Dividend Portfolio Pre-Season Power Rankings: 11-20

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 |  Includes: AMGN, DD, DUK, EMR, GE, GM, HD, NOV, SPY, T, WM
by: Abba's Aces

Summary

General Motors is another dark horse pick of mine which I believe can challenge KLA-Tencor for the championship.

I believe National Oilwell Varco has the greatest potential to move up in the rankings by the end of the year to claim a playoff spot.

This middle of the pack cohort is showing that the capital intensive industries perform just average if they don't have high earnings growth expectations or a deep discounted forward valuation.

It's that time of year again…The summer solstice has passed, some schools are about to begin their fall semester, and most importantly, football season is upon us! A lot has happened in 2014, we saw an emerging market crisis in January which saw the S&P 500 (NYSEARCA:SPY) drop by about 6% only to rally into March for a 1% gain on the year. Then all of a sudden the market was hit with a growth stock ailment which caused the S&P 500 to drop 2% for the year, then rallying again to go up about 6.45% for 2014. To make things interesting, I'm going to use this time to throw out my Dividend Portfolio Pre-Season Power Rankings and see if people feel the same way I do about some of these stocks. I've divided the power rankings into three parts and this is the second. If you would like a refresher of spots 1-10 or would like to catch spots 1-10 for the first time, the first article is located here. I hope to get to spots 21-30 early this week.

11

General Motors Company (NYSE:GM)

GM designs, builds and sells cars, trucks and automobile parts globally.

Fundamentals

Price

TTM P/E

Fwd P/E

PEG

P/FCF

EPS Next Yr

EPS Next 5 Yr

37.95

20.4

8.06

0.93

15.19

54.49%

21.93%

Financials

Dividend

ROA

ROE

ROI

Debt/Eq

Gross Margin

Oper Margin

Profit Margin

3.16%

4%

19.9%

3.7%

0.97

10.6%

4.6%

4.3%

Performance

1 Yr

YTD

My Return

My Weighting

6.81%

-5.55%

7.83%

5.04%

My Take

This stock has taken a beating in the past couple of months due to a plethora of recalls, but the stock has reacted extremely well against the news. Management has been walking an extremely fine line lately and the recalls haven't been keeping the consumer away from the showrooms. The company has been showing increasing sales figures month after month this year. Fundamentally the stock is steeply discounted on 2015 earnings estimates and long-term earnings growth expectations. Earnings growth from 2014 to 2015 is anticipated to be outstanding as sales growth at home and abroad is expected to grow astronomically. Financially you have to keep in mind that this is a capital intensive industry, hence the high debt to equity ratio. In my humble opinion, I believe this company is another dark horse [my other dark horse pick is Goodyear (NYSE:GT)] to win the Dividend Portfolio Super Bowl come January if it can make the playoffs. As it stands right now, there are twelve spots in the bracket and GM has the eleventh.

12

Amgen Inc. (NASDAQ:AMGN)

Amgen is a global biotech company (the first of its kind) which discovers, develops, manufactures and delivers human therapeutics.

Fundamentals

Price

TTM P/E

Fwd P/E

PEG

P/FCF

EPS Next Yr

EPS Next 5 Yr

119.77

19.44

13.7

2.7

21.82

8.06%

7.19%

Financials

Dividend

ROA

ROE

ROI

Debt/Eq

Gross Margin

Oper Margin

Profit Margin

2.04%

7.8%

21.7%

10.5%

1.41

80.5%

31.7%

24.9%

Performance

1 Yr

YTD

My Return

My Weighting

18.22%

6.1%

7.73%

3.96%

My Take

This company used to be one of those high-growth biotech stocks back in the day, kind of like a modern day Gilead (NASDAQ:GILD) or Celgene (NASDAQ:CELG). Nowadays though the company acts as if it's a high-yielding pharma company masquerading as a high-growth biotech. The company is inexpensive based on 2015 earnings estimates but the growth rate is pretty low for the current price. The company has an extremely high debt to equity ratio if you're looking at the balance sheet. However, the company operates extremely well as it is showing an astronomically high gross margin, showing us that its revenues far exceed the cost of goods. From an operations perspective the company knows what it's doing by showing a high operating margin which then translates to a high profit margin at the end of it all. There is no doubt this is well managed company, but it occupies the last playoff spot as it stands right now and I quite frankly don't see it going deep into the playoffs unless they can add some earnings growth.

13

E.I. du Pont de Nemours and Company (DD)

DuPont is a diversified technology company operating in the segments of Agriculture, Electronics & Communications, Industrial Biosciences, Nutrition & Health, Performance Chemicals, Performance Coatings, Performance Materials, Safety & Protection, and Pharmaceuticals.

Fundamentals

Price

TTM P/E

Fwd P/E

PEG

P/FCF

EPS Next Yr

EPS Next 5 Yr

64.89

20.86

13.68

2.69

-

15.91%

7.76%

Financials

Dividend

ROA

ROE

ROI

Debt/Eq

Gross Margin

Oper Margin

Profit Margin

2.77%

5.8%

19.9%

10.8%

0.7

37.4%

12.4%

8.2%

Performance

1 Yr

YTD

My Return

My Weighting

22.41%

1.25%

7.37%

1.5%

My Take

This diversified conglomerate was performing pretty well until last month when it announced that it was going to realize agriculture operating earnings fall by at least 10% for the second quarter. That announcement alone has dropped the stock quite a bit because the agriculture segment accounts for about 40% of the company's revenues. If there is one bright side to the news is that it has been made cheaper, as I believe it is undervalued with respect to 2015 earnings estimates. However, if you're an extremely long term investor, you should note that the long-term earnings growth rate expectations are a bit small; making the stock expensive based on growth expectations. This is another one of those companies which operates in a capital intensive industry as evidenced by the high debt to equity ratio. I believe all the bad news is priced into the stock at this point and actually expect it to move up in the rankings by year end. If this company can claim a playoff spot I believe it can go deep into the playoffs.

14

Emerson Electric Co. (EMR)

Emerson is a diversified global technology company which is engaged in designing and supplying products and technology, and delivering engineering services and solutions in the industrial and commercial worlds.

Fundamentals

Price

TTM P/E

Fwd P/E

PEG

P/FCF

EPS Next Yr

EPS Next 5 Yr

67.1

23.88

15.96

2.45

27.22

12.02%

9.75%

Financials

Dividend

ROA

ROE

ROI

Debt/Eq

Gross Margin

Oper Margin

Profit Margin

2.56%

8.3%

19.1%

14.1%

0.62

40.7%

16.2%

8.1%

Performance

1 Yr

YTD

My Return

My Weighting

19.01%

-3.15%

6.36%

1.65%

My Take

If you're in the processing industry and are designing a process skid, or a new manufacturing facility, you definitely cannot design the equipment without having some piece of Emerson on it. Emerson is guaranteed to have a piece of the pie! Level transmitters, pressure transmitters, temperature transmitters, Emerson has it all. From a stock perspective though, the company is pretty expensive based on long-term earnings growth expectations. Financially it has a high debt to equity ratio because it operates in one of those capital intense environments. As far as my expectations for the ranking at the end of the year, I wouldn't be surprised if the company stays in the middle of the pack as I don't see industrial construction picking up any time soon.

15

General Electric Company (GE)

General Electric is a diversified technology and financial services company operating in the segments of aircraft engines, power generation, industrial products, water processing, household appliances, medical imagine, and business and consumer financing.

Fundamentals

Price

TTM P/E

Fwd P/E

PEG

P/FCF

EPS Next Yr

EPS Next 5 Yr

26.55

18.7

14.59

2.21

34.6

7.37%

8.48%

Financials

Dividend

ROA

ROE

ROI

Debt/Eq

Gross Margin

Oper Margin

Profit Margin

3.31%

1.9%

9.9%

3.2%

2.89

39.8%

11.4%

8.6%

Performance

1 Yr

YTD

My Return

My Weighting

14.59%

-3.66%

5.91%

1.54%

My Take

If you looked up the word "conglomerate" in the dictionary, there is no doubt the GE logo is the first thing you will see. This company by far is one of my favorite companies from "wow" perspective; just everything they do to enhance society is awesome. From a stock perspective though I believe it to be just a bit undervalued with respect to 2015 earnings estimates. But just like Emerson, it is expensive relative to long-term earnings growth expectations. Again, just like Emerson, GE operates in a capital intensive industry and that is why it has a high debt to equity ratio. Because the company is trying to move more towards an industrial portfolio I believe the stock is going to end up in the middle of the pack with respect to the rankings at the end of the year as I don't believe industrial spending is going to pick up for the rest of 2014.

16

AT&T Inc. (T)

AT&T is a provider of telecommunications services in the U.S. and worldwide.

Fundamentals

Price

TTM P/E

Fwd P/E

PEG

P/FCF

EPS Next Yr

EPS Next 5 Yr

35.76

10.43

12.97

1.85

54.65

4.55%

5.64%

Financials

Dividend

ROA

ROE

ROI

Debt/Eq

Gross Margin

Oper Margin

Profit Margin

5.15%

6.6%

20.6%

12.8%

0.88

59.8%

23.7%

14%

Performance

1 Yr

YTD

My Return

My Weighting

5.05%

5.77%

4.09%

2.43%

My Take

Again this is one of those capital intensive environment type of stocks and we find it in the middle of the pack. I personally don't like that I'm paying more for 2015 earnings estimates at this price than I was paying for the trailing twelve month actual earnings. I personally like to see a lower forward looking valuation when purchasing a stock and I won't be surprised if I sell it for something else in the technology sector before the season starts. With that said though, the stock is inexpensive based on the last twelve month earnings and still inexpensive based on 2015 earnings estimates. However, the stock is expensive based on free cash flow. From a financial perspective, as expected, the debt to equity ratio is high because it does operate in a capital intensive industry. On the bright side though, gross margins are extremely high because it pulls in a ton of revenue with respect to the cost of goods sold. Don't be surprised if we see this stock somewhere in the middle of the pack at the end of the year though.

17

Waste Management, Inc. (WM)

Waste Management is a provider of waste management services in North America which collects, transfers, recycles and disposes of waste.

Fundamentals

Price

TTM P/E

Fwd P/E

PEG

P/FCF

EPS Next Yr

EPS Next 5 Yr

44.34

134.36

17.34

21.27

40.93

8.35%

6.32%

Financials

Dividend

ROA

ROE

ROI

Debt/Eq

Gross Margin

Oper Margin

Profit Margin

3.38%

0.7%

2.6%

4.5%

1.78

64.3%

26.7%

1.1%

Performance

1 Yr

YTD

My Return

My Weighting

9.35%

0.57%

4.01%

1.85%

My Take

Another capital intensive company, another middle of the pack prognostication. Waste Management is in a business that will never go out of style. Fundamentally the company is expensive based on the trailing twelve month earnings, but I don't invest on where the company was a year ago, but invest on where it is going in the next year. In the next year it should do better than it did in the past year. However, the stock is expensive relative to its long-term earnings growth expectations. I'm starting to sound like a broken record here, but again, this is one of those capital intensive stocks that is why it sports a high debt to equity ratio. The company definitely takes in a lot of revenue with respect to its cost of goods and shows that it can operate to an awesome efficiency when you take a look at the operating margins. I highly doubt this stock will get into the playoffs when they come around, I just don't see how it can surpass AT&T, GE, and Emerson even.

18

National Oilwell Varco, Inc. (NOV)

Varco provides equipment and components for oil and gas drilling and production; oilfield services; and supply chain integration services to the upstream oil and gas industry worldwide.

Fundamentals

Price

TTM P/E

Fwd P/E

PEG

P/FCF

EPS Next Yr

EPS Next 5 Yr

82.75

14.67

12.29

1.17

15.42

11.64%

12.5%

Financials

Dividend

ROA

ROE

ROI

Debt/Eq

Gross Margin

Oper Margin

Profit Margin

2.22%

7%

11%

9.5%

0.14

24.1%

15.1%

10.3%

Performance

1 Yr

YTD

My Return

My Weighting

27.13%

16.45%

3.5%

4.73%

My Take

After having executed the spinoff of the company's power distribution business the stock has been on a tear. The company is a serial dividend payer with a high dividend growth rate. The company is relatively inexpensive with respect to the trailing twelve month earnings, and 2015 earnings estimates. This company may be in the middle of the pack right now in the pre-season rankings, but I will not be surprised if it can climb to the final playoff spot by the year end. But once it gets to the playoffs it might be a first round loss.

19

Duke Energy (DUK)

Duke Energy Corp is an energy company, operating through its direct and indirect wholly owned subsidiaries.

Fundamentals

Price

TTM P/E

Fwd P/E

PEG

P/FCF

EPS Next Yr

EPS Next 5 Yr

72.16

26.53

15.16

6.33

-

3.95%

4.19%

Financials

Dividend

ROA

ROE

ROI

Debt/Eq

Gross Margin

Oper Margin

Profit Margin

4.32%

1.7%

4.7%

4.5%

1.02

69.7%

22.3%

7.6%

Performance

1 Yr

YTD

My Return

My Weighting

7.88%

6.89%

3.44%

2.18%

My Take

This seems to be another one of those stocks that falls into the Disney (NYSE:DIS) category which I described in the 1-10 rankings; I can never find an opportune time to buy into it. On one hand the stock moves slower than molasses, I think, but it pays a very nice dividend. No one is ever going to buy this stock for its valuation because it is extremely expensive based on long-term earnings growth expectations. Financially, the debt to equity ratio is high because of the industry it operates in actually almost requires it to be. However, the company pulls in lots of revenue with respect to cost of goods to compensate for it, as evidenced in the gross margins. From a rankings perspective the only way I see this stock moving up is if there is a market meltdown and every stock above this one has a complete collapse. But I don't believe that will be the case.

20

The Home Depot, Inc. (HD)

Home Depot is a home improvement retailer.

Fundamentals

Price

TTM P/E

Fwd P/E

PEG

P/FCF

EPS Next Yr

EPS Next 5 Yr

79.61

20.31

15.55

1.25

28.73

16.02%

16.23%

Financials

Dividend

ROA

ROE

ROI

Debt/Eq

Gross Margin

Oper Margin

Profit Margin

2.36%

13.1%

40.8%

22.3%

1.21

34.8%

11.8%

7%

Performance

1 Yr

YTD

My Return

My Weighting

1.88%

-2.19%

1.34%

1.77%

My Take

The home improvement trade seems to be coming to an end as Lumber Liquidators (NYSE:LL) came out recently and said that remodeling is on the decline. This phenomenon can be evidenced in the one year performance of Home Depot as the stock has pretty much done a "round-trip" in its price. I honestly don't see anything special about this company right now other than its efficiency of managing its shareholders equity. The company operates in a highly capital intensive industry and requires a lot of debt when compared to its equity. This company is at the top of my list in terms of swapping it out and I quite honestly don't see it moving up much in the standings.

Click to enlarge

It's going to take a lot from any one of these stocks from 11 through 20 to upset the favorite KLA-Tencor (NASDAQ:KLAC). If anyone can do it though, I believe it is GM. I wouldn't be surprised if KLA-Tencor wins the tournament in consecutive years, but I believe it will get a run for the money with tough opponents in the form of Williams-Sonoma, and my two dark horse picks, GM and Goodyear. I'm trying to keep my homework on the stocks I own entertaining for myself, and I hope I've made it a bit entertaining for you. Sometimes it just gets boring reading the same mundane stuff over and over again. Please stay tuned for my rankings of 21 through 30 in part three of this three part series. If you happened to miss rankings 1 through 10, click on this hyperlink to take you there. As always, happy investing, and may you profit much!

Disclaimer: This article is meant to serve as a journal for myself as to the rationale of why I bought/sold this stock when I look back on it in the future. These are only my personal opinions and you should do your own homework. Only you are responsible for what you trade and happy investing!

Disclosure: The author is long CELG, DIS, GILD, GT, KLAC, LL, AMGN, DUK, WM, EMR, NOV, DD, GE, HD, SPY, T. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.