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Dividends4Life (42.25)

May 2013

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Automatic Data Processing Inc. (ADP) Dividend Stock Analysis

May 31, 2013 – Comments (0) | RELATED TICKERS: ADP , PAYX , NSP

Linked here is a detailed quantitative analysis of Automatic Data Processing Inc. (ADP). Below are some highlights from the above linked analysis:

Company Description: Automatic Data Processing Inc., one of the world's largest independent computing services companies, provides a broad range of data processing services.  [more]

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Pepsico, Inc. (PEP) Dividend Stock Analysis

May 30, 2013 – Comments (0) | RELATED TICKERS: PEP , KO , DPS

Linked here is a detailed quantitative analysis of Pepsico, Inc. (PEP). Below are some highlights from the above linked analysis:

Company Description: PepsiCo, Inc. is a major international producer of branded beverage and snack food products.

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

PEP is trading at a premium to all four valuations above. Since PEP's tangible book value is not meaningful, a Graham number can not be calculated. The stock is trading at a 36.8% premium to its calculated fair value of $60.67. PEP 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%

PEP earned two Stars in this section for 1.) and 3.) 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. PEP 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 1952 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) 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

The NPV MMA Diff. of the $479 is below the $500 target I look for in a stock that has increased dividends as long as PEP has. If PEP grows its dividend at 5.2% per year, it will take 1 years to equal a MMA yielding an estimated 20-year average rate of 2.71%. PEP earned a check for the Key Metric 'Years to >MMA' since its 1 years is less than the 5 year target.

Memberships and Peers: PEP is a member of the S&P 500, a Dividend Aristocrat, a member of the Broad Dividend Achievers™ Index and a Dividend Champion. The company's peer group includes: The Coca-Cola Company (KO) with a 2.6% yield, Dr Pepper Snapple Group, Inc. (DPS) with a 3.1% yield and Fomento Econ (FMX) with a 1.2% yield.

Conclusion: PEP 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 PEP as a 2-Star Weak stock.

Using my D4L-PreScreen.xls model, I determined the share price would need to decrease to $81.80 before PEP's NPV MMA Differential decreased to the $500 minimum that I look for in a stock with 41 years of consecutive dividend increases. At that price the stock would yield 2.7%.

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 5.3%. This dividend growth rate is below the 5.2% used in this analysis, thus providing no margin of safety. PEP has a risk rating of 1.75 which classifies it as a Medium risk stock.

PEP enjoys relatively stable end markets, predictable cash flows and leading global market positions. The U.S. soft drink consumption improved in 2012 and should continue to improve in 2013. Long-term the company will have to focus on international markets for growth. The company's diverse portfolio can mitigate the impact of poor conditions in any one of its markets. PEP's direct store delivery system allows it to leverage its impressive portfolio of brands.

My concerns are PEP's debt as a percent of total capital and its valuation. Since I last reviewed PEP, debt as a percent of total capital is up one point to 57%, while free cash flow payout fell from 60% to a reasonable 49%. PEP is trading above my calculated fair value of $60.67, so for now, I will monitor the stock closely and wait before adding 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 PEP (2.0% of my Dividend Growth Portfolio). See a list of all my dividend growth holdings here.

Related Articles:
- Nike, Inc. (NKE) Dividend Stock Analysis
- Wal-Mart Stores, Inc. (WMT) Dividend Stock Analysis
- Verizon Communications Inc. (VZ) Dividend Stock Analysis
- Microsoft Corporation (MSFT) Dividend Stock Analysis
- More Stock Analysis  [more]

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A Winning Investment Strategy

May 29, 2013 – Comments (3) | RELATED TICKERS: GPC , PG , EMR

We all want to succeed in everything that we do, including investing in the stock market. Though I have no analytical data to back it up, I am convinced that most people will lose money in the stock market over their lifetime. So why do so few people succeed at investing? Could it be that an individual's desire to succeed is a significant reason for their failure.  [more]

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6 Confident and Secure Companies Boosting Dividends

May 28, 2013 – Comments (0) | RELATED TICKERS: JPM , AWR , EXR

If income investing were as simple as picking the stock with the highest yield, everyone would be an expert. Most assume (rightfully so) that yield is heavily influenced by risk, but much more goes into determining yield. The industry the company operates in, legal considerations (REITs and MLPs), maturity and growth potential all have an effect on an individual stock's yield, along with the company's ability to grow its dividend.  [more]

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April 2013 Pocket Change Portfolio Performance

May 25, 2013 – Comments (0) | RELATED TICKERS: ADP , COP , ITW

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 dividends earned.  [more]

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John Wiley & Sons (JW-A) Dividend Stock Analysis

May 24, 2013 – Comments (1) | RELATED TICKERS: JW-A , PSO , MDP

Linked here is a detailed quantitative analysis of John Wiley & Sons (JW-A). Below are some highlights from the above linked analysis:

Company Description: John Wiley & Sons produces print and electronic products, providing content and solutions to customers worldwide.  [more]

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Johnson & Johnson (JNJ) Dividend Stock Analysis

May 23, 2013 – Comments (0) | RELATED TICKERS: JNJ , ABBV , LLY

Linked here is a detailed quantitative analysis of Johnson & Johnson (JNJ). Below are some highlights from the above linked analysis:  [more]

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Industrial Strength Stocks With Dividend Growth

May 22, 2013 – Comments (0) | RELATED TICKERS: NSC , EMR , GD

The Industrials Sector consists of companies that manufacture products or provide business services. The products are often inputs or raw materials into another manufacturing process, such as steel producer.  [more]

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13 Dividend Stocks Delivering What's Important

May 20, 2013 – Comments (0) | RELATED TICKERS: NOC , M , CLX

For many investors, there is no clear conviction as to how they should invest. Today’s investments are guided by what was read yesterday, and the popular media is constantly churning out new and different ideas. Granted it makes for some “interesting” reads, but it certainty is no way to run a portfolio. Time has proven the positive correlation between consistently raising dividends and stock performance.  [more]

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T. Rowe Price Group Inc. (TROW) Dividend Stock Analysis

May 17, 2013 – Comments (0) | RELATED TICKERS: TROW , FII , EV

Linked here is a detailed quantitative analysis of T. Rowe Price Group Inc. (TROW). Below are some highlights from the above linked analysis:

Company Description: T. Rowe Price Group Inc. operates one of the largest no-load mutual fund complexes in the United States.  [more]

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Occidental Petroleum Corporation (OXY) Dividend Stock Analysis

May 16, 2013 – Comments (0) | RELATED TICKERS: OXY , DD , XOM

Linked here is a detailed quantitative analysis of Occidental Petroleum Corporation (OXY). Below are some highlights from the above linked analysis:  [more]

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6 Dividend Stocks To Beat The Wall Street Giants

May 14, 2013 – Comments (0) | RELATED TICKERS: EMR , JNJ , MCD

Driven by computers that cost more than the average person will earn in their lifetime the investment markets move at light speed. To keep pace hedge funds, mutual funds, institutional investors and multi-billion dollar money managers spend large sums of money on high-tech tools to give them an edge. Throw in some illegal insider trading from big names in the industry and it leaves you wondering what chance does a small individual investor have?  [more]

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7 Dividend Stocks Sending More Cash To Shareholders

May 13, 2013 – Comments (0) | RELATED TICKERS: KMB , BAX , WTR

We all are looking for the perfect dividend stock. In an utopian world, the perfect dividend stock would be one that is both high-yield and provide a high dividend growth rate. Its share price would appreciate ratable with its increasing dividend. All of this would be driven by increasing earnings and cash flow.  [more]

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Dividend Income Progress Update - April 2013

May 11, 2013 – Comments (0) | RELATED TICKERS: GPC , WMT , KO

Once again it is time for a goals/progress update. I am pleased to report that annualized dividend income increased in April, extending the streak to 34 consecutive months of increases after June 2010's decline. Since I began publicly tracking annualized dividend income in November 2007, it has increased in 63 of the last 65 months.

My goals were defined in this December 1, 2007 Investing Goals post and last updated in my 2013 Investing Goals post. Below is an updated version of the table found in the original post...  [more]

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Nike, Inc. (NKE) Dividend Stock Analysis

May 10, 2013 – Comments (0) | RELATED TICKERS: NKE , CROX , DECK

Linked here is a detailed quantitative analysis of Nike, Inc. (NKE). Below are some highlights from the above linked analysis:

Company Description: Nike, Inc. is the world's leading designer and marketer of high-quality athletic footwear, athletic apparel and accessories.  [more]

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Wal-Mart Stores, Inc. (WMT) Dividend Stock Analysis

May 09, 2013 – Comments (0) | RELATED TICKERS: WMT , COST , TGT

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, Wal-Mart operates a chain of over 10,000 discount department stores, wholesale clubs, supermarkets and supercenters.  [more]

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First Quarter 2013: Top And Bottom Performing Dividend Stocks

May 07, 2013 – Comments (0) | RELATED TICKERS: JNJ , GPC , NSC

Investing in dividend growth stocks is a long-term proposition. One of the beauties of following a dividend growth strategy is that you don't have to watch your portfolio or the market on a daily basis. For the most part, daily, monthly and yearly movements are just noise in the system.  [more]

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PepsiCo, IBM and 7 Other Dividend Stocks Raising Their Payouts

May 06, 2013 – Comments (0) | RELATED TICKERS: PEP , IBM , ARG

When you purchase individual stocks, risk is inherent. Sometimes bad things happen to good stocks. Eventually, every investor will hold a stock that falls out of favor and endures a double-digit decline. Understanding this from the onset makes it easier to deal with. To minimize the risk of significant declines, your core portfolio should focus on blue-chip dividend growth stocks.  [more]

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Verizon Communications Inc. (VZ) Dividend Stock Analysis

May 03, 2013 – Comments (0) | RELATED TICKERS: VZ , T , S

Linked here is a detailed quantitative analysis of Verizon Communications Inc. (VZ). Below are some highlights from the above linked analysis:

Company Description: Verizon Communications Inc. is the largest U.S. wireless carrier, Verizon also offers wireline and broadband services primarily in the northeastern U.S.  [more]

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Microsoft Corporation (MSFT) Dividend Stock Analysis

May 02, 2013 – Comments (0) | RELATED TICKERS: MSFT , AAPL , GOOGL

Linked here is a detailed quantitative analysis of Microsoft Corporation (MSFT). Below are some highlights from the above linked analysis:

Company Description: Microsoft, the world's largest software company, develops PC software, including the Windows operating system and the Office application suite.  [more]

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A Disciplined Approach To Dividend Stocks

May 01, 2013 – Comments (0) | RELATED TICKERS: AAPL , MCD , PG

Those that have read this space for any period of time are well aware of my enthusiasm for using dividend growth stocks as a vehicle for building long-term wealth and income. However, with that said, a successful investor must do more than just buy stocks that pay a growing dividend, or do more that focusing on a single metric such as dividend yield. Not all dividend stocks are created equal - there is a discipline to selecting good dividend growth stocks.  [more]

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