Seeking Alpha
Profile| Send Message|
( followers)  

Investors would do well to follow some of the suggested guidelines when it comes to looking for new investment ideas. These are not absolute rules; they are just suggestions and there are always exceptions to the rule. The goal is to try to satisfy as many of them as possible. We will list one example from the five plays that satisfies the stated criteria. It is important that readers take the time to read and understand the selection process involved in coming up with these picks. This information can be accessed here - "Our suggested guidelines when searching for new investment ideas."

Reasons to like McDonald's Corp (NYSE:MCD):

A strong levered free cash flow of $3.8 billion

Net income increased from $4.5 billion in 2009 to $5.5 billion in 2011.

Sales surged from 22.7 billion in 2009 to $27 billion in 2011.

A quarterly revenue growth rate of 7.10%

A five-year sales growth rate of 3.58% which is decent for a mature company.

Cash flow per share increased from $5.21 in 2009 to $6.76 in 2011.

Annual EPS before NRI surged from $1.93 in 2009 to $5.27 in 2011.

A good payout ratio of 52%

Year over year projected growth rates of 7.87% and 10.8% for 2012 and 2014 3 respectively.

A decent yield of 3.10

An excellent interest coverage ratio of 15.33

A good quick ratio of 1.22

A 5 year ROE average of 31%

A projected 3-5 year EPS estimated growth rate of 9.9%

A decent free cash flow yield of 4.77%

$100K invested for 10 years would have grown to a stunning $643K. If the dividends were reinvested the rate of return would be much higher.

Company: McDonald's Corp

Levered free cash = 3.8 Billion

Growth

  1. Net Income ($mil) 12/2011 = 5503
  2. Net Income ($mil) 12/2010 = 4946
  3. Net Income ($mil) 12/2009 = 4551
  1. EBITDA ($mil) 12/2011 = 9920
  2. EBITDA ($mil) 12/2010 = 8727
  3. EBITDA ($mil) 12/2009 = 8176
  4. Cash Flow ($/share) 12/2011 = 6.76
  5. Cash Flow ($/share) 12/2010 = 5.9
  6. Cash Flow ($/share) 12/2009 = 5.21
  1. Sales ($mil) 12/2011 = 27006
  2. Sales ($mil) 12/2010 = 24075
  3. Sales ($mil) 12/2009 = 22745
  1. Annual EPS before NRI 12/2007 = 1.93
  2. Annual EPS before NRI 12/2008 = 3.66
  3. Annual EPS before NRI 12/2009 = 3.98
  4. Annual EPS before NRI 12/2010 = 4.59
  5. Annual EPS before NRI 12/2011 = 5.27

Dividend history

  1. Dividend Yield = 3.10
  2. Dividend Yield 5 Year Average 12/2011 = 2.94
  3. Dividend 5 year Growth 12/2011 = 20.48

Dividend sustainability

  1. Payout Ratio 09/2011 = 0.52
  2. Payout Ratio 5 Year Average 12/2011 = 0.5

Performance

  1. Next 3-5 Year Estimate EPS Growth rate = 9.93
  2. 5 Year History EPS Growth 12/2011 = 15.54
  3. ROE 5 Year Average 12/2011 = 31.57
  4. Return on Investment 12/2011 = 21.47
  5. Debt/Total Cap 5 Year Average 12/2011 = 42.21
  6. Current Ratio 12/2011 = 1.17
  7. Current Ratio 09/2011 = 1.17
  8. Current Ratio 06/2011 = 1.26
  9. Current Ratio 5 Year Average = 1.18
  10. Quick Ratio = 1.22
  11. Cash Ratio = 0.84
  12. Interest Coverage Quarterly = 15.33

Valuation

  1. Book Value Quarterly = 14.39
  2. Price/ Book = 6.39
  3. Price/ Cash Flow = 13.59
  4. Price/ Sales = 3.41
  5. EV/EBITDA 12 Mo = 10.42

Company: The Mosaic Co (NYSE:MOS)

Basic Key ratios

  1. Percentage Held by Insiders = 0.52
  2. Number of Institutional Sellers 12 Weeks = 1
  3. Relative Strength 52 weeks = 34
  4. Dividend 5-year Growth = 0
  5. Cash Flow 5 -year Average = 3.56
  6. Dividend Yield 5-Year Average = 0.27

Growth

  1. Net Income ($mil) 12/2011 = 2515
  2. Net Income ($mil) 12/2010 = 827
  3. Net Income ($mil) 12/2009 = 2350
  1. EBITDA ($mil) 12/2011 = 3777
  2. EBITDA ($mil) 12/2010 = 1737
  3. EBITDA ($mil) 12/2009 = 3366
  4. Cash Flow ($/share) 12/2011 = 5.47
  5. Cash Flow ($/share) 12/2010 = 3.03
  6. Cash Flow ($/share) 12/2009 = 5.23
  1. Sales ($mil) 12/2011 = 9938
  2. Sales ($mil) 12/2010 = 6759
  3. Sales ($mil) 12/2009 = 10298
  1. Annual EPS before NRI 12/2007 = 0.95
  2. Annual EPS before NRI 12/2008 = 4.55
  3. Annual EPS before NRI 12/2009 = 4.27
  4. Annual EPS before NRI 12/2010 = 1.9
  5. Annual EPS before NRI 12/2011 = 4.34

Dividend history

  1. Dividend Yield = 1.02
  2. Dividend Yield 5 Year Average 12/2011 = 0.27
  3. Dividend 5 year Growth 12/2011 = 0

Dividend sustainability

  1. Payout Ratio 09/2011 = 0.04
  2. Payout Ratio 5 Year Average 12/2011 = 0.05

Performance

  1. Percentage Change Price 52 Weeks Relative to S&P 500 = -28.29
  2. Next 3-5 Year Estimate EPS Growth rate = 17.96
  3. EPS Growth Quarterly(1)/Q(-3) = 140.5
  4. 5 Year History EPS Growth 12/2011 = 15.63
  5. ROE 5 Year Average 12/2011 = 20.95
  6. Return on Investment 12/2011 = 16.66
  1. Current Ratio 12/2011 = 3.67
  2. Current Ratio 09/2011 = 3.67
  3. Current Ratio 06/2011 = 3.03
  4. Current Ratio 5 Year Average = 2.99
  5. Quick Ratio = 2.81
  6. Cash Ratio = 2.33
  7. Interest Coverage Quarterly = N/A

Valuation

Book Value Quarterly = 27.81

Price/ Book = 1.76

Price/ Cash Flow = 8.93

Price/ Sales = 1.87

EV/EBITDA 12 Mo = 4.93

Company: Caterpillar Inc (NYSE:CAT)

Basic Key ratios

  1. Percentage Held by Insiders = 0.59
  2. Number of Institutional Sellers 12 Weeks = 4

Growth

  1. Net Income ($mil) 12/2011 = 4928
  2. Net Income ($mil) 12/2010 = 2700
  3. Net Income ($mil) 12/2009 = 895
  1. EBITDA ($mil) 12/2011 = 10474
  2. EBITDA ($mil) 12/2010 = 7303
  3. EBITDA ($mil) 12/2009 = 4339
  4. Cash Flow ($/share) 12/2011 = 11.95
  5. Cash Flow ($/share) 12/2010 = 7.91
  6. Cash Flow ($/share) 12/2009 = 5.94
  1. Sales ($mil) 12/2011 = 60138
  2. Sales ($mil) 12/2010 = 42588
  3. Sales ($mil) 12/2009 = 32396
  1. Annual EPS before NRI 12/2007 = 5.37
  2. Annual EPS before NRI 12/2008 = 5.66
  3. Annual EPS before NRI 12/2009 = 2.18
  4. Annual EPS before NRI 12/2010 = 4.19
  5. Annual EPS before NRI 12/2011 = 7.81

Dividend history

  1. Dividend Yield = 1.93
  2. Dividend Yield 5 Year Average 12/2011 = 2.63
  3. Dividend 5 year Growth 12/2011 = 6.69

Dividend sustainability

  1. Payout Ratio 09/2011 = 0.22
  2. Payout Ratio 5 Year Average 12/2011 = 0.39

Performance

  1. Next 3-5 Year Estimate EPS Growth rate = 23
  2. EPS Growth Quarterly(1)/Q(-3) = -128.8
  3. 5 Year History EPS Growth 12/2011 = 2.76
  4. ROE 5 Year Average 12/2011 = 33.87
  5. Return on Investment 12/2011 = 13.87
  6. Debt/Total Cap 5 Year Average 12/2011 = 68.94
  7. Current Ratio 12/2011 = 1.39
  8. Current Ratio 5 Year Average = 1.34
  9. Quick Ratio = 0.83
  10. Cash Ratio = 0.2
  11. Interest Coverage Quarterly = 8.25

Valuation

  1. Book Value Quarterly = 23.19
  2. Price/ Book = 4.12
  3. Price/ Cash Flow = 7.99
  4. Price/ Sales = 0.98
  5. EV/EBITDA 12 Mo = 8.04

Company: Continental Resources (NYSE:CLR) 1066

Basic Key ratios

  1. Percentage Held by Insiders = 68.59
  2. Number of Institutional Sellers 12 Weeks = 2

Growth

  1. Net Income ($mil) 12/2011 = 429
  2. Net Income ($mil) 12/2010 = 168
  3. Net Income ($mil) 12/2009 = 71
  1. EBITDA ($mil) 12/2011 = 1156
  2. EBITDA ($mil) 12/2010 = 554
  3. EBITDA ($mil) 12/2009 = 342
  4. Cash Flow ($/share) 12/2011 = 4.84
  5. Cash Flow ($/share) 12/2010 = 3.26
  6. Cash Flow ($/share) 12/2009 = 1.83
  1. Sales ($mil) 12/2011 = 1650
  2. Sales ($mil) 12/2010 = 839
  3. Sales ($mil) 12/2009 = 626
  1. Annual EPS before NRI 12/2007 = 1.47
  2. Annual EPS before NRI 12/2008 = 1.9
  3. Annual EPS before NRI 12/2009 = 0.61
  4. Annual EPS before NRI 12/2010 = 1.84
  5. Annual EPS before NRI 12/2011 = 2.71

Performance

  1. Percentage Change Price 52 Weeks Relative to S&P 500 = 38.02
  2. EPS Growth Quarterly(1)/Q(-3) = -166.04
  3. ROE 5 Year Average 12/2011 = 27.58
  4. Return on Investment 12/2011 = N/A
  5. Debt/Total Cap 5 Year Average 12/2011 = 30.41
  6. Current Ratio 06/2011 = 0.84
  7. Current Ratio 5 Year Average = 0.93
  8. Quick Ratio = 0.81
  9. Cash Ratio = 0.11

Valuation

  1. Book Value Quarterly = 12.79
  2. Price/ Book = 7.06
  3. Price/ Cash Flow = 18.67

Company: Procter & Gamble (NYSE:PG)

Basic Key ratios

  1. Percentage Held by Insiders = 0.02
  2. 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 ($mil) 12/2009 = 13436
  1. EBITDA ($mil) 12/2011 = 18858
  2. EBITDA ($mil) 12/2010 = 19101
  3. EBITDA ($mil) 12/2009 = 18853
  4. Cash Flow ($/share) 12/2011 = 5.24
  5. Cash Flow ($/share) 12/2010 = 5.03
  6. 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 = 3.53
  2. Dividend Yield 5 Year Average 12/2011 = 2.84
  3. Dividend 5 year Growth 12/2011 = 10.07

Dividend sustainability

  1. Payout Ratio 09/2011 = 0.54
  2. Payout Ratio 06/2011 = 0.53
  3. Payout Ratio 5 Year Average 12/2011 = 0.48

Performance

  1. Next 3-5 Year Estimate EPS Growth rate = 8.04
  2. EPS Growth Quarterly(1)/Q(-3) = 102.08
  3. 5 Year History EPS Growth 12/2011 = 4.67
  4. ROE 5 Year Average 12/2011 = 17.7
  5. Return on Investment 12/2011 = 13.19
  6. Debt/Total Cap 5 Year Average 12/2011 = 24.78
  7. Current Ratio 12/2011 = 0.86
  8. Current Ratio 5 Year Average = 0.8
  9. Quick Ratio = 0.54
  10. Cash Ratio = 0.31
  11. Interest Coverage Quarterly = 18.8

Valuation

  1. Book Value Quarterly = 23.49
  2. Price/ Book = 2.71
  3. Price/ Cash Flow = 12.15
  4. Price/ Sales = 2.06
  5. EV/EBITDA 12 Mo = 10.29

Conclusion

The markets are oversold on a short-term basis, and it would not surprise us if they mounted some sort of relief rally before trending downwards again. Long-term investors can use strong pullbacks to slowly start deploying money into long-term investments. A great way to get into a stock at a price of your choosing is to sell puts at strikes you would not mind owning the stock at.

Investors looking for other investment ideas might find these two articles to be of interest - Ford 1 Of 5 Interesting Dividend Plays and Altria Group 1 Of 5 Eye Catching Plays.

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 and Price Vs industry charts obtained from zacks.com. A major portion of the historical data used in this article was obtained from zacks.com. Data for Y charts sourced from ycharts.com.

Source: McDonald's 1 Of 5 Dividend Candidates To Consider