

Kinder Morgan Energy Partners LP (KMP) is the country’s largest pipeline master limited partnership.  Perhaps the clearest way to think about a pipeline MLP is as a toll road. According to their website, Kinder Morgan Energy Partners LP owns an interest in or operates approximately 75,000 miles of pipelines and 180 terminals. The company’s pipelines transport natural gas, refined petroleum products, crude oil, carbon dioxide (CO2) and store a variety of energy-related products and materials at their terminals.  These would include gasoline, jet fuel, ethanol, coal, petroleum coke and steel.

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Weekend Reading Links - December 2, 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:

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Perspective

I've heard stories before of people who have retired, and soon after retiring they experienced some type of misfortune that resulted in their death. I remember working with a guy a few years ago who told me a story about his grandfather who died of a heart attack a few months after retiring. These have always just been anecdotal examples, and I've never actually personally known someone who experienced this type of regrettable fate.

Until now.

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