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"The majority see the obstacles; the few see the objectives; history records the successes of the latter, while oblivion is the reward of the former."

Alfred Montapert

Halliburton Company (NYSE:HAL) operates out of Houston, Texas. It provides various products and services to the energy industry for exploring, developing and producing oil and natural-gas worldwide. Its business operations are divided into two segments, drilling and evaluation and completion and production.

There are many reasons to like Halliburton, a few of which are: Growth rates for 2012 and 2013 are projected to come to be in the 14.79% and 15.87%, respectively. It sports operating margins of 19%, profit margins of 11.5% and a massive operating cash flow of $3.6b billion. Finally, it's a high beta stock (1.87) which makes it a good candidate for covered writes.

Halliburton is our play of choice for the following reasons:

  • A strong levered free cash flow of $867 million.
  • Net income surged from $1.1 billion in 2009 to $2.83 billion in 2011.
  • EBITDA increased from $2.89 billion in 2009 to $6.07 billion in 2011.
  • Cash flow per share jumped from $2.38 in 2009 t0 $4.84 in 2011.
  • Sales increased from $1.4 billion in 2009 to $2.4 billion in 2011.
  • Annual EPS before NRI increased from $2.66 in 2007 to $3.36 in 2011.
  • It has a very low payout ratio of 11%
  • Even though the dividend rate is low, it has more than made up for this via capital gains.
  • 100K invested for 10 years without reinvesting the dividends would have grown to $387. If the dividends were reinvested the return would be significantly higher.
  • It has a strong quarterly earnings growth rate of 49.
  • A great quarterly revenue growth rate of 36%.
  • A good current and quick ratio of 2.89 and 2.19, respectively.
  • A very good interest coverage ratio of 20.
  • A very good three total return of 111%.

Company: Halliburton Co

Levered Free Cash Flow = 867.12M

Basic Key ratios

Percentage Held by Insiders = 0.36

Growth

  1. Net Income ($mil) 12/2011 = 2839
  2. Net Income ($mil) 12/2010 = 1835
  3. Net Income ($mil) 12/2009 = 1145
  4. 12months Net Income this Quarterly/12 months Net Income 4Q's ago = 54.71
  5. Quarterly Net Income this Quarterly/ same Quarter year ago = 49.75
  1. EBITDA ($mil) 12/2011 = 6071
  2. EBITDA ($mil) 12/2010 = 4071
  3. EBITDA ($mil) 12/2009 = 2898
  4. Net Income Reported Quarterlytr ($mil) = 906
  5. Annual Net Income this Yr/ Net Income last Yr = 54.71
  6. Cash Flow ($/share) 12/2011 = 4.84
  7. Cash Flow ($/share) 12/2010 = 3.3
  8. Cash Flow ($/share) 12/2009 = 2.38
  1. Sales ($mil) 12/2011 = 24829
  2. Sales ($mil) 12/2010 = 17973
  3. Sales ($mil) 12/2009 = 14675
  1. Annual EPS before NRI 12/2007 = 2.66
  2. Annual EPS before NRI 12/2008 = 2.94
  3. Annual EPS before NRI 12/2009 = 1.35
  4. Annual EPS before NRI 12/2010 = 2.06
  5. Annual EPS before NRI 12/2011 = 3.36

Dividend history

  1. Dividend Yield = 1.11
  2. Dividend Yield 5 Year Average 1.2
  3. Annual Dividend 12/2011 = 0.36
  4. Annual Dividend 12/2010 = 0.36
  5. Forward Yield = 1.11
  6. Dividend growth rate = 3.01

Dividend sustainability

  1. Payout Ratio 06/2011 = 0.11
  2. Payout Ratio 5 Year Average 06/2011 = 0.17
  3. Change in Payout Ratio = -0.06

Performance

  1. Percentage Change Price 52 Weeks Relative to S&P 500 = -37.99
  2. Next 3-5 Year Estimate EPS Growth rate = 13
  3. EPS Growth Quarterly(1)/Q(-3) = -147.06
  4. ROE 5 Year Average 06/2011 = 26.47
  5. Return on Investment 06/2011 = 19.18
  6. Debt/Total Cap 5 Year Average 06/2011 = 28.8
  1. Current Ratio 06/2011 = 2.81
  2. Current Ratio 5 Year Average = 3.08
  3. Quick Ratio = 2.19
  4. Cash Ratio = 0.95
  5. Interest Coverage Quarterly = 20.62

Valuation

  1. Book Value Quarterly = 14.36
  2. Price/ Book = 2.26
  3. Price/ Cash Flow = 6.71
  4. Price/ Sales = 1.2
  5. EV/EBITDA 12 Mo = 5.25

Company: Johnson & Johns (JNJ)

Levered Free Cash Flow = 8.19B

Basic Key ratios

  1. Percentage Held by Insiders = 0.03
  2. Number of Institutional Sellers 12 Weeks = 1

Growth

  1. Net Income ($mil) 12/2011 = 9672
  2. Net Income ($mil) 12/2010 = 13334
  3. Net Income ($mil) 12/2009 = 12266
  4. 12months Net Income this Quarterly/12 months Net Income 4Q's ago = -27.46
  5. Quarterly Net Income this Quarterly/same Quarter year ago = -88.77
  1. EBITDA ($mil) 12/2011 = 16090
  2. EBITDA ($mil) 12/2010 = 20341
  3. EBITDA ($mil) 12/2009 = 18980
  4. Net Income Reported Quarterlytr ($mil) = 218
  5. Annual Net Income this Yr/ Net Income last Yr = -27.46
  6. Cash Flow ($/share) 12/2011 = 6.23
  7. Cash Flow ($/share) 12/2010 = 5.91
  8. Cash Flow ($/share) 12/2009 = 5.68
  1. Sales ($mil) 12/2011 = 65030
  2. Sales ($mil) 12/2010 = 61587
  3. Sales ($mil) 12/2009 = 61897
  1. Annual EPS before NRI 12/2007 = 4.15
  2. Annual EPS before NRI 12/2008 = 4.55
  3. Annual EPS before NRI 12/2009 = 4.63
  4. Annual EPS before NRI 12/2010 = 4.76
  5. Annual EPS before NRI 12/2011 = 5

Dividend history

  1. Dividend Yield = 3.48
  2. Dividend Yield 5 Year Average =3.10
  3. Annual Dividend 12/2011 = 2.25
  4. Annual Dividend 12/2010 = 2.11
  5. Forward Yield = 3.48
  6. Dividend 5 year Growth =9.00%

Dividend sustainability

  1. Payout Ratio 06/2011 = 0.46
  2. Payout Ratio 5 Year Average 06/2011 = 0.43
  3. Change in Payout Ratio = 0.03

Performance

  1. Percentage Change Price 52 Weeks Relative to S&P 500 = 4.43
  2. Next 3-5 Year Estimate EPS Growth rate = 5.86
  3. EPS Growth Quarterly(1)/Q(-3) = -109.71
  4. ROE 5 Year Average 06/2011 = 26.6
  5. Return on Investment 06/2011 = 19.16
  6. Debt/Total Cap 5 Year Average 06/2011 = 13.69
  1. Current Ratio 06/2011 = 2.38
  2. Current Ratio 5 Year Average = 1.87
  3. Quick Ratio = 2.11
  4. Cash Ratio = 1.64
  5. Interest Coverage Quarterly = 4.46

Valuation

  1. Book Value Quarterly = 20.9
  2. Price/ Book = 3.14
  3. Price/ Cash Flow = 10.53
  4. Price/ Sales = 2.77
  5. EV/EBITDA 12 Mo = 10

Company: Altria Group Inc. (NYSE:MO)

Levered Free Cash Flow = 4.32B

Basic Key ratios

Percentage Held by Insiders = 0.24

Growth

  1. Net Income ($mil) 12/2011 = 3390
  2. Net Income ($mil) 12/2010 = 3905
  3. Net Income ($mil) 12/2009 = 3206
  4. 12months Net Income this Quarterly/12 months Net Income 4Q's ago = -13.19
  5. Quarterly Net Income this Quarterly/same Quarter year ago = -9.03
  1. EBITDA ($mil) 12/2011 = 7051
  2. EBITDA ($mil) 12/2010 = 7132
  3. EBITDA ($mil) 12/2009 = 6353
  4. Net Income Reported Quarterlytr ($mil) = 836
  5. Annual Net Income this Yr/ Net Income last Yr = -13.19
  6. Cash Flow ($/share) 12/2011 = 2.18
  7. Cash Flow ($/share) 12/2010 = 2.03
  8. Cash Flow ($/share) 12/2009 = 1.9
  1. Sales ($mil) 12/2011 = 23800
  2. Sales ($mil) 12/2010 = 24363
  3. Sales ($mil) 12/2009 = 23556
  1. Annual EPS before NRI 12/2007 = 4.38
  2. Annual EPS before NRI 12/2008 = 1.65
  3. Annual EPS before NRI 12/2009 = 1.75
  4. Annual EPS before NRI 12/2010 = 1.9
  5. Annual EPS before NRI 12/2011 = 2.05

Dividend history

  1. Dividend Yield = 5.37
  2. Dividend Yield 5 Year Average = 8.00
  3. Annual Dividend 12/2011 = 1.58
  4. Annual Dividend 12/2010 = 1.46
  5. Forward Yield = 5.37
  6. Dividend 5 year Growth = -16.00

Dividend sustainability

  1. Payout Ratio 06/2011 = 0.81
  2. Payout Ratio 5 Year Average 06/2011 = 0.73
  3. Change in Payout Ratio = 0.08

Performance

  1. Percentage Change Price 52 Weeks Relative to S&P 500 = 10.46
  2. Next 3-5 Year Estimate EPS Growth rate = 7
  3. EPS Growth Quarterly(1)/Q(-3) = -113.64
  4. ROE 5 Year Average 06/2011 = 77.54
  5. Return on Investment 06/2011 = 23.9
  6. Debt/Total Cap 5 Year Average 06/2011 = 55.27
  1. Current Ratio 06/2011 = 0.93
  2. Current Ratio 5 Year Average = 0.92
  3. Quick Ratio = 0.7
  4. Cash Ratio = 0.67
  5. Interest Coverage Quarterly = 4.37

Valuation

  1. Book Value Quarterly = 1.79
  2. Price/ Book = 17.04
  3. Price/ Cash Flow = 13.98
  4. Price/ Sales = 2.62
  5. EV/EBITDA 12 Mo = 10.25

Company: Pfizer Inc (PFE)

Levered Free Cash Flow = 20.90B

Basic Key ratios

Percentage Held by Insiders = 0.05

Number of Institutional Sellers 12 Weeks = 3

Growth

  1. Net Income ($mil) 12/2011 = 10009
  2. Net Income ($mil) 12/2010 = 8257
  3. Net Income ($mil) 12/2009 = 8635
  4. 12months Net Income this Quarterly/12 months Net Income 4Q's ago = 21.22
  5. Quarterly Net Income this Quarterly/same Quarter year ago = -50.21
  1. EBITDA ($mil) 12/2011 = 21788
  2. EBITDA ($mil) 12/2010 = 17769
  3. EBITDA ($mil) 12/2009 = 15431
  4. Net Income Reported Quarterlytr ($mil) = 1439
  5. Annual Net Income this Yr/ Net Income last Yr = 21.22
  6. Cash Flow ($/share) 12/2011 = 3.54
  7. Cash Flow ($/share) 12/2010 = 3.31
  8. Cash Flow ($/share) 12/2009 = 2.35
  1. Sales ($mil) 12/2011 = 67425
  2. Sales ($mil) 12/2010 = 67809
  3. Sales ($mil) 12/2009 = 50009
  1. Annual EPS before NRI 12/2007 = 2.2
  2. Annual EPS before NRI 12/2008 = 2.42
  3. Annual EPS before NRI 12/2009 = 2.02
  4. Annual EPS before NRI 12/2010 = 2.23
  5. Annual EPS before NRI 12/2011 = 2.31

Dividend history

  1. Dividend Yield = 3.93
  2. Dividend Yield 5 Year Average = 4.7%
  3. Annual Dividend 12/2011 = 0.8
  4. Annual Dividend 12/2010 = 0.72
  5. Forward Yield = 3.93
  6. Dividend 5 year Growth = -7.7%

Dividend sustainability

  1. Payout Ratio 06/2011 = 0.35
  2. Payout Ratio 5 Year Average 06/2011 = 0.43
  3. Change in Payout Ratio = -0.09

Performance

  1. Percentage Change Price 52 Weeks Relative to S&P 500 = 4.13
  2. Next 3-5 Year Estimate EPS Growth rate = 3.76
  3. EPS Growth Quarterly(1)/Q(-3) = -106.38
  4. ROE 5 Year Average 06/2011 = 21.81
  5. Return on Investment 06/2011 = 14.74
  6. Debt/Total Cap 5 Year Average 06/2011 = 21.78
  1. Current Ratio 06/2011 = 2.06
  2. Current Ratio 5 Year Average = 2.29
  3. Quick Ratio = 1.78
  4. Cash Ratio = 1.3
  5. Interest Coverage = 8.6

Valuation

  1. Book Value Quarterly = 10.74
  2. Price/ Book = 2.09
  3. Price/ Cash Flow = 6.32
  4. Price/ Sales = 2.51
  5. EV/EBITDA 12 Mo = 8.13

Company: Procter & Gamble (PG)

Levered Free Cash Flow = 7.69B

Basic Key ratios

Percentage Held by Insiders = 0.02

Number of Institutional Sellers 12 Weeks = 1

Growth

  1. Net Income ($mil) 12/2011 = 11797
  2. Net Income ($mil) 12/2010 = 12736
  3. Net Income ($mil) 12/2009 = 13436
  4. 12months Net Income this Quarterly/12 months Net Income 4Q's ago = -9.72
  5. Quarterly Net Income this Quarterly/same Quarter year ago = -49.3
  1. EBITDA ($mil) 12/2011 = 18858
  2. EBITDA ($mil) 12/2010 = 19101
  3. EBITDA ($mil) 12/2009 = 18853
  4. Net Income Reported Quarterlytr ($mil) = 1690
  5. Annual Net Income this Yr/ Net Income last Yr = -7.37
  6. Cash Flow ($/share) 12/2011 = 5.24
  7. Cash Flow ($/share) 12/2010 = 5.03
  8. Cash Flow ($/share) 12/2009 = 4.93
  1. Sales ($mil) 12/2011 = 82559
  2. Sales ($mil) 12/2010 = 78938
  3. Sales ($mil) 12/2009 = 79029
  1. Annual EPS before NRI 12/2007 = 3.04
  2. Annual EPS before NRI 12/2008 = 3.5
  3. Annual EPS before NRI 12/2009 = 3.58
  4. Annual EPS before NRI 12/2010 = 3.67
  5. Annual EPS before NRI 12/2011 = 3.93

Dividend history

  1. Dividend Yield = 3.13
  2. Dividend Yield 5 Year Average= 3.10
  3. Annual Dividend 12/2011 = 1.97
  4. Annual Dividend 12/2010 = 1.8
  5. Forward Yield = 3.13
  6. Dividend 5 year Growth =10.38%

Dividend sustainability

  1. Payout Ratio 06/2011 = 0.53
  2. Payout Ratio 5 Year Average 06/2011 = 0.48
  3. Change in Payout Ratio = 0.06

Performance

  1. Percentage Change Price 52 Weeks Relative to S&P 500 = 2.46
  2. Next 3-5 Year Estimate EPS Growth rate = 8.8
  3. EPS Growth Quarterly(1)/Q(-3) = 102.66
  4. ROE 5 Year Average 06/2011 = 17.6
  5. Return on Investment 06/2011 = 13.27
  6. Debt/Total Cap 5 Year Average 06/2011 = 24.77
  1. Current Ratio 06/2011 = 0.79
  2. Current Ratio 5 Year Average = 0.79
  3. Quick Ratio = 0.54
  4. Cash Ratio = 0.31
  5. Interest Coverage Quarterly = 14.47

Valuation

  1. Book Value Quarterly = 23.15
  2. Price/ Book = 2.9
  3. Price/ Cash Flow = 12.82
  4. Price/ Sales = 2.17
  5. EV/EBITDA 12 Mo = 10.67

Conclusion

The markets are rather overbought and investors would do well to wait for a strong pullback before committing large sums of money to this market. Selling covered calls thus is a great way to earn extra income while you wait for this pullback to materialize.

Disclaimer

This list of stocks is meant to serve as a starting point. Please do not treat this as a buying list. It is imperative that you do your due diligence and then determine if any of the above plays meet with your risk tolerance levels. The Latin maxim caveat emptor applies-let the buyer beware.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Additional disclosure: EPS, EPS surprise, broker recommendations and price and consensus charts sourced from zacks.com. A significant portion of the historic data was obtained from zacks.com. Consensus estimate analysis table sourced from reuters.com. Free cash flow yield, income from cont operations, and revenue growth sourced from Ycharts.com.

Source: 5 Dividend Champs: Halliburton Our Top Pick