This article originally appeared on The DIV-Net March 9, 2009.
Company Description: Wal-Mart Stores, Inc. is the largest retailer in North America. The company operates retail stores in various formats worldwide. It operates through three segments: Wal-Mart Stores, Sam's Club, and International.
Showing posts sorted by relevance for query "(WMT)". Sort by date Show all posts
Showing posts sorted by relevance for query "(WMT)". Sort by date Show all posts
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Linked here is a PDF copy of my analysis of Wal-Mart Stores, Inc. (WMT) (alt.1, alt.2). Below are some highlights from the above linked analysis:
Company Description: Wal-Mart Stores, Inc. operates retail stores in various formats worldwide. It operates through three segments: Wal-Mart Stores, Sam's Club, and International.
Fair Value: I consider 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 and 4.) Graham Number. WMT is trading at a discount to 3 of the 4 valuations listed above - all but 4.) Graham Number. If I exclude the high and low valuation, and average the remaining two valuations, WMT is trading at an astounding 10.8% discount. WMT gets a Star for being fairly valued.
Dividend Analytical Data: In this section I consider five factors, see page 2 of the linked PDF for a detailed description: 1.) Rolling 4-yr Div. > 15%, 2.) Dividend Growth Rate, 3.) Years of Div. Growth, 4.) 1-Yr. > 5-Yr Growth and 5.) Payout 15% of avg. WMT earned 3 of the 4 available Stars, missing out only on 1.) Rolling 4-yr Div. > 15% above.
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: 1.) NPV MMA Diff. and 2.) Years to >MMA. WMT earned a star for 1.) above. Given its current yield and calculated dividend growth rate, the 1.) NPV MMA Diff. is an impressive $15,814 per $1,000 invested.
Other: For decades WMT has been a retail juggernaut. Mowing down prices and the competition in one swoop. Double-digit sales and earnings growth have been the norm.
Conclusion: WMT earned one Star in the Fair Value section, a three Stars in the Dividend Analytical Data section and one Star in the Dividend Income vs. MMA section for a total of Five Stars, which rates it as a 5-Star Strong Buy. I cautiously continue to add to my WMT position.
WMT has become so large that double-digit growth going forward will be difficult for them to sustain. WMT must maintain a 14.3% average dividend increase to maintain an acceptable NPV MMA Diff. When I lower the EPS growth rate to 13% and the dividend growth rate to 14.3%, WMT's DCF value drops to $43.45, which would mean it is trading at a 8.7% premium. WMT's long-term earnings growth will have to be driven by international expansion. I will be watching closely WMT's annual dividend increase likely to be announced in early March.
Disclaimer: As always this is only my opinion and you should not rely on it. 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 own shares of WMT.
What are your thoughts on WMT?
Recent Stock Analyses:
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This article originally appeared on The DIV-Net October 12, 2009.
Company Description: Wal-Mart Stores, Inc. is the largest retailer in North America. The company operates retail stores in various formats worldwide. It operates through three segments: Wal-Mart Stores, Sam's Club, and International.
Fair Value: I consider four calculations of fair value, see page 2 of the linked PDF for a detailed description:
WMT is trading at a discount to 1.) and 3.) above. The stock is trading at a 7.9% premium to its calculated fair value of $46.31. WMT 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:
WMT 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 1973 and has increased its dividend payments for 35 consecutive years.
Dividend Income vs. MMA: Why would you assume the equity risk and invest in a dividend stock if you could earn a better return in a much less risky money market account (MMA)? 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:
WMT earned a Star in this section for its NPV MMA Diff. of the $922. This amount is in excess of the $500 target I look for in a stock that has increased dividends as long as WMT has. If WMT grows its dividend at 11.3% per year, it will take 6 years to equal a MMA yielding an estimated 20-year average rate of 3.9%.
Other: WMT is a member of the S&P 500, a Dividend Aristocrat and a member of the Broad Dividend Achievers™ Index.
Conclusion: WMT did not earn any Stars 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 three Stars. This quantitatively ranks WMT as a 3 Star-Hold.
Using my D4L-PreScreen.xls model, I determined the share price would need to drop to $59.68 before WMT's NPV MMA Differential increased to the $500 that I like to see for a stock with 35 years of consecutive dividend increases. At that price the stock would yield 1.83%.
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 9.6%. This dividend growth rate is less than the 11.3% used in this analysis, thus providing a slight margin of safety. WMT has a risk rating of 1.00 which classifies it as a low risk stock.
WMT is a quality company with a sound strategic plan. At 2.18%, WMT's dividend is lower than I prefer. However, given the quality of the company, I try to purchase some shares each year during a pullback. Its currently trading at a 8% premium to its buy price of $46.31. For additional information, including the stock'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 was long in WMT (2.4% of my Income Portfolio). What are your thoughts on WMT?
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Linked here is a detailed quantitative analysis of Wal-Mart Stores, Inc. (WMT). Below are some highlights from the above linked analysis: Company Description: Wal-Mart Stores, Inc. is the largest retailer in the world, operating a chain of over 10,000 discount department stores, wholesale clubs, supermarkets and supercenters.
WMT enjoys dominant positions in most markets where it competes. WMT's huge scale, geographic and product diversities, aggressive cost savings and strong international presence and increased marketing of its core value message should deliver improved results in the long-term. Going forward, WMT will face fierce competition from Costco, Amazon, dollar stores and other such retailers. WMT did not earn any Stars in the Fair Value section, earned two Stars in the Dividend Analytical Data section and did not earn any Stars in the Dividend Income vs. MMA section for a total of two Stars. This quantitatively ranks WMT as a...
Source: Dividend Growth Stocks
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While many retailers have been taking it on the chin in the past few weeks, one — Walmart (WMT) — should be just fine. But before we look at the virtues of WMT stock, let’s look at the carnage in the rest of the sector first. Best Buy (BBY) saw its share price plummet by 29% Thursday after reporting that same-store sales during the holiday season had fallen about a percent from the year before. Now, Mr. Market has been known to overreact to disappointing sales data, but Best Buy’s share price collapse seems a little extreme — a 29% drop after a 0.9% sales decline seems a little out of proportion. So, what gives?
Yet WMT trades at a very attractive 13 times earnings and 0.5 times sales. It also yields an attractive 2.4% in dividends and has been aggressively raising its dividend (see chart) and buying back its stock. And while WMT stock is not seeing the growth it once did, unlike many of the other struggling retailers, Walmart is actually able to grow its top line revenues. It also happens to be the only company with the logistical infrastructure in place to compete with Amazon. Are you going to double your money in WMT in 2014? Probably not. But I do expect it to outperform the broader market given its low price and the generally bearish sentiment towards the stock by investors.
Source: InvestorPlace
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Brand Recognition/Low Price
During an economic downturn consumers may flee many popular brands if their cost is high and generic alternatives are substantially cheaper. Procter & Gamble Co. (PG) [Analysis] has seen this occur in some of their premium brands like Pampers and Tide. However, most people aren't willing to save a few pennies on a generic soda of unknown quality when a Coca Cola Co. (KO) [Analysis] or Pepsico Inc. (PEP) [Analysis] is available.Value-Priced Convenience
In addition to Brand Recognition/Low Price some companies also provide convenience. If you have been out shopping all day and are tired, you are likely to stop on the way home and pick up something that is quick and inexpensive. There seems to be a McDonald's (MCD) [Analysis] on every corner. A stop there provides the guest with a known commodity - clean restrooms, quick service and an inexpensive meal.A Superior Operating Model
How do you compete with a company like Wal-Mart (WMT) [Analysis]? As most of their competitors have learned, you can't beat WMT at providing brand name, quality merchandise at rock bottom prices. During the good times, some people don't mind paying premium prices at an upscale store, but there are plenty of us value conscious people that keeps WMT humming. Where WMT really shines is during an economic downturn. When losing your job is a real option, $120 sneakers just don't quite seem as important as they once were.A Pseudo Monopoly
If you are the only company in the world that is allowed to sell a product that people's lives depend on, you will likely have a robust profit margin. This is the world that pharmaceutical companies operate in. Granted companies like Abbott Laboratories (ABT) [Analysis] and Eli Lilly and Co. (LLY) [Analysis] have to keep coming up with new products as old patents expire, and have to deal with government regulation, but the good ones not only survive, they thrive.Sell What People Want and Need
Sounds simple, but so few companies have mastered it. Consumer staples seem to be the best at it. When you consider the longevity of Johnson & Johnson's (JNJ) [Analysis] products such as Band-Aid, Johnson Baby Products, Listerine, Rolaids, Tylenol, Motrin, Benadryl and many others, it is easy to conclude that the company has identified what people want/need and are providing it at a reasonable cost. Although some of Procter & Gamble Co.'s (PG) premium products are struggling, management has taken action to focus on the company's bargain-priced alternatives and those are seeing some success.They Got a Name for the Winners in the World
Just as in life, companies that are winners separate themselves from the others. They won't settle for second best, instead they continue to look for advantages that will them keep a few steps ahead of the competition. Warren Buffet would describe many of the above advantages as wide moats. If you want to buy and hold a stock forever, make sure it has a competitive advantage that is not easily duplicated.
Full Disclosure: Long ABT, JNJ, KO, LLY, MCD, PEP, PG, WMT. See a list of all my income holdings here.
(Photo Credit)
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Now that more than half the year is behind us, I thought it would be interesting to look at my top 5 performers through July 31, 2008. As dismal as the stock market has been this year, there are still some bright spots. One bright spot is that my top five performers have all achieved double-digit positive total returns since I owned them and positive returns in 2008. Here they are with comments:
#5 - McDonald's (MCD) + 4.4% Total 2008 Return
Last November, I bought this burger maker for $57 in spite of only paying one dividend per year. I was rewarded by MCD moving to quarterly dividends and a 2008 total return of 4.4% and 13.8% since my Oct/2007 initial purchase.
#4 - Johnson & Johnson (JNJ) + 6.4% Total 2008 Return
This is a company that I waited on a good entry point for a long time. In early February of this year a door opened and I snatched up some shares at $63. It has been well worth the wait with JNJ earning 6.4% this year and an annualized yield of 16.6% since my July/2007 purchase!
#3 - Health Care Property Investors Inc. (HCP) + 10.4% Total 2008 Return
HCP is a hold-over from my yield chasing days. With a July 31, 2008 yield of 5.05%, it keeps the quarterly cash rolling in. However, with a 10.4% total return for 2008, it is not just another pretty dividend stock. Since March 2005, when I opened my position, it has earned me a 15.3% annualized return.
#2 - Canadian National Railway Company (CNI) + 11.5% Total 2008 Return
On July 31, 2008 CNI had the lowest dividend yield of all my holdings. I had to swallow hard when I initiated a position in it last November at $47. Now, I am breathing easy with a 30.2% annualized return since my Nov/2007 initial purchase.
#1 - Wal-Mart (WMT) + 24.8% Total 2008 Return
WMT cut its dividend growth rate and accelerated its share price appreciation. Earlier this year I put it "On The Shelf" since it no longer met meet my minimum criteria for additional purchases. On July 31, 2008, WMT's life-to-date annualized yield was 20.5% and was up nearly $10 from my July 2007 initial purchase.
Unfortunately, not all of my holdings performed this well. For the every top, there is a bottom. Thursday, we'll take a look at my bottom five holdings.
Disclosure: Long in JNJ, CNI, HCP, MCD and WMT.
(Photo: Steve Woods)
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The week before last we mentioned that JPMorgan (JPM), the second-largest U.S. bank, slashed its dividend by 87% to $0.05. Possibly that wasn't quite enough to keep keep big brother happy, so JPM took their quarterly dividend down to $0.01/share. The dividend is to be paid on Friday, April 3, 2009 to common stockholders of record as of Friday, March 20, 2009. JPM closed down 8.14% - it is always good to deliver bad news twice.
Last Wednesday, following in JPM's footsteps, U.S. Bancorp (USB) slashed its dividend by 88% to $0.05/share. U.S. Bancorp Chairman, President and Chief Executive Officer Richard K. Davis said, "The decision to reduce our quarterly dividend was thoughtfully considered and very difficult, given the importance of the dividend to our shareholders." USB closed down 12.48% after the announcement. Then dropped another 18.2% on Thursday.
While the financials continue to wither, some companies are designed to flourish in these difficult economic times. Last Thursday, Wal-Mart (WMT) reported that same store sales, ex-fuel, for the month rose 5.1%, and its Board increased the quarterly dividend 15% to $0.2725/share. WMT's dividend now yields around 2%. This is the 35th consecutive year WMT has raised its dividend. CEO Mike Duke said, "The strength of our operations and the resulting strong financial position allow us to increase our dividend payout to shareholders again this year. Our free cash flow remains strong enough to fund Wal-Mart's growth around the world, make strategic acquisitions and fund returns to shareholders through dividends and share repurchases."
Other companies are poised to perform by raising their cash dividends to shareholders. Here are several that have recently done just that:
For more companies around the world with a long string of consecutive dividend increases, see Dividends Value's Stock Ideas page.
Full Disclosure: Long WMT
(Photo: Steve Woods)
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WMT is a member of the S&P 500, a Dividend Aristocrat and a member of the Broad Dividend Achievers™ Index. WMT enjoys dominant positions in most markets where it competes. The company continues to gain market share aided by the economic downturn as consumers choose WMT over higher-cost competitors and take advantage of its convenience. Its unmatched scale leads to favorable terms on everything from the products it sells to store leases and distribution agreements. These advantages are demonstrated in the company's strong free cash flow of $3.63/share for FY 2010, up over 23% from FY 2009 and 2.7 times FY 2008's comparative number of $1.33. The company recently announced an 11% increase in its cash dividend. ...
Source: Dividends Value
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Linked here is a detailed quantitative analysis of Wal-Mart Stores, Inc. (WMT). Below are some highlights from the above linked analysis: Company Description: Wal-Mart Stores, Inc. is the largest retailer in the world, operating a chain of over 10,000 discount department stores, wholesale clubs, supermarkets and supercenters.
WMT did not earn any Stars in the Fair Value section, earned one Star in the Dividend Analytical Data section and did not earn any Stars in the Dividend Income vs. MMA section for a total of one Star. This quantitatively ranks WMT as a...
Source: Dividend Growth Stocks
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Markets this year have been highly volatile and directionally down. This is depressing for short-term investors, but for us dividend investors it is an exciting buying opportunity! I have been able to increase my position in GE and initiate a position in JNJ. I have been able to increase positions in high yield securities like ACAS, AOD and several banks.
Now a declining market is only good if the companies continue to perform and raise their dividend as expected. Sometimes, for various reasons, that doesn't happen. In yesterday's article "On The Shelf", I described a new concept that I have adopted. In short, if a security is not performing at the desired level for additional purchases, but also is not performing badly enough to warrant a sale, then I will put it "on the shelf". By that I mean it will be set aside within my income portfolio with no additional purchases made until its outlook improves or deteriorates to the point it should be sold.
Let's take a look at several securities that are candidates for the shelf:
Home Depot (HD)
The decline in residential construction has hit HD hard. It has struggled as of late and this has been reflected in its dividend. HD has held its dividend constant at $0.225/share for the last six quarters. Its dividend yield of 3.6% does not allow me to look the other way. Assuming it increases its dividend within a year, the stock could be salvaged, depending on the magnitude of the increase.
Verdict: On The Shelf
Walmart (WMT)
WMT this week raised their quarterly dividend from $0.22/share to $0.2375/share. The market rejoiced and ran WMT's price up. It was one of my few black stocks on that red day, but I was not happy! This was only an 8.0% increase and when I dropped the new dividend rate into my model the NPV MMA Diff. went negative (-2,444). Under the current circumstances WMT was no longer a buy.
Verdict: On The Shelf
SunTrust Bank (STI)
As discussed in my article "Time is My Friend", STI recently raised its quarterly dividend from $0.73/share to $0.77/share. This lowered its growth rate to 5.5% from 10%. Its NPV MMA Dif. is still positive at $9,447. I suspect most of the other banks will significantly lower their growth rate so, as noted in the article, I am taking a wait and see approach to the banks I hold.
Verdict: On The Shelf
M&T Bank Corporation (MTB)
When I started writing "Time is My Friend" I expected the outcome to be a sell for MTB. On a return basis it has been the poorest performer of the banks that I hold. My gut tells me it still may be the first to go once all the dividend increase data is in. As such, I do not think it is appropriate to purchase additional shares at this time.
Verdict: On The Shelf
It is important to continue evaluate your holdings to determine if they merit a buy, hold or sell. I plan to add another section in my holdings for "On the Shelf" securities. These four will be the first to move in. I have an ETF that is eying the neighborhood as well, so stay tuned...
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Wal-Mart just released its third quarter results with a great performance. To be honest, I think we were many to doubt about WMT’s ability to generate growth before the Holiday season. We will go through the main highlights of their reports, but first, we will analyze what Wal-Mart has been doing over the past five years and determine whether or not it should be part of your dividend portfolio. Let’s see if “Save Money, Live Better” can translate into “Make Money, Invest Better”!
This dividend aristocrat has increased its dividend for 41 consecutive years. Over the past ten years, the dividend doubled more than twice! The dividend paid back in 2004 was $0.36/share and WMT will pay $1.88/share to shareholders this year. However, lately WMT has struggled to show solid growth and deals with high margin pressures. The company has put several initiatives into action to increase sales with a more complete food offering, electronic departments’ new look and a massive investment in e-commerce.
Source: Guru Focus
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This is an article that I started to write several times, but would always stop after getting mired in the details. My natural tendency is make every question an analytical exercise and solve it by modeling and crunching numbers.
This time, I will show some restraint and take a little different approach by relying more on my subjective instincts. To that end, here are my selections for the 10 best U.S. dividend stocks:
10. Automatic Data Processing Inc. (ADP) - Analysis
ADP is one of the world's largest independent computing services companies, provides a broad range of data processing services. The last slot was the most difficult to fill, due to the number of worthy companies. I considered all the Honorable Mentioned companies listed below and it came down to ADP and GPC. ADP gt the nod due its historic low debt levels and dividend payout.
9. Wal-Mart Stores (WMT) - Analysis
WMT Inc. is the largest retailer in North America. Great management, business plan and execution. It would have ranked higher, but WMT's dividend yield tends to be lower end of my acceptable range.
8. The Coca-Cola Company (KO) - Analysis
KO is the world's largest soft drink company. The Coca-Cola name is the world's most recognizable trademark. For those who see no value in intangibles, try selling carbonated sugar water under another name.
7. McDonald's Corporation (MCD) - Analysis
MCD is the largest fast-food restaurant company in the world. This company has grown its dividends at an incredible rate. Unfortunately, that is likely to slow, but MCD's international presence will benefit to its shareholders in the future.
6. Abbott Laboratories (ABT) - Analysis
Abbott Laboratories is engaged in the discovery, development, manufacture and sale of a diversified line of healthcare products. Not the biggest or most well known drug company, but the one that arguably has one of the better track records.
5. Emerson Electric Co. (EMR) - Analysis
EMR primarily makes backup power equipment for telecom and Internet providers and users, climate control components, and electric motors. Industrials are not supposed to do well in recessions. Someone forgot to tell EMR. It has endured some bumps in the road, but has held up quite well.
4. SYSCO Corporation (SYY) - Analysis
SYY through its subsidiaries, engages in the marketing and distribution of a range of food and related products primarily for foodservice industry in the United States and Canada. This is a company that continues to perform in the face of expert predictions that it won't.
3. 3M Co. (MMM) - Analysis
MMM is a diversified technology company with a presence in various businesses. This is a company I really like. Problem is so do a lot of other people and institutions. It is a stock you have to watch for the right entry point. I bought in March when the stock was trading in the high 40's, it is now trading in the low 70's.
2. The Procter & Gamble Company (PG) - Analysis
PG is focused on providing branded consumer goods products. The Company markets its products in more than 180 countries. Good management capable of adjusting when necessary. Currently working to adjust to new market dynamics of the economic downturn.
1. Johnson & Johnson (JNJ) - Analysis
JNJ engages in the manufacture and sale of various products in the health care field worldwide. This was an easy selection for my top spot. Though not perfect the company has a history of making good decisions and executing on them.
The following companies earned an Honorable Mention:
That's my 10 best U.S. dividend stocks. These are based on what stocks I believe will perform well as income investments over-time. Most are not good buys today, but are ones that I am always watching. Obviously, there is a great deal of subjectivity in a list like this. I would love to see your 10 best dividend stocks (doesn't have to be U.S.)
Full Disclosure: Long ABT, WMT, KO, MCD, ADP, EMR, SYY, MMM, PG, JNJ, GPC, UTX, NUE, PEP. See a list of all my income holdings here.
(Photo Credit)
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Wading through the mainstream financial news, two story lines are forming regarding the recent financial turmoil in the markets. The articles are trying to predict the near-term future of the stock market and cover virtually every possible outcome, with most articles falling at the two extremes - Boom or Bust. Below are some thoughts from these two camps:
The Bust Case
Paul Krugman, a U.S. economist and winner of this year’s Nobel economics prize, said the world could face a Japan-style, decade-long slump in the stock market. He called called on policy makers to spend liberally to cushion a withering global downturn. He was quoted as saying:“A scenario I fear is that we’ll see, for the whole world, an equivalent of Japan’s lost decade, the 1990s—that we’ll see a world of zero interest rates, deflation, no sign of recovery, and it will just go on for a very extended period, and that’s unfortunately very easy to see happen. We can easily be talking about a world economy that is depressed until 2011 and maybe beyond.”
Krugman added that in his worst case scenario there would also be a series of extremely serious crises in particular countries that are in big trouble.
The Boom Case
Birinyi Associates said that if some market watchers are right and the bear market is over, this could be the strongest start to a bull run in over 75 years. Looking at the S&P 500 and assuming that 750 marked the bottom, Birinyi argues the index has shown its strongest advance for any 11-day start to a bull market since 1932.
According to Jeffery Rubin, an analyst at Birinyi Associates, the markets having turned bullish is beyond question. His firm uses factors like money flows to gauge market psychology, to discover what kind of bull market this may be.
Birinyi Associates, headed by founder Laszlo Birinyi, has been just one voice in a recent chorus of fund managers and market participants who are calling investors back to stocks. Bill Miller of Legg Mason and Steve Leuthold of Leuthold Group are two others.
What To Do
First, we should stop trying to predict the future. It is obvious that very smart and credible people have vastly different opinions on where we are headed. Here are five stocks for consideration that have done well during booms and busts:Kimberly-Clark Corporation (KMB): This leading consumer products company's global tissue, personal care and health care brands include Huggies, Pull-Ups, Kotex, Depend, Kleenex, Scott and Kimberly-Clark. During a bust or a boom, people still need KMB's products and most people are very loyal to their brand.
Buying good, solid dividend companies is a time proven means of investing in the good and bad times. They produce a stable stream of dividend income and help cushion the market's volatility. While everyone else is panicked about their portfolio's decline, dividend investors see a bust as a buying opportunity that will eventually turn into a boom.
Buy Below Price: $52.87
PepsiCo, Inc. (PEP): This company is a major international producer of branded beverage and snack food products. During a bust, most people don't give up sodas and snack food, during a boom PEP moves into new markets.
Buy Below Price: $70.61
Integrys Energy Group, Inc. (TEG): This utility holding company serves about 485,000 regulated electric and 1,674,000 regulated gas customers. The company also operates an unregulated energy supply and services business. During a bust or boom, people don't stop using electricity or natural gas.
Buy Below Price: $49.95
United Technologies Corp (UTX): This aerospace-industrial conglomerate's portfolio includes Pratt & Whitney jet engines, Sikorsky helicopters, Otis elevators and Carrier air conditioners, among other products. Large backlogs for commercial aircraft and strong demand for military helicopters will keep UTX busy during a bust and a boom.
Buy Below Price: $56.27
Wal-Mart Stores, Inc. (WMT): The largest retailer in North America, operates a chain of discount department stores, wholesale clubs, and combination discount stores and supermarkets. During busts, the company is well positioned to gain market share, and during booms WMT will continue its global expansion.
Buy Below Price: $62.40
Full Disclosure: Long KMB, PEP, TEG, UTX, WMT
References:
- Now entering bull market? Some analysts think so
- Nobel laureate Krugman: Lost decade possible
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The S&P 500 Dividend Aristocrats is a list of companies that have followed a policy of consistently increasing dividends every year for at least 25 consecutive years. A quarter of a century is a long time. Once a company has increase its dividend for that period of time, it would think twice before giving up its Aristocrat crown. This is an excellent place to look for potential dividend stocks. Here are five household names to consider:McDonald's Corporation (MCD) is the largest fast-food restaurant company in the world. Its restaurants serve a varied, yet limited, value-priced menu in more than 100 countries around the world. MCD has paid a cash dividend to shareholders every year since 1937 and has increased its dividend payments for 32 consecutive years. (Analysis)
These companies, and the other companies on the Dividend Aristocrats list, have been there before. As previously noted, I am currently reworking my dividend analysis worksheets to focus on what’s most important in selecting a dividend stock. In the new analysis stocks that have increased their dividends in 15 or more years will earn a Star.
Wal-Mart Stores, Inc. (WMT) is the largest retailer in North America. The company operates retail stores in various formats worldwide. It operates through three segments: Wal-Mart Stores, Sam's Club, and International. WMT has paid a cash dividend to shareholders every year since 1973 and has increased its dividend payments for 35 consecutive years. (Analysis)
Abbott Laboratories (ABT) is engaged in the discovery, development, manufacture and sale of a diversified line of healthcare products including: drugs, nutritional products, diabetes monitoring devices and diagnostics. ABT has paid a cash dividend to shareholders every year since 1926 and has increased its dividend payments for 37 consecutive years. (Analysis)
PepsiCo, Inc. (PEP) 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. PEP has paid a cash dividend to shareholders every year since 1952 and has increased its dividend payments for 37 consecutive years. (Analysis)
Lowe's Companies, Inc. (LOW) 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. LOW has paid a cash dividend to shareholders every year since 1961 and has increased its dividend payments for 46 consecutive years. (Analysis)
Full Disclosure: Long MCD, WMT, ABT, PEP, LOW. See a list of all my income holdings here.
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- Margaret Thatcher
If you have followed the U.S. Social Security saga over the last several years, you know it is projected to run out of money soon. As it turns out "soon" just may be much sooner than previously expected. To make matters worse, it has been "broke" for some time, but through creative accounting that would land a private-sector CFO in jail, the government has been able to keep the appearance of solvency.
Bill Fleckenstein in a recent MSN Money article, discussed several issues facing Social Security. Here are some of the key points from his article:
Do you really want to bet your retirement on a system like this? I certainly won't. When planning for retirement, my underlying assumption is that Social Security will go broke before I ever receive a dime. Like everyone, I will need an income during my retirement years. I am currently planting the seeds for that income with high-quality dividend stocks that have a long track record of increasing their dividends each year. Below are some blue chip dividend stocks that eventually end up in most income investors' portfolio:
Wal-Mart Stores, Inc. (WMT) - Yield: 2.11% - Analysis
As for Social Security running out of money, I think people will be paid what was promised since the government can print all the money it needs. However, what was promised may not be enough after inflation, particularly if a lot of money is printed.
The largest retailer in North America knows how to treat customers and shareholders. WMT has rewarded investors with 35 years of consecutive dividend increases.
Abbott Laboratories (ABT) - Yield: 2.11% - Analysis
This drug manufacturer knows the best medicine for a sick portfolio is increased dividends. ABT has been dispensing higher dividends for 37 consecutive years.
Johnson & Johnson (JNJ) - Yield: 3.23% - Analysis
For 47 consecutive years this manufacturer of health care has delighted investors with increased dividends.
Procter & Gamble Co. (PG) - Yield: 3.14% - Analysis
This provider of branded consumer goods products and Dividend Aristocrat has made investors smile for 53 consecutive years with increased dividends.
Full Disclosure: Long ABT, JNJ, PG, WMT. See a list of all my income holdings here.
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The Golden Investments concept did not originate with me, and others have different names for it, including 'zero-basis stock.' I don't care for that name since, in reality it is nearly impossible to hold a stock with zero basis (at least the way the IRS calculates basis). A Golden Investment is one in which I have fully recovered my entire investment either through dividends or from partial liquidation or a combination of both.
I am pleased to announce that Wal-Mart (WMT) has now earned Golden Investment status. With this month's dividend, along with prior sales and dividends received over the years, cash received from my WMT investment now account for 100.8% of my original investment. In my income portfolio, I am currently holding these Golden Investments with several more going Golden in the next 24 months...
Source: Dividend Growth Stocks
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If I am achieving my goal of creating an ever-increasing income from dividend investment, I would not drastically change my investing strategy if I were to under-perform the S&P. However, the opposite isn't true. If I were not consistently growing dividend income, but nearly always beating the S&P, it would be time for me to totally rethink my strategy.
A person that tries to please everyone, usually ends up pleasing no one. In the same vien, trying to achieve your goals and desires may lead you to achieving neither. Consider the following dividend stocks and S&P 500 return YTD through June 30:
Note, my returns may be different than your due to additional share purchases.
So far this year each of the above companies have under-performed the S&P. Yet, I consider each of these stocks one of my top-shelf dividend stocks. Last year in the face of a significant downturn, MCD and WMT posted gains. I will continue to hold any dividend stock as long as it continues to increase dividends at a respectable pace, irrespective of its performance against the S&P.
My goal is to generate an ever-increasing income stream from dividends. As noted in Saturday's Progress Report, I have done this in the last 18 of 19 months. My desire is to beat the S&P 500 over time. I beat it by double digits last year. I am trailing slightly this year, but over the last 18 months I am still up. In the end, I will not sell a great dividend stock for under-performing the S&P.
Full Disclosure: Long VFINX, JNJ, MCD, PG, WMT. See a list of all my income holdings here.
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Last week I listed the stocks in my portfolio that I considered to be "My Favorite 5 Stocks for Today". I thought it would be interesting to followup with the stocks that I am holding that are on the other end of the spectrum. It is important to note these picks will change over time (maybe even by the time the market opens on Monday). Below are the 5 stocks in my portfolio that I am the least happy with:
- HD - HD has held its dividend constant at $0.225/share for the last six quarters, and I suspect it will continue for at least one more quarter. That's ok if you have a double-digit yield, but at 3+% I expect more. This stock is currently "On The Shelf".
- WMT - Unlike HD, WMT raised its dividend at the appointed time, but at 8.0% it wasn't enough to keep my model smiling. At the current yield and a lower growth rate the NPV MMA Diff. is now negative. WMT is no longer a buy but is also "On The Shelf".
- STI - As noted in an earlier post, I am holding too many different bank stock (6) and I am looking to sell 2-3 of them. From a total return standpoint STI is my worst performer of all income stocks that I hold, which has put it "On The Shelf".
- MTB - Ditto STI above. From a total return standpoint, MTB is my second-worst performer of all income stocks that I hold, which too has put it "On The Shelf".
- SFI - Within my income investments, SFI is by far my most risky investment. This is reflected in its ~20% yield. SFI is normally above-average when it comes to volatility, but recently, its volatility has been especially high. SFI is currently not "On The Shelf", but I am watching it closely.
Disclaimer: Material presented here is for informational purposes only and is based solely on my opinion. 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 own shares of all the above-mentioned stocks.
What are your 5 least-favorite stocks in your portfolio?
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Procter & Gamble Co. (PG) in April 2009 raised its dividend 10% to $0.44/share from $0.40/share. PG has increased its dividend for 53 consecutive years and I expect them to do so again next year. 2010's increase may not be as strong since 2009's free cash flow was down 8.5% from 2008. However, it is still strong and the trailing 12-months is above the 2008 level. Also, PG's 2009 share count is down in and its cash balance is up. Given this, I project a 2010 increase of 6-8%. The stock is currently yielding 2.9%. [Analysis]
Colgate-Palmolive Co. (CL) in April 2009 also raised its dividend 10% to $0.44/share from $0.40/share. CL has increased its dividend for 46 consecutive years and I expect them to do so again next year. The 2010 increase should be higher then 2009's since the company's 12-month trailing free cash flow is up over 41% compared to 2008. The company's most recet cash balance is up 52% and shares outstanding are down. I project a 2010 increase of 10-12%. The stock is currently yielding 2.1%.
W.W. Grainger Inc. (GWW) in May 2009 raised its dividend 15% to $0.46/share from $0.40/share. GWW has increased its dividend for 38 consecutive years and I expect them to do so again next year. The 2010 increase could be higher since the company's 12-month trailing free cash flow is up over 62% compared to 2008 and its most recent cash balance is up nearly 70%. I project a 2010 increase of 15-17%. The stock is currently yielding 1.8%. [Analysis]
Abbott Laboratories (ABT) in April 2009 raised its dividend 11% to $0.40/share from $0.36/share. ABT has increased its dividend for 37 consecutive years and I expect them to do so again next year. The 2010 increase should be similar to the 2009 increase since the company's 12-month trailing free cash flow is down slightly (2%) compared to 2008, but it is currently sitting on 18% more cash. I project a 2010 increase of 10%. The stock is currently yielding 2.9%. [Analysis]
Wal-Mart Stores Inc. (WMT) in March 2009 raised its dividend 15% to $0.2725/share from $0.2375/share. WMT has increased its dividend for 35 consecutive years and I expect them to do so again next year. This cash generating machine continues to hum with a 10% increase (12-month trailing) in free cash flow compared to 2008. The more impressive statistic is the 12-month trailing cash flow is 2.4 time higher than the 2008 amount. I project a 2010 increase of 10%. The stock is currently yielding 2.0%. [Analysis]
Walgreen Company (WAG) in August 2009 raised its dividend 22% to $0.1375/share from $0.1125/share. WAG has increased its dividend for 34 consecutive years and I expect them to do so again next year. This is another cash generating machine that saw a 2009 free cash flow increase of 168% compared to 2008 and the 2009 ending cash balance is 4.7 time higher than 2008's. I project a 2010 increase of 15-20%. The stock is currently yielding 1.5%. [Analysis]
AFLAC Inc. (AFL) in February 2009 raised its dividend 17% to $0.28/share from $0.24/share. AFL has increased its dividend for 27 consecutive years and I expect them to do so again next year. In spite of all the negative publicity aimed at the financial sector, AFL's free cash flow has grew approximately 15% the last 12 months compared to 2008 and its most recent cash balance has nearly doubled from the 2008 level. I project a 2010 increase of 10%. The stock is currently yielding 2.4%. [Analysis]
Obviously, the above increases are pure speculation on my part. But in a world where cash is king, somehow great companies always find a way to increase their dividends each year.
Full Disclosure: Long ABT, AFL, PG, WMT. See a list of all my income holdings here.(Photo Credit)
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