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In the learning to fish series, we provide investors with suggested guidelines for choosing a potential candidate and one candidate is selected as our play of choice. We provide reasons for this choice and in doing so hope to impart some understanding to those who are new to the field of investing. 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 obtained here "Our suggested guidelines when searching for new investment ideas".

Reasons to be bullish on Lockheed Martin (LMT):

  • A decent yield of 4.6%
  • A five year dividend growth rate of 18.9%
  • It is sitting on an order backlog of roughly $76.6 billion dollars at the end of the first quarter in 2012
  • It has one of the strongest balance sheets among its peers, and it continues to generate strong cash amounts of cash flow. In 2011, it generated roughly $4.3 billion in cash flow. It ended the first quarter with cash and cash equivalents of #3.5 billion and 1.5 billion revolving credit facility.
  • It has strong institutional support. Percentage held by institutions is 90%
  • A low beta of 0.64 indicates that it's not a very volatile stock
  • A strong levered cash flow of $2.01 billion
  • A good quarterly earnings growth rate of 26%
  • A relative strength score of 73 out of a possible 100
  • Cash flow per share increased from $10.68 in 2009 to $11.76 in 2011
  • Sales rose from $45.1 billion in 2009 to $46.4 billion in 2011
  • Annual EPS before NRI rose from $6.84 in 2007 to $8.23 in 2011
  • A projected year over year growth rate of 7.4% for 2013
  • A manageable payout ratio of 46%
  • A strong five year ROE average of 66%
  • An interest coverage ratio of 11.30
  • A projected 3-5 year EPS growth rate of 5%
  • A strong free cash flow yield of 8.06%


(Click to enlarge)

Company: Anadarko Petroleum Corp (APC)

Brief Overview

  1. Percentage Held by Insiders = 0.28
  2. Long term debt to equity ratio = 0.76
  3. Operating Margin = 19%
  4. Quarterly Revenue Growth = 5.8%
  5. Quarterly Earnings Growth = 898%
  6. Operating Cash Flow = 3.11 billion
  7. Beta = 1.51
  8. Percentage Held by Institutions = 87.7%
  9. Short Percentage of Float = 1.4%
  10. Cash Flow 5 -year Average = 20.74
  11. Relative Strength 52 weeks = 50
  12. Cash Flow 5 -year Average = 10.67

Growth

  1. Net Income ($mil) 12/2011 = -2649
  2. Net Income ($mil) 12/2010 = 761
  3. Net Income ($mil) 12/2009 = -135
  4. Net Income Reported Quarterly ($mil) = $2150
  5. EBITDA ($mil) 12/2011 = 1245
  6. EBITDA ($mil) 12/2010 = 6210
  7. EBITDA ($mil) 12/2009 = 4126
  8. Cash Flow ($/share) 12/2011 = 11.07
  9. Cash Flow ($/share) 12/2010 = 9.32
  10. Cash Flow ($/share) 12/2009 = 6.25
  11. Sales ($mil) 12/2011 = 13967
  12. Sales ($mil) 12/2010 = 10984
  13. Sales ($mil) 12/2009 = 9000
  14. Annual EPS before NRI 12/2007 = 8.34
  15. Annual EPS before NRI 12/2008 = 6.92
  16. Annual EPS before NRI 12/2009 = -0.96
  17. Annual EPS before NRI 12/2010 = 1.81
  18. Annual EPS before NRI 12/2011 = 3.38


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Dividend history

  1. Dividend Yield = 0.5
  2. Dividend Yield 5 Year Average = 0.6
  3. Forward Yield = 0.5

Dividend sustainability

  1. Payout Ratio = 0.11
  2. Payout Ratio 5 Year Average = 0.2

Performance

  1. Next 3-5 Year Estimate EPS Growth rate = 27.15
  2. ROE 5 Year Average = 6.93
  3. Return on Investment = 4.94
  4. Current Ratio = 1.42
  5. Current Ratio 5 Year Average = 1.25
  6. Quick Ratio = 1.42
  7. Cash Ratio = 0.75
  8. Retention rate= 89%

Company: Fidelity Nat Information services (FIS)

Brief Overview

  1. Percentage Held by Insiders = 0.93
  2. Levered Free Cash Flow = $992.91M
  3. Relative Strength 52 weeks = 69
  4. Cash Flow 5-year Average = 4.1
  5. Profit Margin = 7.99
  6. Operating Margin = 19.02
  7. Quarterly Revenue Growth = 4.6%
  8. Quarterly Earnings Growth = - 6.1
  9. Operating Cash Flow = 1.12B
  10. Beta = 0.93

Growth

  1. Net Income ($mil) 12/2011 = 470
  2. Net Income ($mil) 12/2010 = 405
  3. Net Income ($mil) 12/2009 = 106
  4. EBITDA ($mil) 12/2011 = 1685
  5. EBITDA ($mil) 12/2010 = 1429
  6. EBITDA ($mil) 12/2009 = 737
  7. Net Income Reported Quarterly ($mil) = 87
  8. Cash Flow ($/share) 12/2011 = 4.58
  9. Cash Flow ($/share) 12/2010 = 4.45
  10. Cash Flow ($/share) 12/2009 = 2.23
  11. Sales ($mil) 12/2011 = 5746
  12. Sales ($mil) 12/2010 = 5270
  13. Sales ($mil) 12/2009 = 3770
  14. Annual EPS before NRI 12/2007 = 3.4
  15. Annual EPS before NRI 12/2008 = 1.49
  16. Annual EPS before NRI 12/2009 = 1.63
  17. Annual EPS before NRI 12/2010 = 2.02
  18. Annual EPS before NRI 12/2011 = 2.27


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Dividend history

  1. Dividend Yield = 2.3

Dividend sustainability

  1. Payout Ratio = 0.23

Performance

  1. Next 3-5 Year Estimate EPS Growth rate = 12.67
  2. Current Ratio = 1.6
  3. Current Ratio 5 Year Average = 1.33
  4. Quick Ratio = 1.24
  5. Cash Ratio = 0.49
  6. Interest Coverage Quarterly = 3.51
  7. Retention rate = 77%

Company: Seadrill Ltd (SDRL)

Levered Free Cash Flow = -722M

Brief Overview

  1. Profit Margin = 23%
  2. Operating Margin = 44%
  3. Quarterly Revenue Growth = -5.2%
  4. Quarterly Earnings Growth = - 52%
  5. Operating Cash Flow = 1.76 billion
  6. Beta = 1.99
  7. Short Percentage of Float = 2.20
  8. Long term debt to equity ratio = 1.49

Growth

  1. Net Income ($mil) 12/2011 = 1482
  2. Net Income ($mil) 12/2010 = 1172
  3. Net Income ($mil) 12/2009 = 1261
  4. Net Income Reported Quarterly ($mil) = 439
  5. EBITDA ($mil) 12/2011 = 2310
  6. EBITDA ($mil) 12/2010 = 2054
  7. Cash Flow ($/share) 12/2011 = 4.22
  8. Cash Flow ($/share) 12/2010 = 3.95
  9. Sales ($mil) 12/2011 = 4192
  10. Sales ($mil) 12/2010 = 4041
  11. Sales ($mil) 12/2009 = 3254
  12. Annual EPS before NRI 12/2009 = 2.6
  13. Annual EPS before NRI 12/2010 = 2.69
  14. Annual EPS before NRI 12/2011 = 2.9


(Click to enlarge)

Dividend history

  1. Dividend Yield = 6.60

Dividend sustainability

  1. Payout Ratio = 1.55

Performance

  1. Next 3-5 Year Estimate EPS Growth rate = 48.32
  2. Return on Investment = 8.75
  3. Current Ratio = 0.70
  4. Quick Ratio = 0.5
  5. Interest Coverage = 4.90

Conclusion

Generally speaking if one is bullish on a stock, a great way to add to your position or even establish a position is through selling puts. If the stock trades below the strike price, the shares could be assigned to your account. If it does not trade below the strike price you at least get paid for trying.

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

Source: Lockheed Martin 1 Of 4 Interesting Dividend Plays