forever because the dividend income goes up every year. This is an
investment, not gambling. How Philip Morris International Lights Up Portfolios
It's important to be extremely wealthy. The idea is to never have to work again unless that's your favorite hobby.
DECEMBER 2012 Are These Weekly Ex-Dividend Stocks Naughty Or Nice?
AT&T: When High Yield Can Trump Dividend Growth
THIS IS FROM DECEMBER 2013, EXCELLENT SUGGESTIONS: Secure Your Future With 9 Rock-Solid Dividend Stocks
Genocide is very lucrative.
Philip Morris: My Favorite 2012 Dividend Stock Idea
Selling garbage food to stupid fat customers is very lucrative.
McDonald's And The Power Of Dividend Growth
McDonald's Headed For The Value Menu
McDonald's stock symbol is MCD. They have a very long history of large increases in their dividend every year, including during recessions. MCD is, in my opinion, a must-buy stock.
Dividend Champions a Rare Undervalued Opportunity
How Apple’s Dividend Yield Stacks Up Against Others
By Scott AustinApple will now pay one of the highest dividends in the U.S. So boasted Chief Financial Officer Peter Oppenheimer on this morning’s conference call.
But the $2.65 per-share quarterly dividend works out to a 1.81% yield at Apple’s current stock price.
While that’s more than the 1.2% average in the tech sector, it’s hardly exceptional.
The S&P 500 average yield is 2.2%. Cracker Barrel, the restaurant chain with the country-store theme and $85 million in profits (300x less than Apple’s), offers 1.8%. Suit outlet Men’s Wearhouse guarantees it too.
Even the 10-year Treasury yield is higher, currently at 2.32%.
Put another way: Apple will pay out about $10 billion each year in dividends, while it generates $75 billion to $80 billion in free cash this year (according to an estimate from brokerage firm Sterne Agee.)
Here’s a look at how Apple compares with other select tech giants. The pressure is now on Google, which has yet to issue a dividend:
AT&T – 5.61%
PFIZER - 4.02%
PHILIP MORRIS INTERNATIONAL - 3.57%
GENERAL ELECTRIC - 3.36%
THE CocaCola COMPANY - 2.90%
JPMorgan Chase & Co. - 2.67%
ExxonMobil - 2.16%
QUALCOMM - 1.50%
Verizon – 5.09%
Microsoft – 2.42%
Hewlett-Packard – 2.01%
Apple – 1.81%
Cisco – 1.6%
IBM – 1.51%
Oracle – 0.81%
Google – 0%
David Dreman, founder of Dreman Value Management, is also the author of four investment books and many scholarly articles. His new book, "Contrarian Investment Strategies: The Psychological Edge," will be published this week. In addition to publishing books and articles, he is also the writer of a column for Forbes, the co-editor of Journal of Psychology and Financial Markets and is on board of directors of the Institute of Behavioral Finance, which publishes Journal of Behavioral Finance. He is currently managing about $5 billion. He used to have $22 billion AUM in 2007 but he was hit hard by the financial crisi in 2008.
In this article, we are going to focus on the dividend stock picks of Dreman. All companies have at least $10 billion market cap and dividend yields of over 3%. As of September 30, 2011, Dreman Value Management invested at least $10 million in these positions.
|ALTRIA GROUP INC||MO||33716||-1%||5.69%|
Pfizer Inc (PFE) also has a dividend yield of higher than 4%. It has a dividend yield of 4.07% and returned 23.43% since the end of the third quarter, beating the market by nearly 10 percentage points. At the end of September, Dreman disclosed owning $28.5 million worth of PFE shares. Ken Fisher’s Fisher Asset Management also had $389 million invested in PFE.
Another mega-cap dividend stock that Dreman is bullish about is General Electric Co (GE). At the end of the third quarter, Dreman Value Management had $23 million invested GE. The stock has a dividend yield of 3.67% and gained 23.09% since the end of September, outperforming the market by more than 9 percentage points. GE is quite popular among hedge funds. There were 44 hedge funds with GE positions in their portfolios at the end of the third quarter, including Ken Fisher’s Fisher Asset Management, Bill Miller’s Legg Mason Capital Management, and Warren Buffett’s Berkshire Hathaway.
Other large-cap dividend stocks that Dreman likes include ConocoPhillips (COP), Philip Morris International Inc (PM) and Intel Corp (INTC). During the past few years, central banks all over the world have been trying to stimulate the economy by using expansionary monetary policies. We are concerned that the Fed’s actions will lead to inflation in the near future. Therefore, we have been recommending investors play defensively by investing in dividend stocks. And one of the most practical ways of picking dividend stocks is to focus on the stock picks of good fund managers like David Dreman.
Recommended by somebody on Nightly Business Report on 12/16/2011 these dividend paying stocks: EXC RAI PAYX INTC ETN
On 12/23/2011 shares of McDonald's Corporation went above $100 for the first time. See Two Stocks Making new Highs and Paying a Good Dividend.
From the 1/11/2012 New York Times:
Companies that pay high dividends were some of the best performers in the markets last year.
Telecommunications, utilities and health care shares had the highest yield rates at the end of 2011, at 5.86, 4.13 and 3 percent, respectively.
McDonald’s had double-digit percentage stock returns, at more than 30 percent, and dividend yields that exceeded the S.& P. index. Other companies with similar performance included Bristol-Meyers, Consolidated Edison and Home Depot. The dividend yield is the amount paid per share as a percentage of the stock price. In McDonald’s case, that equals 2.8 percent, or $2.80 for each share, which are now trading at $99.70.
stock symbols MCD BMY ED HD
12/19/2011 Wall Street Journal: Dividend Stocks Become the Heroes
Urging investors toward dividend-paying shares has been an easy sell. This year, the 100 stocks in the Standard & Poor's 500-stock index with the highest dividend yields are up an average of 3.7% before dividend payouts, according to Birinyi Associates. The 100 lowest-yielding stocks are down an average of 10%.
Dividend yield is calculated by dividing a company's annual per-share dividend by share price. In the third quarter, share-price returns on high-dividend payers exceeded those of lower-paying companies by 17 percentage points, AllianceBernstein calculates.
Investors hungry for stock-price gains have been barreling into dividend-paying shares, long regarded as "widow-and-orphan stocks" because of their steady but stodgy performance. Some analysts say such stocks are the most "crowded" trade around these days. Investors have been dazzled by dividend yields of more than 4% on many utilities, household-goods manufacturers and telecommunications companies. That is twice as much as recent paltry yields on 10-year Treasurys.
Dividend-stock fans say the unusually strong performance is likely to last as long as volatility driven by Europe's debt crisis and the global economic fits and starts continues to grip financial markets. Stocks that pay steady dividends tend to fall less than others when times are tough.
"Investors are demanding the money back in one form or another," says Jennifer Ellison, principal and portfolio manager at Bingham, Osborn & Scarborough in San Francisco, which manages $2.2 billion in investments. Buying stocks with healthy dividends is "not the holy grail that's going to solve all your problems, but it's one more way to mute that volatility," she says.
Skeptics contend that dividend-rich stocks aren't as safe as they look.
The recent run-up is unsustainable, these doubters say, especially if economic conditions improve, which could cause investors to switch to higher-growth companies that tend to pay lower or no dividends.
In contrast to classic dividend-stock investors who care more about quarterly dividend payments than stock price, many recent converts bought the shares for income and the possibility of price gains. If growth stocks spring back to life, the same momentum that pushed dividend-rich shares higher could reverse with just as much force.
"A crowded trade is always risky," says Vadim Zlotnikov, chief market strategist at AllianceBernstein. Last week, he warned clients in a note that, while dividend stocks might keep outperforming the overall stock market, any signs of an economic upswing could quickly end the winning streak.
Mr. Zlotnikov says he was shocked by the angry response from dividend-stock lovers. "You have a lot of fund managers who are happy because they've seen a lot of new clients," he says. "Anyone who is even neutral will be viewed as being against a fairly clear, good investment theme."
In the first half of the 20th century, companies had to pay richer dividends on stocks than on their bonds in order to compensate investors for the higher risk of holding equity. Over time, high-dividend stocks have gotten less attention from investors than growth stocks, except for scurries during periods of economic stress.
High-dividend companies have typically seen their price-to-earnings ratios trade 20% or more lower than non-dividend-paying shares over the past three decades, according to AllianceBernstein. This year, though, valuations on dividend-hefty shares caught up with their no-dividend peers for the first time since the late 1970s.
McDonald's is a darling dividend stock of many investors. The fast-food chain's stock-price surge of 27% in the past year leads every other Dow Jones Industrial Average component.
McDonald's has a dividend yield of about 3%, outpacing the 2.625% coupon bond issued by the company in September, due in 2022. McDonald's has boosted its dividend by an average of 27% annually in the past five years, according to Haverford Trust Co.
"You have the best of both worlds: a company that has seen the stock price go up, and they've increased their dividend," says Hank Smith, chief investment officer at Haverford. The firm manages more than $6 billion in assets.
Ms. Ellison of Bingham, Osborn & Scarborough agrees with concerns that dividend stocks are "a defensive, quality play, and if we have big, big returns on stocks next year, no one will care." Still, if events in Europe and Washington keep hovering over the financial markets for years to come, as some investors expect, the recent surge might last, she says.
Such stocks could get an even longer-lasting lift as more baby boomers reach retirement age—and reduce their risk appetite. The first baby boomers turned 65 years old this year.
Haverford isn't changing direction in its portfolios of dividend-paying blue-chip stocks like McDonald's and Johnson & Johnson. The firm spends a few thousand dollars a month on the "Earned Any Dividends Lately?" billboard.
"We think our message about the importance of dividends is a timeless one," says Joe McLaughlin, Haverford's chairman and chief executive. "But obviously, it's also very timely right now."
Haverford is cooking up three new billboard slogans for 2012.
Santa Claus is coming to town, and he’s checking his list twice for some dividend paying stocks that are not part of the usual sectors that retail investors and dividend-hungry retirees normally flock to. Many individual portfolios are already overweight in sectors like energy, financials, royalty trusts, etc. This concentrates financial and interest rate risk (i.e., Mortgage REITs) or commodity exposure (i.e., energy stocks). Heavy allocations to these sectors can be justified in the current slow-growth, low-rate environment, and these sectors do have some defensive attributes besides healthy dividend yields. But there are other sectors that one can look at that will diversify an investment portfolio while still grabbing some very attractive dividend yields.
Telecom, consumer staples, and consumer non-durables offer additional ways to diversify portfolios while generating new and diversified dividend streams. The yields tend to be much lower than in the financial or energy sectors, but they also have much less operating and financial leverage in their business models. Without being tied directly to the financial sector and hence indirectly to the European debt fiasco, and with products that consumers are loath to discard or cut back on even in recessionary times, their business models tend to be resilient during tough economic times.
Here are 5 dividend stocks whose business models tend to be more stable and less reliant on the ups-or-downs of the U.S. or global economies:
Lockheed Martin (LMT): The defense contractor is trying to shrug off a two-front war: the end of the conflicts in Iraq and Afghanistan, as well as automatic defense budget cuts from Congress. But Lockheed makes important weapons systems with bi-partisan support such as the F-35 Joint Strike Fighter. The last time the U.S. defense sector faced cutbacks were the 1990’s, which ironically produced some of the best returns for many defense companies, even compared to the Cold War buildup of the 1980’s. This is because improved capital management – share buybacks and dividends – take priority instead of dubious R&D on expensive potential weapons systems. Excess costs and overhead tend to be eliminated during the lean times, too. Lockheed Martin’s strong cash flows cover the dividend with room to spare (close to 3x coverage forecasted over the next few years) so even some minor setbacks in divisions impacted by slowing revenue growth should not affect dividend sustainability or prevent small increases in the payout. LMT yields 5.2% after a mid-teens return YTD for 2011.
Philip Morris (PM): Philip Morris is the international operation spinoff from Altria. It is the largest privately-owned cigarette company in the world with about 16% market share of the global cigarette market. Flagship Marlboro and other brands continue to make excellent penetration in emerging markets like Asia, Turkey, South America, and Eastern Europe. The biggest risks to Philip Morris are currency-related – all the local revenues must be translated back into dollars, so a strengthening dollar hurts results – as well as smoking restrictions and dubious government lawsuits related to healthcare costs. Philip Morris has large market share and profits generated from Europe, so any economic or Euro currency weakness overseas will hit the bottom line. But Philip Morris raised 2011guidance several times and is looking for double-digit growth in earnings for 2012. If Philip Morris can ever get scale in the Chinese cigarette market (< 1% market share due to government monopoly restrictions), look out. In the meantime, other markets continue to provide growth and PM yields 4.1% at current levels.
CenturyLink (CTL): Telecom shares have traditionally been a defensive sector during troubled times for investors, the proverbial ‘widows and orphans’ stocks. CenturyLink, the successor to Century Telephone, is a rural-based carrier less susceptible to the intense competition seen in more urban markets. CTL recently completed the acquisition of Qwest, the old U.S. West regional spinoff from the 1983 Ma Bell breakup. The recent acquisition of Saavis could help CTL with cloud-based and information technology top-line growth. A rough 2011 saw CTL’s stock price get hit from integration issues regarding Qwest and fears of more dilutive acquisitions. CTL’s operating cash flows cover the dividend by 2x, and the dividend yield is at historically wide spreads to the shares of other telecom companies like Verizon and AT&T. CTL yields 8.2% at current depressed levels.
Cablevision Systems (CVC): Cable companies have traditionally not been a place to seek dividends, but after decades of investment in their fiber optic infrastructure, the payoff is finally taking place. Cablevision has had a very tough 2011 with personnel defections, competition from Verizon’s FiOS, and underwhelming operating results leading to a share decline in excess of 40%. But the dividend is well-covered from cash flows, and the controlling Dolan Family has tried to take the company private in the past and may do so again in the future. The MSG sports empire and the Rainbow programming assets have already been spun-off, so the pure-play CVC assets would appeal to a private equity buyer or a strategic buyer like TimeWarner Cable or Comcast, two long-rumored potential acquirers. Cablevision generates the highest revenue per subscriber figures in the industry, with record levels of triple-play (video, broadband, phone) penetration. After last week’s decline following the surprise resignation of well-respected CEO Tom Rutledge, the shares yield 4.3%.
The ETF Channel Flexible Growth Investment Portfolio is designed to seek growth for investors — anywhere and everywhere. The key to the program is our portfolio strategy allows us complete flexibility in terms of asset allocation as there are no predetermined guidelines as to the level of stocks, bonds, cash, regions, countries, sectors, commodities, or even asset classes in the portfolio! In short, this is a completely flexible portfolio designed to follow the performance trail wherever it leads us.
Avon Products (AVP): Avon has been a dismal performer in 2011, falling over 40% YTD. The roles of Chairman and CEO have recently been separated and Andrea Jung will be concentrating on the former. The dividend has been increased 19 consecutive years, so it is unlikely with the share price drop that management would anger shareholders further with a dividend cut. If Avon holds the payout steady and brings back some cash from overseas that might ease the payout burden since they are currently not earning the dividend from operating cash flow. Borrowing at low rates to fund the dividend while waiting for earnings and cash flow to improve is also a possibility. Better yet, a decline in working capital would boost cash flow and that means reducing inventory and turning over accounts receivable into cash at a faster rate. AVP yields 5.5% at the current depressed share price.
Building a successful portfolio of dividend-paying stocks involves more than buying the highest yielding equities or checking dividend coverage ratios. Diversification is key. Sometimes it pays to buy multiple names within a sector to reduce risk, as with the Mortgage REITs or Energy stocks. Other times, buying best-of-breed in different sectors can spread the risks. Or you may prefer to go the ETF or closed-end fund route. By purchasing a diversified portfolio like the stocks listed above, you can fill out your income needs by reducing stock specific, sector specific, or European contagion specific risks while also grabbing rich dividend yields.
1.) Abbott Laboratories (ABT) is currently trading at $52.5 with a 1 year price target estimate of $57.94 (10.36% upside potential). For the current fiscal year this company boasts: 11.27% EPS growth and 10.44% revenue growth. 5yr dividend growth of 9.86% and a current dividend yield of 3.73%. Current diluted EPS is 3.28 with a P/E ratio of 16.01x. The profit margin is 13.78% with an ROA of 8.03% and an ROE of 22.12%. One thing on the radar to watch closely for this company is its debt/equity ratio of 68.83. Total cash is 8.89B and total debt is 18.22B.
2.) Shaw Communications Inc. (SJR) is currently trading at $20.61 with a 1 year price target estimate of $25.07 (21.64% upside potential). For the current fiscal year this company boasts: 22.76% EPS growth and 28.78% revenue growth. 5yr dividend growth of 40.87% and a current dividend yield of 4.39%. Current diluted EPS is 1.1 with a P/E ratio of 18.81x. The profit margin is 10.99% with an ROA of 6.46% and an ROE of 16.62%. Like ABT, this company does have spiraling debt that does need to be factored in and watched carefully. Current debt/equity ratio is 166.77 with total cash of 609.00M and total debt of 5.52B.
3.) McDonald's Corporation (MCD) is currently trading at $89.49 with a 1 year price target estimate of $97.65 (9.12% upside potential). For the current fiscal year this company boasts: 12.58% EPS growth and 11.19% revenue growth. 5yr dividend growth of 27.53% and a current dividend yield of 3.21%. Current diluted EPS is 4.94 with a P/E ratio of 18.13x. The profit margin is 20.56% with an ROA of 15.80% and an ROE of 37.39%. McDonalds has a solid history and foundation despite its current debt/equity ratio of 82.15. Total cash is 2.07B and total debit is 12.28B, with a beta as low as 0.36. McDonalds seems to be a solid player with good dividend payments. Overall, it seems to be a safe bet.
Picking a bottom in the market is never easy. Many times investors find themselves trying to “catch falling knives” as the saying goes. We have found that there is one way to not financially handicap one’s self by investing in turbulent times and that is simply by doing more of that which is working, and less of that which is not. It seems simple, yet many investors panic and sell their winners to continue to fund, or be able to afford to keep, their losing positions. Below are a few stocks that are at or near 52-week highs and providing a significant yield and thus cash flow. If these were in our portfolio, we would most certainly be holding these stocks and not selling them to hold onto the losers in our portfolio.
Kimberly-Clark Corp. (KMB)
Kimberly-Clark is a solid bet for investors. The stock currently yields 3.9% based upon its $2.80/share dividend. Currently trading at about $71/share, KMB shares are just off of their 52-week high of $71.78 (the 52-week low is $61/share) and have held in quite strongly as of late. The company is best known to consumers for their various brand names including Kleenex, Scott’s, Huggies, Pull-Ups, GoodNites, Kotex, Depend and Poise among others. KMB is a large, financially sound entity with over 50,000 employees and an operating record dating back to 1872.
McDonald’s Corp. (MCD)
McDonald’s is one of those great American growth stories where investors could have purchased the shares at almost any time over the past 40 years and made money. MCD has consistently rewarded investors and after a few missteps in the early 2000s, the company’s stock resumed its upward path. MCD has recently been raising its dividend, now currently $2.80/share (based off the past 12 months), which yields 3.2%. The company has positioned itself to be relevant for the next generation, as well as today, by offering a Dollar Menu, healthy choices, premium coffee and drinks and the burgers and fries that started it all. MCD shares are a bit off of their 52-week high of $91.22 as the stock currently trades at $87.20. With 32,943 restaurants worldwide, located in 117 countries, MCD offers investors exposure to both the US and international markets.
Bristol-Myers Squibb Co. (BMY)
BMY seems to have finally gotten its act together. Once the least favored of the Big Pharma stocks, the company has experienced somewhat of a renaissance in its shares, which trade at $32.33, just off of its 52-week high of $32.75. Although the shares have been rising, BMY still sports a healthy dividend yield of 4.1% (current rate is $1.32/share). According to analyst estimates, both sales and earnings should be down next year, but with nearly $7.7 billion in cash and a tad over $5.2 billion in debt, the company appears in solid financial condition. The payout ratio is at 67%, and is high by most measures, however this payout ratio is below some of its peers in the industry, notably Pfizer (PFE) and Eli Lilly (LLY).
Reynolds American (RAI)
RAI makes some of the best known cigarette brands not owned by Altria. The company has a dividend of $2.12/share and a yield of 5.4%. With its high yield and the uncertain economic times, the stock currently trades at $39.36, just off of the 52-week high of $39.87. Although the smoking population has been shrinking in developed markets for years, RAI and its competitors have found ways to raise prices and cut costs in order to continue to improve revenue and profits and keep the payouts flowing to shareholders. The snus product could prove to be a growth driver for years to come and open up new markets for the company. The company does have an 87% payout ratio but sales and profits are increasing, thus providing what we believe to be a healthy cushion for RAI shareholders.
Duke Energy (DUK)
Duke Energy is in the midst of purchasing Progress Energy, a purchase which it believes will result in considerable cost savings and economies of scale. The acquisition is still awaiting approval from the Feds, but in all likelihood will be approved. Currently DUK has a payout of $1.00/share and yields 5.0%. The shares have held in strongly throughout the economic concerns of late and the acquisition they are performing, which we believe highlights the underlying strength in its shares. Just below its 52-week high of $20.21, DUK trades at $19.79. The company has a payout ratio of 64%, which leaves plenty of room for the dividend and capital expenditures once the Progress Energy acquisition closes and the synergies are realized.
The Southern Company (SO)
SO is a utility company focused on the southeastern United States, and provides services mostly in Georgia, Alabama, Mississippi, and Florida. Other than power services, the company offers wireless and fiber-optic services. The Atlanta based company has a dividend of $1.89/share and provides a yield to investors of 4.5%, the current dividend rate has the company at a 79% payout ratio. Like the other companies we have highlighted, SO is also near a 52-week high with shares currently trading at $42.37, just off of the high at $43.09.
With yields at historic lows for government paper and other debt instruments, investors can lock in healthy yields via dividends from the above mentioned companies. Although riskier than sitting in cash, this option enables one to realize capital gains (and possibly capital losses) and get a revenue stream from the dividends. With the dividends yielding a few times more than most debt instruments and many times more what one could realize by parking cash in a savings instrument we think that these well performing yielders are the way to go. Remember, do more of that which is working and less of that which is not.
Everybody likes winners. Looking at the history of the most successful dividend stocks, I have been able to identify several traits, which have been strong predictors of performance.
A business has to be able to have strong competitive advantages and to deliver value to consumers in the form of goods or services they need. By having a strong brand, a business can afford to raise prices, and have a differentiated product that is more desirable that the competition. A business that manages to grow earnings per share either organically or through acquisitions, can afford to pay a rising dividend.
High Return on Equity
High returns on equity are important to companies. Only a company with a wide-moat is able to charge higher prices. Growing such business might not be as easy simply through additional investments in it. Companies with high returns on equity are typically characterized with having excessive cash flows generated each year, which cannot be easily deployed 100% in the business. Some portion will be deployed, but these companies need to be mindful of the returns generated from new investments. If you generate 20% on your investment, making a new investment might increase earnings per share, but it might not be desirable because it could generate a lower return on equity. I typically want to see a stable ROE, because a declining one shows me that management is taking on any project available, regardless of profitability, without having the best interests of shareholders in mind.
Decreasing number of shares
Some of the most successful companies in the world generate so much cash flow that they tend to have stock buybacks, which decrease the number of shares outstanding. This helps EPS, but also makes each share more valuable as it provides shareholders with a larger percentage of the business, without doing anything. Few companes consistently repurchase shares however, as most end up buying back stock when times are good and stock prices are high and stop buying back shares when times are tough but stock prices are low.
Sustainable Dividend Payout Ratio
Some of the best dividend stocks have been able to create a balance between the amount of money they reinvest in the business, and the amount they distribute to shareholders in the form of dividends or share buybacks. A company that distributes too much to shareholders, might be unable to maintain its business without selling more stock or taking on additional debt. A company that pays too little in dividends might focus too much at growth at any price, which might reduce returns on equity over time.
Dividend Growth History
The companies which are able to generate higher amounts of excess cash flows each year, tend to boost distributions annually. This creates a dividend stream for investors which increases at or above the rate of inflation each year. By strategically allocating these growing dividends through dividend reinvestment, investors are essentially turbocharging their income. There are less than 300 companies in the US which have a culture of sharing their success with shareholders in the form of higher dividends.
Five companies which provide excellent examples of the five metrics above include:
Wal-Mart Stores (WMT) has paid uninterrupted dividends on its common stock since 1973 and increased payments to common shareholders every year for 37 years. The company has managed to deliver an increase in EPS of 12.20% per year since 2001. On average the company has managed to repurchase 2.20% of its stock annually over the past decade. Wal-Mart has one of the largest and most consistent stock buyback programs in the US. The company has had a high return on equity, which has remained in a tight range between 20% and 23% over the past decade. Check my analysis of the stock.
Colgate-Palmolive (CL) is a dividend champion which has increased distributions for 48 years in a row. The company has managed to deliver an impressive increase in EPS of 9.60% per year since 2001. In addition, company has managed to decrease the number of shares outstanding by 1.30% per year over the past decade through share buybacks, which has aided earnings growth. It currently spots a return on equity of 78% and has a sustainable dividend payout ratio. Check my analysis of the stock.
PepsiCo (PEP) is a dividend aristocrat which has increased distributions for 38 years in a row. The company has managed to deliver an average increase in EPS of 10.90% per year since 2000. PepsiCo has a high return on equity, which has remained above 30%, with the exception of a brief decrease in 2004. The company has managed to repurchase 1.35% of its outstanding shares each year since 2001. Check my analysis of the stock.
McDonald’s (MCD) has paid uninterrupted dividends on its common stock since 1976 and increased payments to common shareholders every year for 35 years. The company has managed to deliver an increase in EPS of 15.50% per year since 2001. In addition, the company has managed to repurchase 2.20% of its stock annually over the past decade. The company has been able to increase in return on equity from the high teens in early 2000s to over 30% over the past three years. Check my analysis of the stock.
Procter & Gamble (PG) is a dividend aristocrat which has increased distributions for 55 years in a row. The company has managed to deliver an average increase in EPS of 14.50% per year since 2000. The return on equity has decreased since the purchase of Gillette several years ago, although it is on the increase. Procter & Gamble has spent billions repurchasing stock over the past decade. The only reason why the share count has increased slightly is due to the fact that major acquisitions were made using stock. Check my analysis of the stock.
This is from the 10/19/2011 New York Times:
Chasing Opportunity in an Age of Upheaval
Ron Carson, the founder of the Carson Wealth Management Group in Omaha, which manages $2.6 billion, said his firm focused on an “advance and protect” strategy, with the emphasis these days on protect. He has investments in dividend-paying stocks like Johnson & Johnson, Microsoft, Verizon, ConocoPhillips and Abbott Laboratories.
|Constituent||Symbol||GICS® Sector||Price ($)|
|VF Corp||VFC||Consumer Discretionary||113.4|
|Target Corp||TGT||Consumer Discretionary||50.02|
|Coca-Cola Co||KO||Consumer Staples||69.37|
|Consolidated Edison Inc||ED||Utilities||55.12|
|Grainger, W.W. Inc||GWW||Industrials||149.22|
|McDonald's Corp||MCD||Consumer Discretionary||85.02|
|Clorox Co||CLX||Consumer Staples||67.48|
|McGraw-Hill Cos Inc||MHP||Consumer Discretionary||38.72|
|Abbott Laboratories||ABT||Health Care||50.43|
November 4, 2011 | Comments (1)
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Ever since the Gulf oil disaster, offshore drilling has had a stigma attached to it. But in many parts of the world, you'll find some of the biggest reserves in hard-to-reach places below ocean floors. Seadrill (NYSE: SDRL ) hopes to take advantage of those opportunities. Below, we'll look at how Seadrill does on our 10-point scale.
The right stocks for retireesWith decades to go before you need to tap your investments, you can take greater risks, weighing the chance of big losses against the potential for mind-blowing returns. But as retirement approaches, you no longer have the luxury of waiting out a downturn.
Sure, you still want good returns, but you also need to manage your risk and protect yourself against bear markets, which can maul your finances at the worst possible time. The right stocks combine both of these elements in a single investment.
When scrutinizing a stock, retirees should look for:
- Size. Most retirees would rather not take a flyer on unproven businesses. Bigger companies may lack their smaller counterparts' growth potential, but they do offer greater security.
- Consistency. While many investors look for fast-growing companies, conservative investors want to see steady, consistent gains in revenue, free cash flow, and other key metrics. Slow growth won't make headlines, but it will help prevent the kind of ugly surprises that suddenly torpedo a stock's share price.
- Stock stability. Conservative retirement investors prefer investments that move less dramatically than typical stocks, and they particularly want to avoid big losses. These investments will give up some gains during bull markets, but they won't fall as far or as fast during bear markets. Beta measures volatility, but we also want a track record of solid performance as well.
- Valuation. No one can afford to pay too much for a stock, even if its prospects are good. Using normalized earnings multiples helps smooth out one-time effects, giving you a longer-term context.
- Dividends. Most of all, retirees look for stocks that can provide income through dividends. Retirees want healthy payouts now and consistent dividend growth over time -- as long as it doesn't jeopardize the company's financial health.
What We Want to See
Pass or Fail?
|Size||Market cap > $10 billion||$15.9 billion||Pass|
|Consistency||Revenue growth > 0% in at least four of past five years||5 years||Pass|
|Free cash flow growth > 0% in at least four of past five years||3 years||Fail|
|Stock stability||Beta < 0.9||1.34||Fail|
|Worst loss in past five years no greater than 20%||(65.3%)||Fail|
|Valuation||Normalized P/E < 18||16.76||Pass|
|Dividends||Current yield > 2%||9.0%||Pass|
|5-year dividend growth > 10%||NM||NM|
|Streak of dividend increases >= 10 years||2 years||Fail|
|Payout ratio < 75%||73.9%||Pass|
|Total score||5 out of 9|
Even with oil prices having retreated from their recent highs, activity in the deepwater drilling space has never been stronger. Although Seadrill started the trend, traditional oil servicer Transocean (NYSE: RIG ) has worked hard to get into the game. Moreover, competition has also come from an unlikely source: DryShips (Nasdaq: DRYS ) , which spun off its Ocean Rig (Nasdaq: ORIG ) ultra-deepwater drill-ship business just last month.
Seadrill has an impressive list of customers, including Statoil (NYSE: STO ) , Petroleo Brasileiro (NYSE: PBR ) , and Total (NYSE: TOT ) . With operations in many locations throughout the world, Seadrill isn't exposed to the same geographical risks that devastated Gulf-centered drillers after the spill and subsequent drilling moratorium.
For retirees and other conservative investors, Seadrill's volatility takes a little getting used to. But with a 9% dividend, you'll find it easier to ride out the ups and downs of the stock. For someone with the right risk profile, Seadrill would make a good addition to a retirement portfolio.
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