It is human nature to want to jump on the what's hot bandwagon and ignore what is considered boring. Long considered the domain for “widows and orphans”, utilities have developed a somewhat stodgy reputation. Why are utilities considered good for widows and orphans? Here a few reasons: [more]
Bonds have long been sought after for their stability and safety. For those following a disciplined asset allocation model, bonds likely make up a significant portion of their portfolio. Over time, this has been a well-devised plan. However, to continue holding significant positions in bonds in this economic environment will likely result in a catastrophic end. [more]
Most investors are not surprised when a company cuts its dividend. They see the early warning signs well in advance of the actual cut. Here are three signs that a company is heading toward a dividend cut: [more]
Linked here is a detailed quantitative analysis of Nike, Inc. (NKE). Below are some highlights from the above linked analysis: [more]
Linked here is a detailed quantitative analysis of Emerson Electric Co. (EMR). Below are some highlights from the above linked analysis: [more]
I know very little about hockey, but I have always loved this quote:
I skate to where the puck is going to be, not where it has been."
- Wayne Gretzky [more]
As humans we are often driven by our emotions and relationships. Over time we tend grow fond of people we have a relationship with. Sometimes we grow to love them like a brother or sister; sometimes even more. In much the same way we can easily grow to love certain stocks, but this is not necessarily a good thing. [more]
Are you looking for companies that can sustain and grow their dividend? In making that determination, a company’s Statement of Earnings is one of the last places you should look. Cash is king for the dividend investor and the Statement of Cash Flows is where astute investors begin when they want to understand the viability of a company. To succeed as a dividend investor, you must find companies that can sustain and grow dividends by focusing on their ability to generate cash. You can fake earnings, but you can’t fake cash. [more]
The Pocket Change Portfolio (PCP) was first introduced on September 13, 2008 as a real money dividend income portfolio funded by the "pocket change" earned from my various online endeavors. Each month I report on the portfolio's progress and update its holdings. [more]
Linked here is a detailed quantitative analysis of Exxon Mobil Corporation (XOM). Below are some highlights from the above linked analysis: [more]
Linked here is a detailed quantitative analysis of AT&T Inc. (T). Below are some highlights from the above linked analysis:
Company Description: AT&T Inc. provides telephone and broadband service and holds full ownership of AT&T Mobility (formerly Cingular Wireless). Plans to acquire T Mobile USA were recently scrapped.
Fair Value: In calculating fair value, I consider the NPV MMA Differential Fair Value along with these 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
4. Graham Number
T is trading at a premium to all four valuations above. Since T's tangible book value is not meaningful, a Graham number can not be calculated. The stock is trading at a 36.3% premium to its calculated fair value of $21.61. T 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:
1. Free Cash Flow Payout
2. Debt To Total Capital
3. Key Metrics
4. Dividend Growth Rate
5. Years of Div. Growth
6. Rolling 4-yr Div. > 15%
T earned two Stars in this section for 2.) and 3.) above. The stock earned a Star as a result of its most recent Debt to Total Capital being less than 45%. T earned a Star for having an acceptable score in at least two of the four Key Metrics measured. The company has paid a cash dividend to shareholders every year since 1984 and has increased its dividend payments for 28 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) or Treasury bond? 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.
2. Years to > MMA
T earned a Star in this section for its NPV MMA Diff. of the $1,509. This amount is in excess of the $700 target I look for in a stock that has increased dividends as long as T has. The stock's current yield of 5.84% exceeds the 3.1% estimated 20-year average MMA rate.
Memberships and Peers: T is a member of the S&P 500, a Dividend Aristocrat and a member of the Broad Dividend Achievers™ Index and a Dividend Champion. The company's peer group includes: CenturyLink, Inc. (CTL) with a 7.7% yield, Sprint Nextel Corp. (S) with a 0.0% yield and Verizon Communications Inc. (VZ) with a 5.3% yield.
Conclusion: T 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 T as a 3-Star Hold stock.
Using my D4L-PreScreen.xls model, I determined the share price would need to increase to $39.60 before T's NPV MMA Differential decreased to the $700 minimum that I look for in a stock with 28 years of consecutive dividend increases. At that price the stock would yield 4.3%.
Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the target $700 NPV MMA Differential, the calculated rate is -0.9%. This dividend growth rate is lower than the 2.4% used in this analysis, thus providing a margin of safety. T has a risk rating of 2.00 which classifies it as a Medium risk stock.
T is in a strong competitive position. Such a strong competitive position, that it abandoned it bid to purchase T-Mobile due to concerns that regulatory approval would be hard to come by. The gains in consumer wireless and broadband should continue to outpace losses wireline customers. It should generate good operating margins in 2012.
The company has a strong balance sheet and exercises power over many of its suppliers. A concern is its Free Cash Flow payout has crept up to 68%, which is at the higher end of its 10 year range. It is currently trading well above my calculated fair value price of $21.61, so for now I will wait for a more favorable time to add to my position.
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 T (2.8% of my Dividend Growth Portfolio). See a list of all my dividend growth holdings here.
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Before the 2008 financial meltdown, names like Bank of America (BAC), Citigroup, Inc. (C), U.S. Bancorp (USB) and Wells Fargo & Company (WFC) were held in many dividend growth portfolios. And why not? They paid a good yield and grew their dividend on a regular basis. Now their yields range between 0.5% and 1.7%. There is a lesson to be learned here. [more]
For investors in dividend growth stocks, The Broad Dividend Achievers™ Index is one of the most widely used resources. With 201 stocks on the 2012 list, it is certainty one of the largest lists and contains most stocks listed on other similar lists. In addition, to the mainstream dividend growth stocks, The Broad Dividend Achievers lists many up and coming stocks that could one day find a place in our portfolios. [more]
Dividend stocks are sometimes referred to as defensive stocks since many investors flee to them in an economic downturn. Their dividends, if sustainable, provide a minimum level of positive return. This cushions the downward pressure from the market. Better yet, great dividend companies not only sustain their dividends in a downturn - they actually raise them. [more]
Once again it is time for a goals/progress update. I am pleased to report that annualized dividend income increased in January, extending the streak to 19 consecutive months of increases after June 2010's decline. Since I began publicly tracking annualized dividend income in November 2007, it has increased in 48 of the last 50 months.
My goals were defined in this December 1, 2007 Investing Goals post and last updated in my 2012 Investing Goals post. Below is an updated version of the table found in the original post.
Continue Reading » [more]
Linked here is a detailed quantitative analysis of Lockheed Martin Corp. (LMT). Below are some highlights from the above linked analysis: [more]
Linked here is a detailed quantitative analysis of Stanley Black & Decker Inc. (SWK). Below are some highlights from the above linked analysis: [more]
For many people the S&P 500 and U.S. Stock Market are synonymous terms. While in reality the U.S. stock market is much larger with public companies numbering in the thousands. The S&P 500 Index is owned and maintained by Standard & Poor's, a division of McGraw-Hill. The index was first published in 1957 and is the second most recognized index in the U.S. behind only the Dow Jones Industrial Average. [more]
It seems that every financial adviser or financial publication is proclaiming that you should own dividend stocks. Each are proclaiming the virtues of dividend stocks from their own perspective. [more]
Linked here is a detailed quantitative analysis of Leggett & Platt, Inc. (LEG). Below are some highlights from the above linked analysis: [more]
Linked here is a detailed quantitative analysis of 3M Company (MMM). Below are some highlights from the above linked analysis: [more]
Companies in the Industrial Sector are often referred to as members of the “smokestack industry” and are classified as cyclical stocks. A cyclical stock is one that rises and falls in step with the economy. The Industrials Sector consists of companies that manufacture products or provide business services. The products are sometimes inputs into another manufacturing process.
Timing is important when buying an industrial stock. If you buy when business is booming you will likely pay too much, which means a very low yield. Most stocks in this sector are currently overpriced. The average yield on the Industrial Sector stocks that I follow is only 2.2%, with just 6 stocks yielding over 3%.
The Industrials Sector is one of the largest sectors in my dividend growth database. Of the 214 stocks that I track, it currently is represented by 37 stocks (17%). As noted above, this is not a sector I am in a position to buy often, but when the time is right, I plan on taking full advantage of the opportunity. [more]