This article originally appeared on The DIV-Net January 19, 2009.
Company Description: Legg Mason, Inc. is a diversified investment manager serving individual and institutional investors through offices around the United States.
Fair Value: I consider four calculations of fair value, see page 2 of the linked PDF for a detailed description:
LM is trading at a discount to 1.) and 2.) above. Since LM's tangible book value is not meaningful, a Graham number can not be calculated. If I exclude the high and low valuations and average the remaining two, LM is trading at a 22.8% discount. LM earned a Star in this section since it is trading at a fair value.
Dividend Analytical Data: In this section I consider five factors, see page 2 of the linked PDF for a detailed description:
LM earned three Stars in this section for 1.), 2.) and 3.) above. Rolling 4-yr Div. > 15% means that dividends grew on average in excess of 15% for each consecutive 4 year period over the last 10 years (1999-2002, 2000-2003, 2001-2004, etc.) I consider this a key metric since dividends will double every 5 years if they grow by 15%. LM has paid a cash dividend to shareholders every year since 1983 and has increased its dividend payments for 27 consecutive years. Last year's dividend payout was 44%, up from 15% in 2007. Since the increase was in excess of 15 points, a Star is deducted, leaving a net of two Stars in this section.
Dividend Income vs. MMA: Why would you assume the equity risk and invest in a dividend stock if you could earn a better return in a much less risky money market account (MMA)? This section compares the earning ability of this stock with a high yield MMA. Two items are considered in this section, see page 2 of the linked PDF for a detailed description:
LM earned both of the available Stars in this section. The NPV MMA Diff. of the $239,028 is in excess of the $2,500 minimum I look for in a stock that has increased dividends as long as LM has. LM's current yield of 4.64% exceeds the 3.45% estimated 20-year average MMA rate.
Other: LM is a member of the S&P 500, a Dividend Aristocrat and a member of the Broad Dividend Achievers™ Index. The company has a strong market share and boasts an impressive historic investment performance. However, recent under performance in some of LM's flagship funds may have resulted in increased client redemptions. That combined with struggling equity markets, have resulted in sharply lower asset balances. Risks include industry cyclicality, acquisition integration further market declines and poor investment performance.
Conclusion: LM earned one Star in the Fair Value section, earned two Stars in the Dividend Analytical Data section and earned two Stars in the Dividend Income vs. MMA section for a net total of five Stars. This quantitatively ranks LM as a 5 Star-Strong Buy.
Using my D4L-PreScreen.xls model, I determined the share price could increase to $85.88 before CFR's NPV MMA Differential fell to the $3,000 that I like to see. At that price the stock would yield 1.12%.
Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the needed $3,000 NPV MMA Differential, the calculated rate is 0.5%. This dividend growth rate is substantially below the 20.0% used in this analysis.
LM has not increased its dividend since June 2007 and runs the risk of losing its status as a Dividend Aristocrat. Before initiating a position, I would wait and determine LM's dividend policy going forward. LM's buy price is $27.26. For additional information, including LM's dividend history, please refer to its data page.
Disclaimer: Material presented here is for informational purposes only. The above quantitative stock analysis, including the Star rating, is mechanically calculated and is based on historical information. The analysis assumes the stock will perform in the future as it has in the past. This is generally never true. Before buying or selling any stock you should do your own research and reach your own conclusion. See my Disclaimer for more information.
Full Disclosure: At the time of this writing, I held no position in LM (0.0% of my Income Portfolio) .
What are your thoughts on LM?
Recent Stock Analyses:
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Description: Legg Mason, Inc. (LM) is a member of the S&P 500, a Dividend Aristocrat and a member of the Broad Dividend Achievers™ Index. The company, is a diversified investment manager serving individual and institutional investors through offices around the United States.
Quantitative Stock Analysis: Updated: 1-17-2009
LM-Analysis.PDF
Share Data:
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Click the Dividends tab above to see historical dividend information.
Comments: Updated: 1-17-2009
The company has a strong market share and boasts an impressive historic investment performance. However, recent under performance in some of LM's flagship funds may have resulted in increased client redemptions. That combined with struggling equity markets, have resulted in sharply lower asset balances. Risks include industry cyclicality, acquisition integration further market declines and poor investment performance.
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One approach to recognizing appropriate stocks is to look for companies with an average dividend yield of 3% and positive average annual dividend growth. Numerous stocks hike dividends over time, counterbalancing inflation risks. Here are three dividend-paying stocks retirees should consider for their nest egg portfolio...
Eaton Vance (EV) is currently shelling out a dividend of $0.38 per share, with a dividend yield of 3.12%. Legg Mason (LM) is paying out a dividend of 0.4 per share at the moment, with a dividend yield of 4.18%. Currently paying a dividend of 0.16 per share, Magic Software (MGIC) has a dividend yield of 3.04%. An upside to adding dividend stocks to your retirement portfolio: they can help lessen the effects of inflation, since many dividend-paying companies (especially blue chip stocks) generally increase their dividends over time.
Source: NASDAQ
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Baby bonds, or exchange-traded debt, are similar to preferred stock in that each behaves both like a stock and a bond. Baby bonds trade like stocks on the major exchanges, however there is a narrow range of prices they trade in. It is easier to trade baby bonds because, unlike regular bonds that often trade in minimum baskets of $10,000, you can buy or sell any amount. Like many bonds, they push out distributions on a quarterly basis. However, the money gets taxed as ordinary income, not as dividends. Here are three issues worth looking at for your portfolio...
Stanley Black & Decker 5.75% Jr. Subordinated Debentures (NYSE:SWJ) are baby bonds issued by that most famous of consumer brands, Stanley Black & Decker, Inc. (NTSE:SWK). Entergy Louisiana 5.25% First Mortgage Bonds (NYSE:ELB) are issued by a public utility (electricity) that is based in Louisiana. Legg Mason Inc. 6.375% Jr. Sub. Notes Due 2056 (NYSE:LMHA) are bonds courtesy of the solid and reputable investment firm of Legg Mason, Inc. (NYSE:LM).
Source: InvestorPlace
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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
(Photo: Sachin Ghodke)
There are some really good articles here, please take time and read a few of them.
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Dividend Aristocrats constituents exhibit the following characteristics:
Among others, Dividend Aristocrats include these highly recognizable names, with years of consecutive dividend increases shown:
Members may be deleted during the December rebalance if calendar-year dividends did not increase from the previous year, or intra-year if the stock is removed from the underlying S&P 500.
On December 4th, S&P announced changes to the Dividend Aristocrats Index. Standard & Poor’s will perform the annual reconstitution of the S&P 500 Dividend Aristocrats Index after the close of trading on Friday, December 18, 2009.
The following stocks will be added to the Dividend Aristocrats:
The following stocks will be dropped from the Dividend Aristocrats:
As the number of drops vs. adds indicates, the last two years were difficult for dividend stocks, but that is not necessarily a bad thing. During good times it is easy for companies to increase dividends, and many companies were added to the index. It is during times of adversity that we learn who the real aristocrats are.
Full Disclosure: Long CLX, KO, JNJ, MCD, PG, WMT. See a list of all my income holdings here.(Photo Credit)
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In this article, we look at seven DividendRank stocks that insiders are buying. Bargain hunters are wise to pay careful attention to insider buying, because although there are many various reasons for an insider to sell a stock, presumably the only reason they would use their hard-earned cash to make a purchase, is that they expect to make money.
Two Harbors Investment Corp (NYSE:TWO) is a Maryland corporation focused on investing, financing and managing residential mortgage-backed securities (RMBS) and related investments. Northstar Realty Finance Corp (NYSE:NRF) is a diversified commercial real estate investment and asset management company that is organized as an internally managed REIT. United Fire Group (NASDAQ:UFCS) sells through more than 1,000 independent agencies in 43 states, plus the District of Columbia, and as a life insurer in 36 states, represented by more than 900 independent life agencies. Coca-Cola (NYSE:KO) is the world’s largest beverage company. Cincinnati Financial Corp. (NASDAQ:CINF) stands among the nation’s top 25 property casualty insurer groups. Legg Mason, Inc. (NYSE:LM) is a diversified group of global asset management firms. Provident Financial Services (NYSE:PFS) is the holding company for The Provident Bank.
Source: Forbes
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Rising interest rates are usually the kill shot for dividend stocks. But there’s a category of high-yielding equities that have ducked it. It’s companies with big dividends that are also projected to raise them, according to data compiled by Bloomberg and Goldman Sachs Group Inc. Such stocks have surged more than 30 percent since the start of July, beating the S&P 500 Index by the most in eight years over any comparable period.
Goldman Sachs Dividend Growth Basket contains 50 stocks with a median expected 2017 dividend yield of 2.6%; the firm expects they’ll raise their dividends by an average of 12% in 2017. The basket has outperformed the S&P 500 by 10 percentage points since the start of July. That trailing spread reached 11.9 percentage points on March 15, which was the widest for any 8 1/2-month period since 2009: Bloomberg data. Companies in the index (as of March 17): VFC, IPG, WHR, HD, LOW, PHM, MO, RAI, ADM, CVS, MJN, VLO, PSX, MPC, TSO, LM, HBAN, KEY, MMC, MS, BEN, UNM, ABBV, PFE, AMGN, CAH, MDT, ABT, DGX, BA, NLSN, ITW, HON, IR, CSCO, XRX, HPQ, IBM, TXN, MSI, MSFT, GLW, ADP, HRS, AAPL, DOW, EXR, VZ, NEE, EIX.
Source: Bloomberg
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Believe it or not, seniors fear running out of cash more than they fear dying. And unfortunately, even retirees who have built a nest egg have good reason to be concerned - with the traditional approaches to retirement planning, income may no longer cover expenses. That means retirees are dipping into principal to make ends meet, setting up a race against time between dwindling investment balances and longer lifespans. Retirement investing approaches of the past don't work today.
As a replacement for low yielding Treasury bonds (and other bond options), we believe dividend-paying stocks from high quality companies offer low risk and stable, predictable income investors in retirement seek. Here are three dividend-paying stocks retirees should consider for their nest egg portfolio. American Eagle Outfitters (AEO) is currently shelling out a dividend of $0.14 per share, with a dividend yield of 3.33%. General Mills (GIS) is paying out a dividend of 0.49 per share at the moment, with a dividend yield of 3.8%. Currently paying a dividend of 0.4 per share, Legg Mason (LM) has a dividend yield of 4.09%.
Source: NASDAQ
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- A Roadmap To Build Wealth With Dividend Stocks
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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
Other Articles
There are some really good articles here, please take time and read a few of them.
________________________________________________________________
One way to identify suitable candidates is to look for stocks with an average dividend yield of 3%, and positive average annual dividend growth. Many stocks increase dividends over time, helping to offset the effects of inflation. Here are three dividend-paying stocks retirees should consider for their nest egg portfolio...
Darden Restaurants (DRI) is currently shelling out a dividend of $0.88 per share, with a dividend yield of 3%. Legg Mason (LM) is paying out a dividend of 0.4 per share at the moment, with a dividend yield of 4.4% compared to the Financial - Investment Management industry's yield of 2.33% and the S&P 500's yield. Currently paying a dividend of 7.59 per share, NetEase (NTES) has a dividend yield of 5.33%.
Source: Yahoo Finance
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This article originally appeared on The DIV-Net January 26, 2009.
Company Description: Lowe's Companies, Inc. and its subsidiaries operate as a home improvement retailer in the United States and Canada. The company offers a range of products and services for home decoration, maintenance, repair, remodeling, and property maintenance.
Fair Value: I consider four calculations of fair value, see page 2 of the linked PDF for a detailed description:
LOW is trading at a discount to all four valuations above. If I exclude the high and low valuations and average the remaining two, LOW is trading at a 39.5% discount. LOW earned a Star in this section since it is trading at a fair value.
Dividend Analytical Data: In this section I consider five factors, see page 2 of the linked PDF for a detailed description:
LOW earned three Stars in this section for 1.), 2.) and 3.) above. Rolling 4-yr Div. > 15% means that dividends grew on average in excess of 15% for each consecutive 4 year period over the last 10 years (1999-2002, 2000-2003, 2001-2004, etc.) I consider this a key metric since dividends will double every 5 years if they grow by 15%. LOW has paid a cash dividend to shareholders every year since 1961 and has increased its dividend payments for 46 consecutive years.
Dividend Income vs. MMA: Why would you assume the equity risk and invest in a dividend stock if you could earn a better return in a much less risky money market account (MMA)? This section compares the earning ability of this stock with a high yield MMA. Two items are considered in this section, see page 2 of the linked PDF for a detailed description:
LOW earned one Star in this section for 1.) above. The NPV MMA Diff. of the $19,636 is in excess of the $2,500 minimum I look for in a stock that has increased dividends as long as LOW has. If LOW grows its dividend at 20.0% per year, it will take 7 years to equal the cumulative earnings from a MMA yielding an estimated 20-year average rate of 3.45%.
Other: LOW is a member of the S&P 500, a Dividend Aristocrat and a member of the Broad Dividend Achievers™ Index. The the home improvement retail industry tends to be very cyclical and relies on economic growth. However, LOW is a strong player with opportunities for growth both domestically and abroad. Aging homes and relatively high home ownership rates are powerful long-term demographic drivers that should help mitigate the continued weakness in residential construction. Consumers viewing their homes as investments will continue to spend money on home improvement projects. Risks include a continued decline in the economy, a large rise in long term interest rates and failure by LOW to execute expansion strategy.
Conclusion: LOW earned one Star in the Fair Value section, earned three Stars in the Dividend Analytical Data section and earned one Star in the Dividend Income vs. MMA section for a net total of five Stars. This quantitatively ranks LOW as a 5 Star-Strong Buy.
Using my D4L-PreScreen.xls model, I determined the share price could increase to $35.98 before LOW's NPV MMA Differential fell to the $3,000 that I like to see. At that price the stock would yield 0.92%.
Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the needed $3,000 NPV MMA Differential, the calculated rate is 13.6%. This dividend growth rate is substantially below the 20.0% used in this analysis, thus providing a margin of safety.
LOW has an S&P Quality Ranking of A+ from its consistent historical earnings and dividend growth. It has held up much better than its chief rival Home Depot (HD). I have followed LOW for some time, but have been hesitant to initiate a position in a cyclical company with such a low dividend yield. I calculate LOW's buy price at $33.11. For additional information, including LOW's dividend history, please refer to its data page.
Disclaimer: Material presented here is for informational purposes only. The above quantitative stock analysis, including the Star rating, is mechanically calculated and is based on historical information. The analysis assumes the stock will perform in the future as it has in the past. This is generally never true. Before buying or selling any stock you should do your own research and reach your own conclusion. See my Disclaimer for more information.
Full Disclosure: At the time of this writing, I held no position in LOW (0.0% of my Income Portfolio) .
What are your thoughts on LOW?
Recent Stock Analyses:
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