This article originally appeared on The DIV-Net September 22, 2008.
Linked here is a PDF copy of my detailed analysis of V.F. Corp. (VFC) (alt.1, alt.2). Below are some highlights from the above linked analysis:
Company Description: V.F. Corp is a global apparel company with leading shares in denim and daypacks. The company is transforming into a designer and marketer of lifestyle apparel brands.
Fair Value: I consider four calculations of fair value, see page 2 of the linked PDF for a detailed description:
VFC is trading at a premium to all four valuations above. If I exclude the high and low valuations and average the remaining two, VFC is trading at a 40.9% premium. VFC had a Star deducted for trading at a premium in excess of 5%.
Dividend Analytical Data: In this section I consider five factors, see page 2 of the linked PDF for a detailed description:
VFC earned one Star in this section for 3.) above. VFC has paid a cash dividend to shareholders every year since 1941 and has increased its dividend payments for 34 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:
VFC earned no Stars in this section, and had one Star deducted for a negative NPV MMA Diff. The negative NPV MMA Diff. means that on a NPV basis for every $1,000 invested in VFC you would earn $1,669 less than a MMA earning a 20-year average rate of 4.61%. If VFC grows its dividend at 4.0% per year, it will never equal the cumulative earnings from a MMA yielding an estimated 20-year average rate of 4.61%.
Other: VFC is a member of the S&P 500, a Dividend Aristocrat and a member of the Broad Dividend Achievers™ Index. VFC's has a strong management team in place. Recent acquisitions and international expansion provide for good growth potential. VFC continues to look for acquisitions of brands that will fit its portfolio. The denim business provides steady growth and generates significant cash flow.
Conclusion: VFC lost one Star in the Fair Value section, earned one Star in the Dividend Analytical Data section and lost one Star in the Dividend Income vs. MMA section for a net total of negative one Star. Since my scale bottoms out at zero, this quantitatively ranks VFC as a 0 Star-Avoid stock.
Using my D4L-PreScreen.xls model, I determined the share price would have to drop to $51.18 before VFC's NPV MMA Diff. increases to the $3,000 NPV MMA Diff. that I like to see. At that price VFC would yield 4.53%.
Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the $3,000 NPV MMA Differential I'm looking for, the calculated rate is 9.7%. This dividend growth rate is more than double the 4.0% used in this analysis. VFC may be headed in the right direction, but at this level it does not earn a spot in my income portfolio.
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 had no position in VFC (0.0% of my Income Portfolio) .
What are your thoughts on VFC?
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This article originally appeared on The DIV-Net September 15, 2008.
Linked here is a PDF copy of my detailed analysis of Colgate Palmolive (CL) (alt.1, alt.2). Below are some highlights from the above linked analysis:
Company Description: Colgate-Palmolive Company (Colgate) is a consumer products company, whose products are marketed throughout the world. Colgate’s Oral Care products include toothpaste, toothbrushes, oral rinses, dental floss and pharmaceutical products.
Fair Value: I consider four calculations of fair value, see page 2 of the linked PDF for a detailed description:
CL is trading at a premium to all four valuations above. Since CL'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, CL is trading at a 51.1% premium. CL had a Star deducted for trading at a premium in excess of 5%.
Dividend Analytical Data: In this section I consider five factors, see page 2 of the linked PDF for a detailed description:
CL earned one Star in this section for 3.) above. CL has paid a cash dividend to shareholders every year since 1895 and has increased its dividend payments for 45 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:
CL earned no Stars in this section. The NPV MMA Diff. of the $176 is below the $2,500 minimum I look for in a stock that has increased dividends as long as CL has. If CL grows its dividend at 11.4% per year, it will take 14 years to equal the cumulative earnings from a MMA yielding an estimated 20-year average rate of 4.61%. The 14 years is more than the 10 years maximum I like to see. .
Other: CL is a member of the S&P 500, a Dividend Aristocrat and a member of the Broad Dividend Achievers™ Index. Demand for household and personal care products is generally static, and not affected by changes in the economy or geopolitical factors. The industry is mature and quite competitive. CL's restructuring are likely to continue to benefit EPS growth. The CEO transition from Reuben Mark (CEO since 1984) to Ian Cook (former COO, became CEO on July 1, 2007) appears to have gone smoothly.
Conclusion: CL lost one Star 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 net total of zero Star. This quantitatively ranks CL as a 0 Star-Avoid stock.
Using my D4L-PreScreen.xls model, I determined the share price would have to drop to $62.10 before CL's NPV MMA Diff. decreases to the $3,000 NPV MMA Diff. that I like to see. At that price CL would yield 2.51%.
Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the $3,000 NPV MMA Differential I'm looking for, the calculated rate is 13.9%. CL has not grown its dividend 13.9% or above since 2005 when its year-over-year dividend growth rate was 15.6%. CL will not be joining my income portfolio anytime soon.
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 had no position in CL (0.0% of my Income Portfolio) .
What are your thoughts on CL?
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This article originally appeared on The DIV-Net September 8, 2008.
Linked here is a PDF copy of my detailed analysis of McGraw-Hill Companies Inc (MHP) (alt.1, alt.2). Below are some highlights from the above linked analysis:
Company Description: The McGraw-Hill Companies Inc. is a leading information services organization serves worldwide markets in education, business, industry, other professions and government.
Fair Value: I consider four calculations of fair value, see page 2 of the linked PDF for a detailed description:
MHP is trading at a discount to 1.), 2.) and 3.) above. Since MHP'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, MHP is trading at a 11.7% discount. MHP 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:
MHP earned one Star in this section for 3.) above. MHP has paid a cash dividend to shareholders every year since 1937 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:
MHP earned no Stars in this section, and had one Star deducted for a negative NPV MMA Diff. The negative NPV MMA Diff. means that on a NPV basis for every $1,000 invested in MHP you would earn $2,310 less than a MMA earning a 20-year average rate of 4.61%. If MHP grows its dividend at 7.3% per year, it will never equal the cumulative earnings from a MMA yielding an estimated 20-year average rate of 4.61%.
Other: MHP is a member of the S&P 500, a Dividend Aristocrat and a member of the Broad Dividend Achievers™ Index. MHP noted in its 2007 10-K report filed with the SEC in February 2008 that among the risks facing its businesses are the level of educational funding both domestically and internationally, and the health of capital and equity markets, including future interest rate changes.
Conclusion: MHP earned one Star in the Fair Value section, earned one Star in the Dividend Analytical Data section and lost one Star in the Dividend Income vs. MMA section for a net total of one Star. This quantitatively ranks MHP as a 1 Star-Very Weak stock.
Using my D4L-PreScreen.xls model, I determined the share price would have to drop to $24.91 before MHP's NPV MMA Diff. decreases to the $3,000 NPV MMA Diff. that I like to see. At that price MHP would yield 3.53%. MHP will not be joining my dividend income portfolio in the near-term.
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 had no position in MHP (0.0% of my Income Portfolio) .
What are your thoughts on MHP?
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This article originally appeared on The DIV-Net September 1, 2008.
Linked here is a PDF copy of my detailed analysis of Nucor Corp (NUE) (alt.1, alt.2). Below are some highlights from the above linked analysis:
Company Description: Nucor Corporation is engaged in the manufacture and sale of steel and steel products. As the largest minimill steelmaker in the U.S., Nucor has one of the most diverse product lines of any steelmaker in the Americas.
Fair Value: I consider four calculations of fair value, see page 2 of the linked PDF for a detailed description:
NUE is trading at a discount to 1.), 2.) and 3.) above. If I exclude the high and low valuations and average the remaining two, NUE is trading at a 30.9% discount. NUE 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:
NUE 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 (1998-2001, 1999-2002, 2000-2003, etc.) I consider this a key metric since dividends will double every 5 years if they grow by 15%. NUE 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:
NUE earned one Star in this section for 1.) above. The NPV MMA Diff. of the $9,719 is in excess of the $2,500 minimum I look for in a stock that has increased dividends as long as NUE has. If NUE grows its dividend at 15.0% per year, it will take 9 years to equal the cumulative earnings from a MMA yielding an estimated 20-year average rate of 4.61%.
Other: NUE is a member of the S&P 500, a Dividend Aristocrat and a member of the Broad Dividend Achievers™ Index. Even though NUE is exposed to cyclical end-markets, the company has a low total debt to assets ratio and generates substantial free cash flow. With the global steel industry consolidating via mergers, the increased concentration of production among fewer companies should result in greater pricing discipline. This should help NUE to continue generating strong free cash flow for the next several years, thus enabling NUE to raise its dividend, make acquisitions and invest in new capital/technology improvements.
Conclusion: NUE 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 NUE as a 5 Star-Strong Buy.
Using my D4L-PreScreen.xls model, I determined the share price could rise to $70.16 before NUE's NPV MMA Diff. decreases to the low-end $3,000 NPV MMA Diff. that I like to see. At that price NUE would yield 1.82%. I find NUE intriguing and would consider adding it to my income portfolio sometime in the future.
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 had no position in NUE (0.0% of my Income Portfolio).
What are your thoughts on NUE?
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This article originally appeared on The DIV-Net August 25, 2008.
Linked here is a PDF copy of my detailed analysis of Avery Dennison (AVY) (alt.1, alt.2). Below are some highlights from the above linked analysis:
Company Description: Avery Dennison Corp. is a leading worldwide manufacturer of pressure-sensitive adhesives and materials, office products, labels, retail systems and specialty chemicals.
Fair Value: I consider four calculations of fair value, see page 2 of the linked PDF for a detailed description:
AVY is trading at a discount to 1.) and 3.) above. Since AVY'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, AVY is trading at a 29.2% premium. AVY had a Star deducted for trading at a premium in excess of 5%.
Dividend Analytical Data: In this section I consider five factors, see page 2 of the linked PDF for a detailed description:
AVY earned one Star in this section for 3.) above. AVY has paid a cash dividend to shareholders every year since 1919 and has increased its dividend payments for 29 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:
AVY earned no Stars in this section, and had one Star deducted for a negative NPV MMA Diff. The negative NPV MMA Diff. means that on a NPV basis for every $1,000 invested in AVY you would earn $1,387 less than a MMA earning a 20-year average rate of 4.61%. If AVY grows its dividend at 1.9% per year, it will never equal the cumulative earnings from a MMA yielding an estimated 20-year average rate of 4.61%.
Other: AVY is a member of the S&P 500, a Dividend Aristocrat and a member of the Broad Dividend Achievers™ Index. AVY is the market leader in pressure-sensitive adhesives and office products. It has enjoyed above-average growth rates in key end-markets and a relatively strong balance sheet. labels. In 2007 AVY acquired Paxar, a major competitor in the product identification industry. AVY should see significant cost savings over the next few years.
Conclusion: AVY lost one Star in the Fair Value section, earned one Star in the Dividend Analytical Data section and lost one Star in the Dividend Income vs. MMA section for a net total of negative one Star. Since my scale bottoms out at zero, this quantitatively ranks AVY as a 0 Star-Avoid stock.
Using my D4L-PreScreen.xls model, I determined the share price would have to drop to $31.03 before AVY's NPV MMA Diff. increases to the $3,000 NPV MMA Diff. I like to see. At that price AVY would yield 5.28%. At 1.9%, AVY's dividend growth rate is anemic. If AVY were to grow its dividend at 7.6% it would reach the desired $3,000 NPV MMA Diff. at the current yield. AVY will not be invited to join my income portfolio anytime soon.
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 did not own shares of AVY (0.0% of my Income Portfolio).
What are your thoughts on AVY?
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This article originally appeared on The DIV-Net August 18, 2008.
Linked here is a PDF copy of my detailed analysis of Walgreen Co (WAG) (alt.1, alt.2). Below are some highlights from the above linked analysis:
Company Description: Walgreen Co is the largest U.S. retail drug chain in terms of revenues. It sells prescription and non-prescription drugs, beauty care, personal care, household items, candy, photofinishing, greeting cards, seasonal items and convenience foods.
Fair Value: I consider four calculations of fair value, see page 2 of the linked PDF for a detailed description:
WAG is trading at a discount to 1.), 2.) and 3.) above. If I exclude the high and low valuation and average the remaining two, WAG is trading at a 31.1% discount. WAG 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:
WAG earned two Stars in this section for 3.) and 4.) above. WAG has paid a cash dividend to shareholders every year since 1933 and has increased its dividend payments for 33 consecutive years. It's one year dividend growth rate exceeded its 5-year growth rate. This could indicate the growth rate is accelerating.
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:
WAG earned no Stars in this section, and had one Star deducted for a negative NPV MMA Diff. The negative NPV MMA Diff. means that on a NPV basis for every $1,000 invested in WAG you would earn $3,175 less than a MMA earning a 20-year average rate of 4.61%. If WAG grows its dividend at 11.9% per year, it will never equal the cumulative earnings from a MMA yielding an estimated 20-year average rate of 4.61%.
Other: WAG is a member of the S&P 500, a Dividend Aristocrat and a member of the Broad Dividend Achievers™ Index. WAG should benefit from increased generic drug sales, new Medicare legislation, new store growth and an aging U.S. population. Potential threats would include the growth of non-traditional competitors, such as Wal-Mart (WMT), et. al., and potential legislation changes.
Conclusion: WAG earned one Star in the Fair Value section, earned two Stars in the Dividend Analytical Data section and lost one Star in the Dividend Income vs. MMA section for a net total of two Stars. This quantitatively ranks WAG as a 2 Star-Weak stock.
Using my D4L-PreScreen.xls model, I determined the share price would have to drop to $17.27 before WAG's NPV MMA Diff. increases to the $3,000 NPV MMA Diff. I like to see. At that price WAG would yield 2.41%. As a value investment WAG could possibly have merit. However, as a dividend investment WAG comes up short at this time.
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 had no position in WAG (0.0% of my Income Portfolio) and was long in WMT (1.6% of my Income Portfolio).
What are your thoughts on WAG?
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This article originally appeared on The DIV-Net August 11, 2008.
Linked here is a PDF copy of my detailed analysis of Air Products and Chemicals Inc. (APD) (alt.1, alt.2). Below are some highlights from the above linked analysis:
Company Description: Air Products and Chemicals Inc. produces industrial gases and specialty and intermediate chemicals and also has interests in environmental and energy-related businesses.
Fair Value: I consider four calculations of fair value, see page 2 of the linked PDF for a detailed description:
APD is trading at a premium to all four valuations above. If I exclude the high and low valuation and average the remaining two, APD is trading at a 24.0% premium. APD had a Star deducted for trading at a premium in excess of 5%.
Dividend Analytical Data: In this section I consider five factors, see page 2 of the linked PDF for a detailed description:
APD earned two Stars in this section for 3.) and 4.) above. APD has paid a cash dividend to shareholders every year since 1954 and has increased its dividend payments for 26 consecutive years. It's one year dividend growth rate exceeded its 5-year growth rate. This could indicate the growth rate is accelerating.
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:
APD earned no Stars in this section, and had one Star deducted for a negative NPV MMA Diff. The negative NPV MMA Diff. means that on a NPV basis for every $1,000 invested in APD you would earn $802 less than a MMA earning a 20-year average rate of 4.61%. If APD grows its dividend at 10.4% per year, it will never equal the cumulative earnings from a MMA yielding an estimated 20-year average rate of 4.61%.
Other: APD is a member of the S&P 500, a Dividend Aristocrat and a member of the Broad Dividend Achievers™ Index. On the plus side, the industrial gases industry tends to have stable growth versus commodity chemicals. On the minus side, APD experiences volatile raw material cost in the chemical segment. APD has a relatively strong balance sheet.
Conclusion: APD lost one Star in the Fair Value section, earned two Stars in the Dividend Analytical Data section and lost one Star in the Dividend Income vs. MMA section for a net total of zero Stars. This quantitatively ranks APD as a 0 Star-Avoid stock.
Using my D4L-PreScreen.xls model, I determined the share price would have to drop to $61.74 before APD's NPV MMA Diff. increases to the $3,000 NPV MMA Diff. I like to see. At that price APD would yield 2.75%. Given APD's current valuation, I will not be purchasing shares anytime soon.
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 do not own shares of APD (0.0% of my Income Portfolio).
What are your thoughts on APD?
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This article originally appeared on The DIV-Net August 4, 2008.
Linked here is a PDF copy of my detailed analysis of Stanley Works (SWK) (alt.1, alt.2). Below are some highlights from the above linked analysis:
Company Description: Stanley Works is a worldwide producer of tools, hardware and specialty hardware for home improvement, consumer, industrial and professional use.
Fair Value: I consider four calculations of fair value, see page 2 of the linked PDF for a detailed description:
SWK is trading at a discount to only 3.) above. Since SWK's tangible book value is not meaningful, a Graham number can not be calculated. If I exclude the high and low valuation and average the remaining two, SWK is trading at a 16.1% premium. SWK had a Star deducted for trading at a premium in excess of 5%.
Dividend Analytical Data: In this section I consider five factors, see page 2 of the linked PDF for a detailed description:
SWK earned one Star in this section for 3.) above. SWK has paid a cash dividend to shareholders every year since 1877 and has increased its dividend payments for 41 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:
SWK earned no Stars in this section, and had one Star deducted for a negative NPV MMA Diff. The negative NPV MMA Diff. means that on a NPV basis for every $1,000 invested in SWK you would earn $2,013 less than a MMA earning a 20-year average rate of 4.61%. If SWK grows its dividend at 3.3% per year, it will never equal the cumulative earnings from a MMA yielding an estimated 20-year average rate of 4.61%.
Other: SWK is both an S&P 500 Dividend Aristocrat and a member of The Broad Dividend Achievers™ Index. Though SWK has a strong brand name and is well positioned versus it competitors, SWK is is experiencing a cyclical downturn from a weak housing market and slowing U.S. economy. Overseas growth has been able to partially offset this downturn.
Conclusion: SWK lost a Star in the Fair Value section, earned a Star in the Dividend Analytical Data section and lost a Star in the Dividend Income vs. MMA section for a net total of -1 Stars. Since my scale bottoms out at zero, this quantitatively rates SWK as a 0 Star-Avoid stock.
Using my D4L-PreScreen.xls model, I determined the share price would have to drop to $26.32 before SWK's NPV MMA Diff. increases to the $3,000 NPV MMA Diff. I like to see. At that price SWK would yield 4.79%. Given SWK's current valuation, I will not be purchasing shares anytime soon.
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 do not own shares of SWK (0.0% of my Income Portfolio).
What are your thoughts on SWK?
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This article originally appeared on The DIV-Net July 28, 2008.
Linked here is a PDF copy of my detailed analysis of Kimberly-Clark Corporation (KMB) (alt.1, alt.2). Below are some highlights from the above linked analysis:
Company Description: 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.
Fair Value: I consider four calculations of fair value, see page 2 of the linked PDF for a detailed description:
KMB is trading at a discount to 1.) and 3.) above. If I exclude the high and low valuation and average the remaining two, KMB is trading at a 5.9% premium. KMB had a Star deducted for trading at a premium in excess of 5%.
Dividend Analytical Data: In this section I consider five factors, see page 2 of the linked PDF for a detailed description:
KMB earned one Star in this section for 3.) above. KMB has paid a cash dividend to shareholders every year since 1935 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:
KMB earned both available Stars in this section. With a NPV MMA Diff. of $8,952, KMB is well above the $3,000 I look for in a company that is both an Achiever and an Aristocrat. KMB's current yield of 4.19%, exceeds the 20-year expected MMA rate of 4.61%.
Other: KMB is both an S&P 500 Dividend Aristocrat and a member of The Broad Dividend Achievers™ Index. The generally static demand for household and personal care products are usually not affected by changes in the economy or political events. KMB's 2008 earnings should benefit from the 2005 strategic cost reduction program, but for the most part, it will be over shadowed by higher commodity costs.
Conclusion: KMB lost a Star in the Fair Value section, earned a Star in the Dividend Analytical Data section and two Stars in the Dividend Income vs. MMA section for a net total of 2 Stars. This quantitatively rates KMB as a 2 Star-Weak stock.
Using my D4L-PreScreen.xls model, I determined the share price could go up to $73.97 before KMB's NPV MMA Diff. drops to the $3,000 NPV MMA Diff. I like to see. At that price KMP would yield 3.14%. Like the analysis on LLY earlier this month, KMB is a 2 Star-Weak stock that is very close to being a 4 Star-Buy. Given KMB's strong NPV MMA Diff., I would be very comfortable initiating a position at $55.50, or 5% above the $52.87 calculated fair value. This would be a $0.49 or 0.9% decrease from KMB recent price of $55.99.
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 do not own shares of KMB (0.0% of my Income Portfolio).
What are your thoughts on KMB?
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This article originally appeared on The DIV-Net July 21, 2008.
Linked here is a PDF copy of my detailed analysis of Consolidated Edison, Inc. (ED) (alt.1, alt.2). Below are some highlights from the above linked analysis:
Company Description: Consolidated Edison, Inc., through its subsidiaries, provides electric, gas, and steam utility services in the United States serving parts of New York, New Jersey and Pennsylvania.
Fair Value: I consider four calculations of fair value, see page 2 of the linked PDF for a detailed description:
ED is trading at a discount to 1.), 3.) and 4.) above. If I exclude the high and low valuation and average the remaining two, ED is trading at a 14.8% discount. ED 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:
ED earned one Star in this section for 3.) above. ED has paid a cash dividend to shareholders every year since 1885 and has increased its cash dividend payment 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:
ED earned both available Stars in this section. With a NPV MMA Diff. of $4,321, ED is well above the $3,000 I look for in a company that is both an Achiever and an Aristocrat. ED's current yield of 6.16%, exceeds the 20-year expected MMA rate of 4.61%.
Other: ED is both an S&P 500 Dividend Aristocrat and a member of The Broad Dividend Achievers™ Index. As a regulated electric and gas utility, ED produces a strong and steady cash flows. It has a solid balance sheet, an A- credit rating and operates in a historically supportive regulatory environment.
Conclusion: ED earned a Star in the Fair Value section, earned one Star in the Dividend Analytical Data section and two Stars in the Dividend Income vs. MMA section for a net total of 4 Stars. This quantitatively rates ED as a 4 Star-Buy.
Using my D4L-PreScreen.xls model, I determined the share price could go up to $41.39 before ED's NPV MMA Diff. drops to the $3,000 NPV MMA Diff. I like to see. At that price ED would yield 5.65%. I would be very comfortable adding to my position at the current price of $38.48 and a 6+% yield.
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 own shares of ED (2.9% of my Income Portfolio).
What are your thoughts on ED?
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This article originally appeared on The DIV-Net July 14, 2008.
Linked here is a PDF copy of my analysis of Abbott Laboratories (ABT) (alt.1, alt.2). Below are some highlights from the above linked analysis:
Company Description: Abbott Laboratories 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.
Fair Value: I consider four calculations of fair value, see page 2 of the linked PDF for a detailed description:
ABT is trading at a discount to only 3.) above. If I exclude the high and low valuation, and average the remaining two valuations, ABT is trading at an astounding 61.6% premium. A Star is deducted since ABT is trading at a premium in excess of 5%.
Dividend Analytical Data: In this section I consider five factors, see page 2 of the linked PDF for a detailed description:
ABT earned two Stars in this section for 3.) and 4.) above. It has paid a cash dividend to shareholders every year since 1903 and has increased its quarterly cash dividend payments for 36 consecutive years. The 1-Yr. > 5-Yr Growth metric indicates that dividend growth has been accelerating.
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:
ABT was deducted one Star in this section for 1.) above. At its current yield of 2.51% and a dividend growth rate of 7.1%, ABT will under-perform a MMA averaging 4.61% by $957 per $1,000 invested over 20 years.
Other: ABT is a member of the S&P 500, is an Achiever and an Aristocrat. Like all drug companies, ABT is facing challenges to their branded patents, drug development and regulatory issues. However, ABT has a relatively strong new product pipeline, with possible significant launches in both the medical device and pharmaceutical areas.
Conclusion: ABT lost a Star in the Fair Value section, earned two Stars in the Dividend Analytical Data section and lost one Stars in the Dividend Income vs. MMA section for a net total of 0 Stars. This quantitatively rates ABT as a 0 Star-Avoid stock.
Using my D4L-PreScreen.xls model, I determined the share price would have to drop to $40.55 for the NPV of MMA Differential to reach the $2,500 minimally acceptable level for from a company that is both an Achiever and an Aristocrat. In short, ABT is overvalued and not a good dividend investment at this time. Thus, I won't be buying ABT any time soon.
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 do not own shares of ABT (0.0% of my Income Portfolio).
What are your thoughts on ABT?
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Article sharing is one of the benefits of DIV-Net. Periodically, I plan to post on Dividends4Life some articles originally appearing on The DIV-Net to allow my readers to experience first hand the high-quality authors writing for The DIV-Net.
This article by Old School Value originally appeared on The DIV-Net July 5, 2008.
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As one of the few value investors in The DIV-Net so far, I would first like to touch on what value investing is.
Charlie Munger stated it quite clearly. Intelligent investing = value investing.
By value investing, the general population tends to think of it as bottom feeding and being cheap, but such a statement only holds true in a town called Speculatown.
Value investing is much more than buying cheap companies. It's just like how we all love to find something great in the sale bin and then brag about it to our friends. It revolves around paying less or a fair amount to its real value, referred to as intrinsic value or buying $1 for 50c.
Benjamin Graham, the father of value investing, stated in his book Security Analysis,"An investment operation is one which, upon thorough analysis, promises safety of principal and a satisfactory return. Operations not meeting these requirements are speculative."
Without data and reasoning associated with an appropriate price tag, this type of activity should be labeled "Get Rich Quick Like That Guy on TV".
Speculation is darn easy but value investing is difficult. Difficult because it requires;
Many great value investors mentioned by Warren Buffett in his famous speech, The Super Investors of Graham and Doddsville, show the track record of these great investors. They weren't able to beat the benchmark year after year, but their overall records tell the true story.
Seth Klarman clarifies the idea when saying that"while others attempt to win every lap around the track, it is crucial to remember that to succeed at investing, you have to be around at the finish".
This brings me to the point of long term buy and hold. While there certainly are opportunities where the market provides short term no brainer investments, a long term buy and hold methodology will allow an investor to look at the horizon, focus on quality businesses and live a life without the computer.
By investing for the long term in quality companies, we are recognizing that we are the business partners.
As an associate member of the Dividend Investing and Value Network, I hope to bring light to great companies and value investing. I am proud to be a business partner and hope to be one with you as well.
If you enjoyed this article, please visit Old School Value and subscribe to his feed.
(Photo: sanja gjenero)
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This article originally appeared on The DIV-Net July 7, 2008.
Linked here is a PDF copy of my analysis of Eli Lilly and Co. (LLY) (alt.1, alt.2). Below are some highlights from the above linked analysis:
Company Description: Eli Lilly and Company discovers, develops, manufactures and sells prescription drugs that offers a wide range of treatments for neurological disorders, diabetes, cancer, and other conditions. The company also sells animal health products.
Fair Value: I consider four calculations of fair value, see page 2 of the linked PDF for a detailed description:
LLY is trading at a discount to 1.) and 3.) above. If I exclude the high and low valuation, and average the remaining two valuations, LLY is trading at a 9.3% premium. A Star is deducted since LLY is trading at a premium in excess of 5%.
Dividend Analytical Data: In this section I consider five factors, see page 2 of the linked PDF for a detailed description:
LLY earned two Stars in this section for 3.) and 4.) above. It has paid a cash dividend to shareholders every year since 1885 and has increased its quarterly cash dividend payments for 40 consecutive years. The 1-Yr. > 5-Yr Growth metric indicates that dividend growth has been accelerating.
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:
LLY earned one Star in this section for 1.) above, and was very close to earning a Star for 2.) above. A company earns a Star for Years to >MMA if it less than 5 years and LLY is at 5 years.
Other: LLY is a member of the S&P 500, is an Achiever and an Aristocrat. Drug companies are facing challenges to their branded patents, drug development and regulatory issues. However, LLY's drug portfolio has limited near-term patent expiration exposure and it has a healthy pipeline in place.
Conclusion: LLY lost a Star in the Fair Value section, earned two Stars in the Dividend Analytical Data section and earned one Stars in the Dividend Income vs. MMA section for a net total of 2 Star. This quantitatively rates LLY as a 2 Star-Weak stock.
LLY is a good example of why you don't stop with a mechanical quantitative analysis. The NPV MMA Diff. is one of the main metrics I look at and at $4,355 it exceeds the $3,000 I look for in a company that is both an Achiever and an Aristocrat. In the case of LLY, the rating is purely a valuation issue and even there it is extraordinarily close. If LLY had closed at $45.10, instead of the $46.98 used in this valuation, this $1.88 (4%) decline would have made LLY a 4-Star Buy.
Using my D4L-PreScreen.xls model, I determined the dividend growth rate could drop more than a full point to 5.7% and still generate the $3,000 NPV of MMA Differential that I look for from a company that is both an Achiever and an Aristocrat. I have added LLY to my watch list.
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 do not own shares of LLY (0.0% of my Income Portfolio).
What are your thoughts on LLY?
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This article originally appeared on The DIV-Net June 30, 2008.
Some may have wondered what is the connection between Dividend and Value Investing. The connection does not necessarily exist in all cases. For example, an investor selecting investments based solely on dividend yield, is not considering the value aspect of the equation. Conversely, value investors selecting stocks based only on current valuation and future capital appreciation, are ignoring the dividend aspect.
Before going much further, it would be helpful to define value and dividend investing:
Value Investing: As defined by Benjamin Graham and David Dodd generally consists of a system in which the investor identifies market inefficiencies in which a security's price is below its intrinsic value, i.e. it is undervalued. Graham referred to this market price discount from intrinsic value as the "margin of safety". In short, the intrinsic value is the discounted value of all future distributions.
Dividend Investing: In the classic implementation, focuses on identifying solid companies with a record of growing their dividends each year; and an expectation that it will continue into the future. The focus is not solely on yield but a combination of yield and dividend growth. Often it is the lower yield, higher growth, security that will provide the best return over time.
I have always considered Dividend Investing, at least the way I do it, as a subset of Value Investing. Since my first screen is to determine if a stock is a good dividend stock, my universe of stocks is smaller than the average Value Investor. Once a promising dividend stock is located, then I look at its valuation. Is it trading at a discount, fair value or at a premium?
When determining the fair value of a stock I consider four calculations:
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!
(Photo: Robert Linder)
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The DIV-Net is a unique network providing exclusive, original and unpublished content daily from a growing membership containing the best authors in the field. Seven Core Members are responsible for maintaining and administering The DIV-Net site and the DIV-Net network.
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We believe strongly in the virtues of dividend investing, value investing and a long-term buy and hold philosophy. Thus, we didl not want limit DIV-Net to just seven Core Members. In our aim to include as many bloggers interested in our core focus we created an Associate Membership. Associate Members are eligible to submit original unpublished articles to The DIV-Net, access to use DIV-Net's content on their site, participate in the aggregated feed and a site listing on The DIV-Net's Associates page.
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