This article originally appeared on The DIV-Net December 22, 2008.
Linked here is a PDF copy of my detailed analysis of Kraft Foods Inc (KFT) (alt.1, alt.2). Below are some highlights from the above linked analysis:
Company Description: Kraft Foods is the largest U.S. branded food and beverage company, and the second largest in the world.
Fair Value: I consider four calculations of fair value, see page 2 of the linked PDF for a detailed description:
KFT is trading at a discount to 1.) and 3.) above. Since KFT's tangible book value is not meaningful, a Graham number can not be calculated. If I exclude the high and low valuations and average the remaining two, KFT is trading at a slight discount. KFT earned a Star in this section since it is trading at a fair value.
Dividend Analytical Data: In this section I consider five factors, see page 2 of the linked PDF for a detailed description:
KFT earned no Stars in this section. KFT has paid a cash dividend to shareholders every year since 2001 and has increased its dividend payments for 7 consecutive years. Last year's dividend payout was 64%, up from 52% in 2006. Since the increase was in excess of 15 points, a Star is deducted, leaving a net of zero Stars in this section.
Dividend Income vs. MMA: Why would you assume the equity risk and invest in a dividend stock if you could earn a better return in a much less risky money market account (MMA)? This section compares the earning ability of this stock with a high yield MMA. Two items are considered in this section, see page 2 of the linked PDF for a detailed description:
KFT earned one Star in this section for 2.) above. The NPV MMA Diff. of the $7,218 is below the $10,000 minimum I look for in a stock that has increased dividends as long as KFT has. If KFT grows its dividend at 7.7% per year, it will take 2 years to equal the cumulative earnings from a MMA yielding an estimated 20-year average rate of 4.61%. KFT earned a Star since its Years to >MMA of 2 is less than 5 years.
Other: KFT is a member of the S&P 500. Its leading global market position has allowed it to build a strong balance sheet and cash flows. The company has used its cash flow to pay increasing dividends and currently has a generous yield in excess of 4%. Due to the relatively stable nature of the company's end markets, the stock should benefit from investors looking for defensive or lower-risk investments. Risks include execution of internal restructuring, competitive conditions, higher input costs and possible disappointing consumer acceptance of new product introductions.
Conclusion: KFT earned one Star in the Fair Value section, lost one Star in the Dividend Analytical Data section and earned one Star in the Dividend Income vs. MMA section for a net total of one Star. This quantitatively ranks KFT as a 1 Star-Very Weak stock.
Using my D4L-PreScreen.xls model, I determined the share price would need to decrease to $23.49 for KFT's NPV MMA Differential to increase to the $10,000 that I like to see. At that price the stock would yield 4.77%.
Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the needed $10,000 NPV MMA Differential, the calculated rate is 8.9%. This dividend growth rate is above the 7.7% used in this analysis.
KFT is a strong international brand and has a lot working in its favor. Before purchasing KFT, I would like to see a higher NPV MMA Differential and lower payout ratio (64% in 2007). My buy price for KFT is $23.49. For additional information on KFT, including its dividend history, please refer to its data page.
Disclaimer: Material presented here is for informational purposes only. The above quantitative stock analysis, including the Star rating, is mechanically calculated and is based on historical information. The analysis assumes the stock will perform in the future as it has in the past. This is generally never true. Before buying or selling any stock you should do your own research and reach your own conclusion. See my Disclaimer for more information.
Full Disclosure: At the time of this writing, I held no position in KFT (0.0% of my Income Portfolio) .
What are your thoughts on KFT?
Recent Stock Analyses:
________________________________________________________________
Description: Kraft Foods is a member of the S&P 500 and is the largest U.S. branded food and beverage company. The company is the second largest in the world.
Quantitative Stock Analysis: Updated: 12-22-2008
KFT-Analysis.PDF (alt.1, alt.2)
Share Data:
Click the Dividends tab above to see historical dividend information.
Comments: Updated: 12-22-2008
KFT's leading global market position has allowed it to build a strong balance sheet and cash flows. The company has used its cash flow to pay increasing dividends and currently has a generous yield in excess of 4%. Due to the relatively stable nature of the company's end markets, the stock should benefit from investors looking for defensive or lower-risk investments. Risks include execution of internal restructuring, competitive conditions, higher input costs and possible disappointing consumer acceptance of new product introductions.
More...
Other Resources:
Dividends4Life Articles
Yahoo Finance
Google Finance
MSN Recent News
________________________________________________________________
Other Articles
Each Sunday I highlight the Carnivals I participated in over the past week, along with any notable articles that I came across. For those readers not familiar with carnivals, it's where personal finance bloggers submit their best articles of the week with one blog serving as the host. The entries are separated into various categories such as Investing, Credit, Debt, Budgeting, Frugality, Wealth Building, Money Management, Financial Planning, Insurance, Taxes, The Economy, Real Estate, et. al.
Below are the carnivals that I participated in this week, along with a link to my article:
Articles I enjoyed reading included (in no particular order):
The DIV-Net Featured Articles
Articles From DIV-Net Members
The Wealth, Money & Life Network Featured Articles
There are some really good articles here, please take time and read a few of them.
(Photo: Sachin Ghodke)
________________________________________________________________
In his annual letter to shareholders, Buffett revealed that he has selected selected his successor at Berkshire Hathaway, though he did not reveal the person's identity. Today we're taking a closer look at 10 of Buffett's top dividend stocks, based on Berkshire Hathaway's most recent quarterly 13F filing with the SEC, which reflects holdings as of Dec. 31, 2011. These stocks each comprise at least 1% of Berkshire's portfolio and yield at least 1.5%.
10. IBM (IBM) yield of 1.5%
9. Moody's (MCO) yield of 1.6%.
8. Wells Fargo(WFC) yield of 1.6%
7. Washington Post (WPO) yield of 2.5%
6. Wal-Mart (WMT) yield of 2.5%
5. Coca-Cola (KO) yield of 3%
4. Kraft (KFT) yield of 3.1%
3. Procter & Gamble (PG) yield of 3.1%
2. Johnson & Johnson (JNJ) yield of 3.5%
1. ConocoPhillips (COP) yield of 3.5%
Source: The Street
Related Articles:
- The Most Important Thing To Consider When Selecting A Dividend Stock
- 3 Powerful Concepts for Compounding Wealth with Dividend Stocks
- 11 Higher Yielding, Lower Risk Stocks To Perk Up Your Dividend Income
- 4 Secrets To Finding The Best Dividend Stocks
- 7 Undervalued, Big-Name Stocks To Consider For Your Dividend Portfolio
________________________________________________________________
First, a short primer for those fortunate enough not to be involved in pension accounting. There are two basic types of company sponsored retirement plans - defined contributions (DC) and defined benefits (DB) plans. As the names imply, a DC plan defines what the company will contribute to the plan on behalf of the employee. An example of a DC plan is a 401(k) where the company will match the first 5% contributed by the employee. There is no guarantee of what the employee will get out of the plan. The DB plan in contrast defines the benefit the employee will receive upon retirement, such as a salary of 80% of his or her highest earnings year, weighted by years of service. In the DC plan the employee assumes the risk of under-performance, while in the DB plan the employer assumes the risk.
For DB plans, actuaries will look at the number of employees, their ages, their income and other factors to determine what the company's future liability will be. The actuaries will then look at the invested assets, estimate a future return and determine if the assets will be sufficient to cover the future liability. When the market is spiraling up, assets are usually greater than the liabilities and the company does not have to put any money in the plan, thus it does not have recognize an expense. But when the market is down, as it has been lately, the liability is greater than the assets on hand. This is referred to as underfunded, and over time the company has to come up with cash and recognize an expense.
One of the biggest pension plans in the world is General Motors (GM). A recent New York Times article looked at GM, which hasn't been doing so well lately, and the effect of its underfunded pension plan. As of last November the estimated shortfall in GM pension plan was $20 billion. So what happens if it fails?
If GM's pension plan collapses, the Pension Benefit Guaranty Corporation (PBGC) will pick up part of the tab. However, most of that shortfall would be made up by workers in the form of smaller benefits — not by GM or the PBGC. Unfortunately, this will likely set other pension funds into play. Since GM's plan is so large, its failure will result in the PBGC losing a big source of the premium revenue. But more importantly, other automakers such as Ford, Toyota and Honda will be looking to rid themselves of their DB plans to cut costs and stay stay competitive.
The Pension Protection Act (PPA) and IRS regulations impose restrictions on accelerated payments (e.g. lump sum distributions) when the funding level falls below 80%. This is not just a problem with companies in struggling industries. Tyler Durden in a March 7, 2009 article cites data from a Merrill Lynch Pension Database showing several well-known companies with a projected (data as of 10/22/08) funded status below 80%. Here is a sampling of some traditional dividend companies:
Generations before us relied on defined benefit pension plans to ensure their lifestyle in retirement. Our generation may not have the same luxury. There is one thing this economic and financial downturn has taught us - there are no sure things in life. We must take responsibility for our financial future and mange it.
Full Disclosure: Long JNJ, CVX, PEP, KMB (my income holdings)
Related Articles:
________________________________________________________________
Credit Suisse(CS_) says U.S. stocks will trade within a narrow range. The bank predicts a ceiling of 1,200 on the S&P 500 and a floor of 1,000. It's no wonder the bank is recommending clients purchase dividend stocks. Here are 15 of Credit Suisse's 20 favorites. They are ordered by yield, from big to biggest:
15. PepsiCo(PEP), Dividend Yield: 2.9%, Forward P/E: 14
14. General Mills(GIS), Dividend Yield: 3.0%, Forward P/E: 14
13. Procter & Gamble(PG), Dividend Yield: 3.3%, Forward P/E: 15
12. McDonald's(MCD), Dividend Yield: 3.3%, Forward P/E: 16
11. Johnson & Johnson(JNJ), Dividend Yield: 3.4%, Forward P/E: 13
10. Kraft Foods(KFT), Dividend Yield: 3.6%, Forward P/E: 14
9. Kimberly-Clark(KMB), Dividend Yield: 3.9%, Forward P/E: 13
8. Excel Energy(XEL), Dividend Yield: 4.2%, Forward P/E: 14
7. American Electric Power(AEP), Dividend Yield: 4.6%, Forward P/E: 12
6. Bristol-Myers Squibb(BMY), Dividend Yield: 4.7%, Forward P/E: 13
5. Southern Co.(SO), Dividend Yield: 4.8%, Forward P/E: 15
4. Consolidated Edison(ED), Dividend Yield: 4.8%, Forward P/E: 14
3. Duke Energy(DUK), Dividend Yield: 5.5%, Forward P/E: 13
2. Progress Energy(PGN), Dividend Yield: 5.5%, Forward P/E: 14
1. Verizon(VZ), Dividend Yield: 6.0%, Forward P/E: 14
Source: TheStreet.com
Related Articles:
________________________________________________________________
Each Sunday I highlight the Carnivals I participated in over the past week, along with any notable articles that I came across. For those readers not familiar with carnivals, it's where personal finance bloggers submit their best articles of the week with one blog serving as the host. The entries are separated into various categories such as Investing, Credit, Debt, Budgeting, Frugality, Wealth Building, Money Management, Financial Planning, Insurance, Taxes, The Economy, Real Estate, et. al.
Below are the carnivals that I participated in this week, along with a link to my article:
Articles I enjoyed reading included (in no particular order):
The DIV-Net Featured Articles
Articles From DIV-Net Members
The Wealth, Money & Life Network Featured Articles
There are some really good articles here, please take time and read a few of them.
(Photo: Sachin Ghodke)
________________________________________________________________
Today we're taking a closer look at Buffett's 10 highest-yielding stocks, based on Berkshire Hathaway's most recent quarterly 13F filing with the SEC, which reflects holdings as of March 31, 2011.
10. Coca-Cola (KO) recently yielded 2.8%
9. UPS (UPS) with a current yield of 2.9%
8. General Electric (GE) yields 3.3%
7. M&T Bank (MTB) with a current yield of 3.3%
6. Kraft (KFT) with a current yield of 3.3%
5. Procter & Gamble (PG) with a yield of 3.3%
4. Sanofi (SNY) which yields 3.4%
3. Johnson & Johnson (JNJ) with a current yield of 3.4%
2. ConocoPhillips (COP) with a current yield of 3.5%
1. GlaxoSmithKline (GSK) remains Buffett's highest-yielder at 4.9%
Source: The Street
Related Articles:
- 8 Dividend Stocks With The Right Stuff
- International Diversification Begins At Home
- Dividend Payout vs. Free Cash Flow Payout
- High-Yield Dividend Stocks: A Safer Approach
- 10 Best U.S. Dividend Stocks
________________________________________________________________
With record cash in corporate coffers, investors have been egging on corporate management teams to return value to shareholders in the form of dividend checks -- and a growing number of companies are listening. Over the last 36 years, dividend stocks outperformed the rest of the S&P 500 by 2.5% annually, and they outperformed nonpayers by nearly 8% every year, according to a study from National Data Research.
Dividend investing is "a sustainable strategy that will be a key driver for performance and total return in 2011," said Lawrence Glazer, Managing Partner with Mayflower Advisors, in a recent appearance on CNBC. Glazer encouraged investors to reconsider top dividend-paying "Dogs of the Dow" such as Verizon(VZ), Johnson & Johnson(JNJ), Merck(MRK) and Kraft Foods(KFT), blue chips that have offered decades of dividend increases and sustainable payouts, many with stronger yields than 10-year treasury notes. Verizon, which recently increased its quarterly dividend by 2.6% to 48.75 cents per share, offers an annualized dividend yield of around 5.73%; Johnson & Johnson 3.49%, Merck 4.22% and Kraft 3.77%.
Source: TheStreet.com
Related Articles:
________________________________________________________________
Dividends are a critical component of total stock market return, accounting for 43% of the S&P 500's return from 1990 to 2010. Unfortunately, the dividend yield of the S&P 500 has fallen to 1.85% (approaching 120 year lows) -- income investors might find better opportunity in a diverse basket of carefully chosen stocks.
Each of the seven stocks listed below has a higher dividend yield than a S&P 500 index fund, has a buy rating from TheStreet Ratings award-winning stock rating model: B&G Foods(BGS), Deere(DE), Dow Chemical(DOW), Kraft(KFT), York Water Company(YORW), Molex(MOLX) and Illinois Tool Works(ITW).
Source: The Street
Related Articles:
- Four Dividend Stocks Stepping Up In The Downturn
- Increasing Dividend Yield Part VI: Time
- Increasing Dividend Yield Part V: MLPs
- Increasing Dividend Yield Part IV: Bonds
- Increasing Dividend Yield Part III: Preferred Stock
________________________________________________________________
Large companies that pay dividends will lead North American stock markets over the next three to five years as government austerity limits economic growth, said Bruce Cooper, head of equities at TD Asset Management. International Business Machines Corp. (IBM), Kraft Foods Inc. (KFT), PepsiCo Inc. and Canadian Oil Sands Ltd. are among the best bets to outperform estimated returns of about 5 percent a year from the U.S. and Canadian stock markets, said Cooper, a vice chairman at the unit of Toronto-Dominion Bank that manages about C$190 billion ($200 billion).
“We could be in a low-growth environment for several years,” Cooper said in a telephone interview from Toronto. “If you can buy stocks that have dividend yields of 3, 4, 5, 6 percent and can deliver dividend growth, we think that’s a solid way for investors to protect themselves.” Economic growth in developed markets will remain slower than before the recession as governments in the U.S. and Europe cut spending to address their budget deficits, Cooper said.
Source: Bloomberg
Related Articles:
- Never Fall In Love With A Stock
- 3 Powerful Concepts for Compounding Wealth with Dividend Stocks
- 11 Higher Yielding, Lower Risk Stocks To Perk Up Your Dividend Income
- 4 Secrets To Finding The Best Dividend Stocks
- 7 Undervalued, Big-Name Stocks To Consider For Your Dividend Portfolio
________________________________________________________________
Investors rarely think of restaurant and food stocks as insulated from economic turmoil. However, several companies in this sector pay good dividends and will remain successful if the global economy hits another bump in the road. Let's take a look at which food stocks may be able to protect your portfolio.
H.J. Heinz (NYSE: HNZ ) is an extremely well-known brand with an established presence in first-world economies and a growing influence in emerging markets. We can see that ConAgra (NYSE: CAG ) edges Heinz when judged by virtue of its dividend yield alone, but does that make it a better buy? Kraft (Nasdaq: KFT ) is another direct competitor to Heinz. It makes a variety of packaged food products like condiments, confectionary products, and prepackaged meals.
Source: Motley Fool
Related Articles:
- 15 Dividend Stocks Trading Below Their Calculated Fair Value
- The Most Important Thing To Consider When Selecting A Dividend Stock
- Mid-Year 2012 Top And Bottom Performing Dividend Stocks
- A Simple Approach To Earn More Than 4% In Dividends
- 5 Basic Materials Stocks With Growing 3%+ Dividends
________________________________________________________________
Over the last 36 years, dividend stocks outperformed the rest of the S&P 500 by 2.5% annually, and they outperformed nonpayers by nearly 8% every year, all while paying out cash to their shareholders, according to a study from National Data Research.
Dividend investing is "a sustainable strategy that will be a key driver for performance and total return in 2011," said Lawrence Glazer, Managing Partner with Mayflower Advisors, in a recent appearance on CNBC. Glazer encouraged investors to reconsider top dividend-paying "Dogs of the Dow" such as Verizon (VZ), Johnson & Johnson (JNJ), Merck (MRK) and Kraft Foods (KFT), blue chips that have offered decades of dividend increases and sustainable payouts, many with stronger yields than 10-year treasury notes.
Source: TheStreet.com
Related Articles:
________________________________________________________________
The environment today is kind of depressing if you're searching for yield. A lot of people are doing crazy things like chasing junk bonds or shaky currencies, which is fine if you can stomach a lot of volatility. But what if you're just the average guy or sovereign pension plan looking for income that you can count on? What do you do if you're the guy who can tolerate a little bit of risk but also wants to get the best bang for his buck on that risk?
The first part is to stay long bonds. Part two happens when (or preferably shortly before) the bond party finally does end. When we get the next big equity washout -- and don't worry, we will get at least one washout in the next few years -- that'll be time to sell all your bond funds. Then simply load up on high-quality, strong-dividend equities. Stuff like Johnson & Johnson (JNJ), Intel (INTC), AT&T (T) or Verizon (VZ), Royal Dutch Shell (RDS.A), Coca Cola (KO), Kraft (KFT), or McDonald's (MCD). You know, the usual suspects.
Source: Seeking Alpha
Related Articles:
________________________________________________________________
The stock market has capped the best January for stocks since 1997, and strong retail sales and hints of improvements in the job and housing markets are making it look like 2011 is going to be a good year for investors. But after all the uncertainty of the past few years, many investors are reluctant to jump in with both feet. Safe-haven investments like gold and high-yield dividend stocks remain in favor because some folks are afraid the recovery will stall, while others are downright expecting the bottom to fall out.
Whether you’re bullish or bearish on stocks in 2011, a guaranteed payday of 4%, 5% or even 6% via dividends is a great way to provide stability to your portfolio. And when you’re looking for the top dividend stocks, the blue chips in the Dow Jones Industrial average have a lot to offer. Here are a few dividend stocks boasting the highest yield among the Dow components that income investors may want to consider: AT&T (T), Verizon (VZ), Merck (MRK), Pfizer (PFE) and Kraft Foods (KFT).
Source: InvestorPlace
Related Articles:
________________________________________________________________
Some of my fellow dividend investors have accused Warren Buffett of being a closet dividend investor. I won't quite go that far, but there is significant common ground between dividend and value investors. With that said, let's take a close look at Mr. Buffett's most recent 13-F filing with the Securities and Exchange Commission.
Comparing Berkshire Hathaway's (BRK.A) December 31, 2008 13-F with its March 31, 2009 13-F, I made the following observations for Q1/2009:
Of the stocks held in BRK's 13-F portfolio, the following ones are either held in my income portfolio or are on my watch list of dividend stocks:
Coca Cola (KO) - Yield 3.34% - Analysis
The Coca-Cola Company is the largest manufacturer, distributor and marketer of nonalcoholic beverage concentrates and syrups in the world.
Johnson & Johnson (JNJ) - Yield 3.55% - Analysis
Johnson & Johnson is engaged in the research and development, manufacture and sale of a range of products in the healthcare field.
Kraft Foods (KFT) - Yield 4.44% - Analysis
Kraft is engaged in manufacturing and marketing packaged food products, including snacks, beverages, cheese, convenient meals and various packaged grocery products.
Lowes Companies (LOW) - Yield 1.89% - Analysis
Lowe's Companies, Inc. is a home improvement retailer.
M&T Bank (MTB) - Yield 5.57%
M&T Bank Corporation is a bank holding company. As of December 31, 2008, the Company had two wholly owned bank subsidiaries.
Procter & Gamble Co. (PG) - Yield 3.39% - Analysis
The Procter & Gamble Company is focused on providing branded consumer goods.
Wal-Mart Stores, Inc. (WMT) - Yield 2.19% - Analysis
Wal-Mart Stores, Inc. operates retail stores in various formats worldwide.
In addition, Buffett continues to hold a position in several stocks that I sold over the last twelve months for either cutting or failing to raise their dividend. Those are:
Bank of America Corporation (BAC) - Yield 0.35%
Bank of America Corporation (Bank of America) is a bank holding company and a financial holding company.
General Electric (GE) - Yield 9.20%
General Electric Company is a diversified technology, media and financial services company.
The Home Depot, Inc. (HD) - Yield 3.89%
The Home Depot, Inc.is a home improvement retailer selling an assortment of building materials, home improvement and lawn and garden products, and provide a number of services.
SunTrust Banks, Inc. (STI) - Yield 3.04%
SunTrust Banks, Inc. is a diversified financial services holding company whose businesses provide a range of financial services to consumer and corporate clients.
U.S. Bancorp (USB) - Yield 1.04%
U.S. Bancorp operates as a financial holding company and a bank holding company. U.S. Bancorp provides a range of financial services, including lending and depository services, cash management, foreign exchange, and trust and investment management services.
It is not surprising that the most famous value investor holds several dividend stocks. Historically, stocks that pay dividends have out-performed those that don’t. When you buy dividend stocks at a discount, it’s like turbo-charging your return!
Full Disclosure: Long in JNJ, KO, MTB, PG, WMT . See a list of all my income holdings here.
Related Articles:
________________________________________________________________
What if you don't want to spend your retirement managing and worrying about your portfolio? Put it on Auto Pilot, specifically on a Dividend Investing Auto Pilot. Dividends from a quality, well-diversified portfolio are much more predictable than capital gains and best of all, they are passive. You don't have to do anything, they just show up in your brokerage account each quarter. Inflation? Not to worry, the good companies routinely raise their dividends well in excess of the inflation rate.
Below are several select companies that recently decided to help their shareholders beat inflation by boosting their cash dividends:
After running these companies through my D4L-PreScreen.xls model, none achieved the necessary NPV of MMA Differential to justify a full evaluation. Though they were short of my target, VZ ($2,136) had a positive NPV of MMA Differential and shows future potential.
Disclosure: No position in any of the aforementioned stocks.
(Photo: Steve Woods)
Related Articles:
________________________________________________________________
Josh Brown of The Reformed Broker named income worship as one of his dominant investing themes of 2012. "I believe that the big lesson of the past year is that market timing, for most investors, was a fools game," he writes. "With almost daily 200-point swings in both directions, many investors who chose to get in and out ended up doing little more than whipsawing themselves in the end." Dividend stocks aren't the only way in here. There are also cash distributions from master limited partnerships, which are structured to avoid paying corporate income tax
But let's get back to dividend stocks. A number of websites have listed the best dividend stocks around. I'll summarize them below: DuPont (DD), Veolia (VE), Waste Management (WM), Kraft (KFT) and Royal Bank of Canada (RY).
Source: MSN Money
Related Articles:
- 8 Dividend Stocks With The Right Stuff
- International Diversification Begins At Home
- Dividend Payout vs. Free Cash Flow Payout
- High-Yield Dividend Stocks: A Safer Approach
- 10 Best U.S. Dividend Stocks
________________________________________________________________
This article originally appeared on The DIV-Net January 12, 2009.
Company Description: Cullen/Frost Bankers, Inc., through its subsidiaries, provides banking and financial services primarily in Texas.
Fair Value: I consider four calculations of fair value, see page 2 of the linked PDF for a detailed description:
CFR is trading at a discount to 1.) and 3.) above. If I exclude the high and low valuations and average the remaining two, CFR is trading at a 9.8% discount. CFR earned a Star in this section since it is trading at a fair value.
Dividend Analytical Data: In this section I consider five factors, see page 2 of the linked PDF for a detailed description:
CFR earned one Star in this section for 3.) above. CFR has paid a cash dividend to shareholders every year since 1993 and has increased its dividend payments for 14 consecutive years.
Dividend Income vs. MMA: Why would you assume the equity risk and invest in a dividend stock if you could earn a better return in a much less risky money market account (MMA)? This section compares the earning ability of this stock with a high yield MMA. Two items are considered in this section, see page 2 of the linked PDF for a detailed description:
CFR earned both of the available Stars in this section. The NPV MMA Diff. of the $7,820 is in excess of the $7,500 minimum I look for in a stock that has increased dividends as long as CFR has. CFR's current yield of 3.75% exceeds the 3.54% estimated 20-year average MMA rate.
Other: CFR is a member of the Broad Dividend Achievers™ Index. While other financial institutions are lining up for a cash infusion from the Troubled Assets Relief Program (TARP), CFR took a line from Nancy Reagan and, ‘Just said no.’
“Cullen/Frost is well capitalized now and for the foreseeable future, with sufficient capital to grow our business and take advantage of acquisition opportunities," said Dick Evans, Cullen/Frost's chairman and CEO in a 2008 statement. Operating in a robust and growing Texas economy, CFR exhibits strong credit quality in its loan portfolio and tends to produce relatively stable financial results. Trading at a discount to it historical P/E, some view CFR as an attractive takeover candidate. Risks include unfavorable changes in the slope of the yield curve, operational performance and additional deterioration of the credit market.
Conclusion: CFR earned one Star in the Fair Value section, earned one Star in the Dividend Analytical Data section and earned two Stars in the Dividend Income vs. MMA section for a net total of four Stars. This quantitatively ranks CFR as a 4 Star-Buy.
Using my D4L-PreScreen.xls model, I determined the share price could increase to $44.95 before CFR's NPV MMA Differential fell to the $7,500 that I like to see. At that price the stock would yield 3.69%.
Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the needed $7,500 NPV MMA Differential, the calculated rate is 7.6%. This dividend growth rate is virtually the same as the the 7.8% used in this analysis.
By not accepting TARP funds CFR is in a position to continue to raise its dividend. With a risk rating of 1.25 (low), it is a stock that I will consider adding to my portfolio below its buy price of $44.95. For additional information, including CFR's dividend history, please refer to its data page.
Disclaimer: Material presented here is for informational purposes only. The above quantitative stock analysis, including the Star rating, is mechanically calculated and is based on historical information. The analysis assumes the stock will perform in the future as it has in the past. This is generally never true. Before buying or selling any stock you should do your own research and reach your own conclusion. See my Disclaimer for more information.
Full Disclosure: At the time of this writing, I held no position in CFR (0.0% of my Income Portfolio) .
What are your thoughts on CFR?
Recent Stock Analyses:
________________________________________________________________
This article originally appeared on The DIV-Net December 29, 2008.
Linked here is a detailed quantitative analysis of PepsiCo, Inc. (PEP) (alt.1, alt.2). Below are some highlights from the above linked analysis:
Company Description: PepsiCo, Inc. (PepsiCo) is a global snack and beverage company. The Company manufactures, markets and sells a range of salty, convenient, sweet and grain-based snacks, carbonated and non-carbonated beverages and foods.
Fair Value: I consider four calculations of fair value, see page 2 of the linked PDF for a detailed description:
PEP is trading at a discount to 1.), 2.) and 3.) above. If I exclude the high and low valuations and average the remaining two, PEP is trading at a 21.9% discount. PEP earned a Star in this section since it is trading at a fair value.
Dividend Analytical Data: In this section I consider five factors, see page 2 of the linked PDF for a detailed description:
PEP earned one Star in this section for 3.) above. PEP has paid a cash dividend to shareholders every year since 1952 and has increased its dividend payments for 36 consecutive years.
Dividend Income vs. MMA: Why would you assume the equity risk and invest in a dividend stock if you could earn a better return in a much less risky money market account (MMA)? This section compares the earning ability of this stock with a high yield MMA. Two items are considered in this section, see page 2 of the linked PDF for a detailed description:
PEP earned both of the available Stars in this section. The NPV MMA Diff. of the $16,099 is in excess of the $2,500 minimum I look for in a stock that has increased dividends as long as PEP has. If PEP grows its dividend at 13.0% per year, it will take 2 years to equal the cumulative earnings from a MMA yielding an estimated 20-year average rate of 3.54%. PEP earned a Star since its Years to >MMA of 2 is less than 5 years.
Other: PEP is a member of the S&P 500, a Dividend Aristocrat and a member of the Broad Dividend Achievers™ Index. PEP's global market positions and stable end markets produce consistent and strong cash flows. The company continues to find domestic and international growth opportunities. PEP's product innovation strategy is considered trend-setting for the industry. Though carbonated soft drinks remain the most popular beverage, PEP recognizes that non-carbonated soft drinks are a faster growing category. The company is focusing on the health and wellness trends. It has eliminated trans fats from many of its snack foods, and is introducing "good for you" foods under the Quaker Oats brand. Risks include the highly competitive and very mature nature of it products, also with more exposure to foreign markets, political and currency risks also increase.
Conclusion: PEP earned one Star in the Fair Value section, earned one Star in the Dividend Analytical Data section and earned two Stars in the Dividend Income vs. MMA section for a net total of four Stars. This quantitatively ranks PEP as a 4 Star-Buy.
Using my D4L-PreScreen.xls model, I determined the share price could increase to $92.09 before PEP's NPV MMA Differential fell to the $3,000 that I like to see. At that price the stock would yield 1.79%.
Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the needed $3,000 NPV MMA Differential, the calculated rate is 6.4%. This dividend growth rate is well below the 13.0% used in this analysis, providing a reasonable margin of safety.
PEP is a good value and and an excellent dividend stock. I will continue to add to my position below my buy price of $69.88. For additional information on PEP, including it dividend history, please refer to its data page.
Disclaimer: Material presented here is for informational purposes only. The above quantitative stock analysis, including the Star rating, is mechanically calculated and is based on historical information. The analysis assumes the stock will perform in the future as it has in the past. This is generally never true. Before buying or selling any stock you should do your own research and reach your own conclusion. See my Disclaimer for more information.
Full Disclosure: At the time of this writing, I was long in PEP (2.0% of my Income Portfolio) .
What are your thoughts on PEP?
Recent Stock Analyses:
________________________________________________________________
