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After growing up in abject poverty and at times homeless, I taught myself the basics of economics and finances in the business department of the San Francisco Public Library. I have worked for firms such as Bear Stearns, The Federal Reserve Bank of San Francisco, and as a subcontractor to Fannie... More
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Dividend Inc.
  • Wal Mart Favored by Mr. Buffett
    Dividend Inc. is at it again. Tooting our own horn, 'cause if we don't then who will?

    According to news sources, Warren Buffett increased his holdings of Wal Mart (WMT) by 90% over the summer. This was an increase of 18 million shares above the reported June 30th holdings for Berkshire Hathaway.

    It should be noted that Dividend Inc. stated the case for Wal Mart in a June 18th article titled, "Values Biding Time." The article aptly started with a quote by S.A. Nelson saying,"Value go on increasing, while the market rests..." The overriding point of the article was that there were very few credible arguments that could be made against a company that had traded in a range for so long; especially a Dividend Achiever of 33 years.

    Not to be outdone, in a recent article titled "Dividend Stocks Worth Your Time," Dividend Inc. placed WMT at number 1 out of 10 in a list of companies to consider investing in. Even at the current price, WMT is still reasonably priced. Close attention should be paid to the June 18th article since I dropped an investment grenade in the midst of all that "analysis." A little due diligence would wonderfully augment the investment decision to buy this stock. For all references to WMT on Dividend Inc. click on the following link.

    It is my hope that regular readers of this blog have benefited from the insight and the opportunity. This is only one of many investments that Dividend Inc. has been able to jump on before any annoucements from Berkshire headquarters. Are we luck? Probably. Will we fight our luck? Nope. Keep reading and spread the word if you think that Dividend Inc. has proven useful.

    Disclosure: No positions in WMT
    Tags: WMT, dividends, values, Warren Buffett, Buffett
    Nov 16 09:11 pm | Link | Comment!
  • Dividend Achiever Recommendation Review
    On October 9, 2009, I created a list of ten Dividend Achievers that I felt were the best investments at the time. After having passed the 1 month period, I feel that it is necessary to review the performance of the stocks that were on that list. As with the original article I will show the performance based on those that were ranked from 1st to 10th (chart).
    1. Wal-Mart (WMT) up 6.46%
    2. Cardinal Health (CAH) up 14.43%
    3. Weyco (WEYS) down 0.8%
    4. Bard Inc. (BCR) up 3.62%
    5. Northwest Natural Gas (NWN) up 1.01%
    6. Piedmont Natural Gas (PNY) down 3.67%
    7. Becton Dickinson (BDX) up 5.77%
    8. McCormick & Co. (MKC) up 6.71%
    9. Abbott Laboratories (ABT) up 5.73%
    10. ExxonMobil (XOM) up 4.62%

    As an investor, I believe that the performance of these stocks need to be put in perspective. There are three tiers that I like to categorize my investments:

    1. As compared to the historical CAGR of the stock market
    2. As compared to the gains in a single month
    3. As compared to if the money was in government guaranteed alternatives

    In category one, I have calculated the 100 year compound annual growth rate for the S & P 500 (this is being generous) at 11.57% (Jan. 1, 1908 to Dec. 31, 2008). To me, any investment return greater than 11.57% in less than a year is considered as a sell candidate.

    Category 2 is wholly dependent on category one. If the gain of a stock has exceeded, in one month, more than half what could have been received based on the historical return of the stock market then I need to consider selling the stock.

    Category 3 tells me whether or not I'm doing, at least, better than the alternative guaranteed sources. If I can't beat the government protected sources then I need to re-evaluate the investment position. For the stocks that have lost money so far (WEYS and PNY) the dividend payments allow the investor to wait for a reversal of the declining trend. WEYS has a dividend yield of 2.60% while PNY has a dividend yield of 4.70%. Both instances provide the ability to compete against government guaranteed alternatives over the coming eleven months.

    Based on the aforementioned thoughts, I would recommend that all of the stocks (except WEYS, NWN, and PNY) be sold at the earliest opportunity. For anyone to claim that a stock, which has gained 3 percent in a month, could continue the same trajectory over the next 11 months is going to be highly disappointed. Below is the hypothetical annual return if the past month were to continue at the same rate until October 9, 2010:

    1. WMT up 77.52%
    2. CAH up 173.16%
    3. BCR up 43.44%
    4. NWN up 12.12%
    5. BDX up 69.24%
    6. MKC up 80.52%
    7. ABT up 68.76%
    8. XOM up 55.44%

    Only one of the above stocks has the ability to fulfill the projections with ease and that is Northwest Natural Gas (NWN). Suffice to say, all NWN needs to do is go up 7.32% and combined with the dividend of 3.8% you have acheived the 12.12% annual return. If we exclude the dividend, then NWN would have to rise 11.11%. In either case, NWN has the highest probability of continuing the current trajectory.

    Keep in mind that I tend to invest 100% of my portfolio in 5 companies at the most. Truth be told, I have been invested in 2 or 3 stocks since December 2008. This means 33% to 50% in one stock at a time. Obviously, my approach isn't for everyone however it is worth your time to critically examine the approach that I employ.

    Disclosure: Long NWN
     

    Tags: WMT, CAH, BCR, NWN, BDX, MKC, ABT, XOM, PNY, WEYS, dividends, income, dividend achievers
    Nov 14 06:07 pm | Link | Comment!
  • Monsanto (MON) within striking distance
    According to Google Finance, "Monsanto Company along with its subsidiaries, is a worldwide provider of agricultural products for farmers. The Company’s seeds, biotechnology trait products, and herbicides provide farmers with solutions to produce foods for consumers and feed for animals. The Company operates in two segments: Seeds and Genomics, and Agricultural Productivity."

    Although Monsanto (MON) isn't a Dividend Achiever or a member of the Nasdaq 100, the company has a solid history and provides investors with an exceptional opportunity.

    MON is currently trading within 5.85% of the the 52-week low. What is significant about the low that MON is approaching is that it is close to the November 2008 low. This is a critical support level for the stock which could indicate that a major reversal is ahead.

    According to Dow Theory, MON is projected to decline to the following levels:
    • $52.17
    • $37.08
    • $21.99
    • $6.90
    Each of the downside targets, based on Dow Theory, should provide some kind of support level. Interestingly, MON's 50% level, based on the decline from the prior peak and the July 2002 low, is at $67.90. This means that either the stock declines much further or the stock rebounds from here.

    According to Value Investment Survey dated August 2009, MON typically reverts to a level of 17 times cashflow. Full year 2008 cash flow was $4.50 per share. This equals a price of $76.50 that the shares should revert to at some point in the future. Value Line seems to believe that, for 2009, MON should achieve cash flow of $5.55 per share which implies a mean price of $94.35. I would opt for the lower price just to play it safe. In the period from 1981 to 1996, Value Line had a smaller mean price to cash flow (13x). This means that as time has gone on since 81' to 96' MON has managed to improve their price to cash flow figures.

    With MON trading at 11% below the historical mean value, as well as being within 6% of the low, this is a good opportunity to get your research in as the share price declines. Focus on the downside risk and good luck.

    Disclosure: No positions
    Tags: MON
    Nov 03 10:18 am | Link | 2 Comments
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