I was running a screen on US-stocks that are considered a buy and have at least a 3% dividend yield.
The following list appeared:
|BRISTOL-MYERS SQUIBB CO||BMY||26.46||Health Care||-0.10||12.10||13.60||4.80|
|PHILIP MORRIS INTERNATIONAL||PM||64.90||Consumer Staples||10.90||14.50||13.20||3.90|
|DU PONT (E.I.) DE NEMOURS||DD||44.83||Materials||-10.10||11.80||10.10||3.50|
|KRAFT FOODS||KFT||32.80||Consumer Staples||4.10||15.40||13.80||3.30|
|UNITED PARCEL SERVICE||UPS||61.99||Industrials||-14.60||15.40||13.10||3.20|
AT&T reported good Q2 results which were a touch ahead of analysts’ expectations. Biggest surprise was the customer additions in wireless and the 3.6 million iPhone activations with 24% of subscribers new to AT&T.
Smartphone sales of 5.6 million (best quarter ever) are also an important driver. Wireline results were a bit soft but better than expected. Based on that, prospects for H2 are improving and potential synergies for the pending acquisition of T-Mobile are an add-on.
Bristol Myers Squibb (BMY)
See my previous article, titled "Drug Maker Dividend Stocks With Strong Growth Prospects".
NextEra Energy (NEE)
NextEra reported good Q2 results, which were even better when excluding one-time charges. The utility unit performed positively and the electricity business was flat when adjusting for one-offs. The utility section will drive most of the growth ahead helped by investments. But NEE achieved increased success on its renewable generation and expanded its renewable pipeline as it has lined up significant projects through 2013/14. It added new wind Power Price Agreements (PPA) of 632 MW in Q2 and has 1585 MW wind generation under contract. Even if new wind development would stop after 2012 (ending of some US incentive programs), NEE would still be able to meet its earnings goals. The stock is valued with a 20% PE discount to peers which seems not justified.
After COP had purchased USD 1.6bln of own shares in Q1 2011, the company accelerated its share buy-back program to USD 3.1bln in Q2 2011. Adding the USD 3.9bln spent on share buy-backs in 2010, COP has by now completed USD 8.6bln of its massive USD 15bln share buy-back program by the end of Q2 2012. Thus, roughly half of COP’s buy-back program is still left for 2011/12, which is equivalent to 6% of COP’s market cap. Furthermore, the intended slit of COP in two separate exploration and refining companies in Q2 2012 will unlock additional shareholder value.
Philip Morris Int. (PM)
Q2’s figures were of very high quality given solid volume trend and very strong pricing. Even stripping out the Japan effect, organic volume declined only about 1.0%, still better than expectations and somewhat better than the market trend, which means that company has gained shares in major countries.
The strong free cash flow and a healthy balance sheet with net debt/EBITDA at only 1.1x opens up more potential for shareholder returns (on top of a 3.90% dividend yield and an USD 5 bln share buyback program for 2011).
PMI’s strong business prospects, shareholder friendly return policy as well as its broad geographic diversification should support higher valuation premium.
International Paper (IP)
International Paper reported another solid quality quarter, with every segment showing solid performance. Challenges in the quarter, such as maintenance outages, mill shutdown, caused by flooding, and cost inflation, were managed well.
Q3 maintenance guidance suggests an incremental tailwind, partially offset by higher input costs. However, with pricing and volumes generally expected to be seasonally stable to slightly higher, current Q3 EPS estimates of USD 0.80 may eventually prove conservative.
Due to improving industry fundamentals and undemanding valuation a buy rating is in place. In fact industry consolidation and capacity closure seems to enable the industry to maintain prices for most grades at attractive and elevated levels. At 5.4x and 5.0x 2011/12 EV/EBITDA estimates, the stock trades well below its historical trading range of 6-8x.
Du Pont (DD)
Great Q2 numbers, as with Dow Chemical, and a low risk profile for this highly diversified giant that is exposed now to all the important growth areas (Agro, Consumer goods, Alternative energies, infrastructure spending, EM).
Is this trend sustainable? Maybe not to this extent with both volumes and pricing up markedly, but in the medium to longer term this company will benefit further. Cash generation is high, the balance sheet very strong and more acquisitions in innovations and EM exposure can and will be done.
Meanwhile, the USD weakness and low gas prices (and possibly better management?) will continue to give the US producers an edge over most Europeans.
General Electric (GE)
GE presented strong Q2 results exceeding the street’s expectation. Margin recovery is on track supported by strong order growth with infrastructure orders up 24% in the quarter, equipment up 33% and service orders +16%. Recovery in GE Capital is continuing and perspectives for an ongoing uptrend are solidly backed by its international activities which account for 59% of Industrial revenues.
Copper for delivery in three months on the London Metal Exchange increased by 30% compared to the quarter a year ago. Copper prices showed some strong performance lately in increasing more than 10% since early May. Meanwhile, Freeport’s net cash cost averaged USD 0.93 (per copper lbs) in the quarter compared with USD 0.97 a year earlier. This shows management’s strong experience in operating and developing mines.
Freeport should continue to deliver on its world-class diversified asset portfolio as the world’s largest publicly traded copper and molybdenum producer, as well as the eighth largest gold producer.
A positive effect on the current full-year EPS forecasts due to the lower cash costs, paving the way for higher share price levels. Trading at a discount to its historical average (P/E for 2012e of 7.4x vs. historical average of 12.9x), there is enough upside potential for the stock.
Kraft Foods (KFT)
The de-merger should unlock significant value, because currently KFT’s shares are not given a clear valuation premium for its exposure to emerging markets and to faster-growing categories.
By applying different valuations (valuations akin to their respective peers) for the grocery business (“Yield Co.”) and snack business (“Growth Co.”), analysts arrive at a per share value between USD 13-15 for the grocery unit, and USD 25-31 for the snack one. That means, the KFT stock should have a “fair” value of USD 38-46, clearly higher than the current level.
A separation of the company should attract two different groups of investors, one searching for value and one for growth, paving the way for unlocking hidden value.
United Parcel Services (UPS)
UPS delivered solid Q2 results a touch ahead of estimates. Volume was somewhat disappointing but reflected the hesitant recovery of the US economy. International volume growth was in line with expectations and pricing was satisfying in all segments, especially verifying the revenue management initiatives in supply chain & freight. The weak economy in the US remains a concern but price increases are encouraging. International package is doing well particularly related to China.
Dow Chemical (DOW)
Q2 results show operational excellence as management bounced back quickly from the set back in 2008 and 2009 now achieving record results in most areas. Dow has its 'finger' in all the interesting growth businesses especially in emerging markets. Note, that especially Dow Agrosciences is now a very strong performer - Dow might either want to invest further or divest at a good price.
It also shows, where the demand and pricing power is now very good: in the Global Agrobusiness. High capacity utilization rates and strong market positions makes for good price negotiations - up 19% across the board is very good indeed. The new JV with Saudi Aramco that Dow announced is also excellent - the Saudi's finally want to move more downstream with their petrochemical activities - here is their chance - but at a very good price for Dow.
Emerson Electric (EMR)
Emerson presented solid Q3 (June 30) results which came in roughly in line with reduced expectations. While sales growth in the US (+6%) remained weak, international demand was strong, particularly in emerging markets with a growth rate of 15%. The company continued its cost savings and price increases which did not compensate for the full cost inflation in the quarter. Outlook was reaffirmed although with a slightly more cautious tone in regard to organic growth. EMR’s strong position in emerging markets, which are delivering double-digit growth rates and contributing already one third of total sales, bodes well for the coming quarters. Input cost inflation is an issue but cost savings and accelerating price increases should help to compensate for that.
Buy Quality When Others Sell.