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Craig Lehman

 
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  • Air Products And Chemicals: This Dividend Champion's Dividend Is Risky [View article]
    Gig49,

    Thank you for putting some meat on the bones of what seemed like a pretty formulaic and undocumented article. Now, I doubt that management is asleep at the wheel, analysts seem pretty positive (http://yhoo.it/WeOxct), and APD's track record as a Dividend Champion gives me some confidence that they have a plan, but... I now plan to pay very close attention to the upcoming earnings call, and spend some quality time with the financial statements.

    One thing I would say in response to your observations is, I seriously doubt that APD *intends* to completely repay debt, so the 37-year figure doesn't by itself particularly worry me. I don't have a good idea of typical leverage in the chemical industry, but it must be fairly capital intensive. More to study...
    Jan 18 07:30 PM | 1 Like Like |Link to Comment
  • Air Products And Chemicals: This Dividend Champion's Dividend Is Risky [View article]
    "Cash on hand", the term the above article uses in describing the Valuentum formula, is NOT the same thing as net debt. Net debt = LT debt + ST debt - cash on hand. http://bit.ly/ZYEFnT Depending on the terms of LT debt, say a payment due in five years, it may have little or nothing to do with the issue of cash on hand to pay next year's dividend. After all, the company may have an equivalent or greater amount due to it in the same time frame.

    I still don't get it.
    Jan 16 04:46 PM | 1 Like Like |Link to Comment
  • Air Products And Chemicals: This Dividend Champion's Dividend Is Risky [View article]
    The Valuentum page on APD shows FCF payout currently at 53.6%, projected to drop to 38.6% by 2017. I understand the boilerplate point, always seen in Valuentum reports, that "using the payout ratio in any given year has some limitations", with which I agree, but the long-term average payout ratio is considerably LESS, which is in line with Valuentum's forecasts out to 2017. The "dividend cushion" methodology "is a ratio that sums the existing cash a company has on hand plus its expected future free cash flows over the next five years and divides that sum by future expected dividends over the same time period." So if APD has a dividend cushion <1, and its projected FCF payout is expected to DECLINE, the only other obvious reason to expect APD's "dividend cushion" to be weak would seem to be that cash on hand is deteriorating, But that isn't true either, if Yahoo Finance's numbers are right: http://yhoo.it/U1pdIj. The only other conceivable explanation, given the definition of the "cushion", would be that an imprudent increase in the dividend is expected, but that is pretty implausible.

    I don't get it. Valuentum's estimated FCF payout for the out years is there in black and white, and if there is some reason to anticipate a decline in cash on hand, one would expect an explanation.
    Jan 16 01:29 PM | 1 Like Like |Link to Comment
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