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I seek to liberate investors from the chains of borrowed opinions by teaching metric awareness that leads to the formation of your own opinions. I lack the usual attributes that qualifies me to write on investing. I am a retail investor. But I do gather, process and analyze significantly more... More
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  • Office/Industrial REIT Stats For 09-26-14
    Office/Industrial REIT Stats for 09-26-14

    Yields in spreadsheets are the annualized Q3-14 dividend yields. On 4-30-14 CLI cut its Q3 dividend in half.


     Share Price14 FFO Estimate Div/FFOPercent Change
    The_ full_Company_name_and_stock_ticker1-0109-261-0109-26Yield20142015PricePr+Div14 FFOTarget

    Alexandria Real Estate Equities, Inc.(NYSE:ARE)63.6274.344.734.783.87%60%56%16.8520.251.0612.19
    Brandywine Realty Trust(NYSE:BDN)14.0914.351.451.424.18%42%40%1.855.04-2.0713.61
    BioMed Realty Trust Inc.(NYSE:BMR)18.1220.271.441.534.93%65%65%11.8716.006.255.40
    Boston Properties Inc.(NYSE:BXP)100.37115.255.345.262.26%49%47%14.8316.77-1.5014.35
    Mack-Cali Realty Corp.(NYSE:CLI)21.4819.482.161.743.08%34%32%-9.31-7.22-19.44-3.41
    Douglas Emmett Inc(NYSE:DEI)23.2925.891.561.593.09%50%47%11.1613.741.9213.38
    Digital Realty Trust Inc.(NYSE:DLR)49.1262.364.864.855.32%68%64%26.9530.33-0.2113.00
    Duke Realty Corporation(NYSE:DRE)15.0417.331.121.173.92%58%54%15.2318.624.4613.23
    Highwoods Properties Inc.(NYSE:HIW)36.1739.172.882.934.34%58%56%8.2911.821.745.48
    Kilroy Realty Corp.(NYSE:KRC)50.1859.172.672.762.37%51%46%17.9220.013.3714.59
    Corporate Office Properties Trust(NYSE:OFC)23.6926.212.442.424.20%45%44%10.6414.12-0.8214.51
    PS Business Parks Inc.(NYSE:PSB)76.4276.845.014.832.60%41%40%0.551.86-3.59-1.16
    Parkway Properties Inc.(NYSE:PKY)19.2918.671.431.384.02%54%52%-3.21-0.30-3.509.54
    SL Green Realty Corp.(NYSE:SLG)92.38102.635.646.041.95%33%32%11.1012.727.0911.07
    Vornado Realty Trust(NYSE:VNO)88.79100.764.754.812.90%61%56%13.4815.951.2617.47
    Washington Real Estate Investment Trust(NYSE:WRE)23.3625.751.651.514.66%79%69%10.2312.80-8.48-2.07

    Office Average    3.61%53%50%9.9012.66-0.789.45
    Industrial
    ProLogis, Inc.(NYSE:PLD)36.9538.041.781.793.47%74%67%2.954.740.560.00
    East Group Properties Inc.(NYSE:EGP)57.9361.223.423.453.53%63%58%5.687.540.884.75
    First Potomac Realty Trust(NYSE:FPO)11.6311.800.970.945.08%64%59%1.465.33-3.09-0.47
    First Industrial Realty Trust Inc.(NYSE:FR)17.4517.271.161.142.37%36%33%-1.030.73-1.728.86
    Liberty Property Trust(NYSE:LPT)33.8734.342.492.435.53%78%73%1.395.59-2.414.73

    Industrial Average    4.00%63%58%2.094.79-1.163.57

    Sector Average    3.53%56%52%8.0410.78-0.878.05

    Dividend dates are:

    ARE: 10-14-14BDN: 10-19-14BMR: 10-14-14BXP: 10-30-14CLI: 10-09-14
    DEI: 10-14-14DLR: 09-29-14DRE: 08-28-14HIW: 09-08-14KRC: 10-14-14
    OFC: 09-14-14PKY: 09-23-14PSB: 09-29-14SLG: 10-14-14VNO: 08-20-14
    WRE: 09-29-14EGP: 09-29-14FPO: 08-14-14FR : 10-19-14LRY: 10-14-14PLD: 09-29-14
    Office/Industrial Price/FFO Ratios 09-26
    The FFO estimates came from Yahoo Finance except for OFC and PLD. OFC's projection came from its web site.
    The influence of property cap rates on price/FFO numbers is strong - and explains why NYC property owning REITs like BXP, SLG and VNO have such high ratios.

     FFO / ShareFFO Growth/yearPrice/FFOFFO Spread
    Co.2008200920102011201220132014201512-1313-1414-15201320142015HighLowSprd

    ARE5865523524384324334785170.23%10.39%8.16%17.1715.5514.384.804.760.84
    BDN2391841341381351351421510.00%5.19%6.34%10.6310.119.501.461.3110.56
    BMR18616411611812914715315513.95%4.08%1.31%13.7913.2513.081.551.475.23
    BXP4784713904834884915265510.61%7.13%4.75%23.4721.9120.925.295.201.71
    CLI370329281278264238174185-9.85%-26.89%6.32%8.1811.2010.531.851.6511.49
    DEI1331271241371371491591698.76%6.71%6.29%17.3816.2815.321.621.554.40
    DLR2592933394054424744855167.24%2.32%6.39%13.1612.8612.094.934.763.51
    DRE2481631151141011101171258.91%6.36%6.84%15.7514.8113.861.191.144.27
    HIW2752612462542732812933062.93%4.27%4.44%13.9413.3712.803.032.904.44
    KRC34226020522222326627630619.28%3.76%10.87%22.2421.4419.342.792.732.17
    OFC26424923012121324024224912.68%0.83%2.89%10.9210.8310.532.462.392.89
    PSB45055238846842149548350017.58%-2.42%3.52%15.5215.9115.374.834.830.00
    PKY38133628619312690138144-28.57%53.33%4.35%20.7413.5312.971.421.345.80
    SLG620443484480529516604624-2.46%17.05%3.31%19.8916.9916.456.235.915.30
    VNO677446606600513341481521-33.53%41.06%8.32%29.5520.9519.344.984.539.36
    WRE226214196190189179151173-5.29%-15.64%14.57%14.3917.0514.881.521.491.99

    Office Average       7.356.17 15.3814.46
    Industrial
    PLD3027212563101701791981600.00%5.29%10.61%22.3821.2519.211.441.336.15
    EGP3283142862963083233453704.87%6.81%7.25%18.9517.7416.553.463.430.87
    FPO1781648410611710394102-11.97%-8.74%8.51%11.4612.5511.570.960.915.32
    FR305208108694981141264.26%16.33%10.53%17.6215.1513.711.151.131.75
    LPT315284265258258249243262-3.49%-2.41%7.82%13.7914.1313.112.502.413.70

    Industrial Average       3.468.94 16.1714.83

    Sector Average       6.426.83 15.5614.55

    NOTE: In the spreadsheet below, the FFO estimates and the high and low projections came from the analyst estimate page at Yahoo Finance.
    Dividend History based on Q2 Dividends


     Dividends/Share/QuarterPercentage Dividend GrowthAverage
    Co.2007200820092010201120122013201408-0909-1010-1111-1212-1313-142012-14

    ARE0.7600.7800.8000.3500.4500.4500.6500.7202.56-56.2528.570.0044.4410.7727.61
    BDN0.4400.4400.1000.1500.1500.1500.1500.150-77.2750.000.000.000.000.000.00
    BMR0.3100.3350.3350.1400.2000.2000.2350.2500.00-58.2142.860.0017.506.3811.94
    BXP0.6800.6800.6800.5000.5000.5000.6500.6500.00-26.470.000.0030.000.0015.00
    CLI0.6400.6400.4500.4500.4500.4500.3000.150-29.690.000.000.00-33.33-50.00-41.67
    DEI0.1750.1880.1000.1000.1300.1300.1800.200-46.670.0030.000.0038.4611.1124.79
    DLR0.2860.3100.3300.4800.6800.6800.7800.8306.4545.4541.670.0014.716.4110.56
    DRE0.4750.4800.1700.1700.1700.1700.1700.170-64.580.000.000.000.000.000.00
    HIW0.4250.4250.4250.4250.4250.4250.4250.4250.000.000.000.000.000.000.00
    KRC0.5550.5800.5800.3500.3500.3500.3500.3500.00-39.660.000.000.000.000.00
    OFC0.3100.3400.3720.3930.4120.2750.2750.2759.565.375.10-33.330.000.000.00
    PSB0.4400.4400.4400.4400.4400.4400.4400.5000.000.000.000.000.0013.646.82
    PKY0.6500.6500.3250.0750.0750.0750.1500.188-50.00-76.920.000.00100.0025.0062.50
    SLG0.7000.7870.3750.1000.1000.1000.3300.500-52.38-73.330.000.00230.0051.52140.76
    VNO0.8500.9000.9500.6500.6900.6900.7300.7305.56-31.586.150.005.800.002.90
    WRE0.4130.4320.4320.4320.4340.4340.3000.3000.000.000.280.00-30.830.00-15.41
    PLD0.5000.5200.2800.2800.2800.2800.2800.330-46.150.000.000.000.0017.868.93
    EGP0.5000.5200.5200.5200.5200.5200.5300.5400.000.000.000.001.921.891.90
    FPO0.3400.3400.2000.2000.2000.2000.1500.150-41.180.000.000.00-25.000.00-12.50
    FR0.7100.7200.0000.0000.0000.0000.0850.102-100.00nananana20.59na
    LPT0.6200.6250.4750.4750.4750.4750.4750.475-24.000.000.000.000.000.000.00

    Disclosure: The author is long OFC, VNO.

    Sep 27 11:24 AM | Link | Comment!
  • Technology & Industrial Dividend Growth Companies 9-26-14

    This update is provided to those who require more evidence that a price-implied forward dividend CAGR can be extracted from P/E Ratios. This system is not perfect - but I believe the data shows the system is good enough. Due to lacking data on historical EPS projection accuracy, my RRRs (Required Rate of Return) assessments lack the quality of those done in sectors where my tracking has been done for longer periods. But the tracking in this sector has been done for a longer period than those for the Health Care / Pharma and Transportation sectors.

    There are some weirdly high (or high ratios from low growth large companies) and weirdly low P/E ratios in this sector. Something is going on here. It does not surprise me that there are high variances in the quality of earnings.

    Technology & Industrial Dividend Growth Companies 9-26-14

    The Q3-14 dividend is used for yield calculations. This is another sector where the fiscal and calendar years are not in sync. ACN and BBL pay dividends only twice per year - and that quirk is accounted for in the yield calculation and the dividend/EPS ratio. I did not gather beginning of the year EPS projections or targets for ADI, APH, ORCL, TEL and STX - which were added to this universe in August.


      12-31-13CurrentDividendCurrentDiv/EPSPercent Change
    Company PricePrice/QuarterYieldRatioPricePr+Div14 EPSTargetDiv*

    Accenture PLCACN82.2279.290.9302.3541%-3.56-2.430.444.3914.81
    Analog Devices, Inc.ADI50.9350.030.3702.9662%-1.770.410.84-3.398.82
    Amphenol CorporationAPH89.18101.820.2500.9823%14.1714.624.000.2025.00
    Apple Inc.AAPL80.15100.750.4701.8730%25.7027.461.4430.077.87
    Applied Materials, Inc.AMAT17.6821.740.1001.8438%22.9624.66-1.8534.080.00
    Automatic Data ProcessingADP80.8082.590.4802.3261%2.223.40-0.959.3310.34
    Broadcom Corp.BRCM29.6540.610.1201.1817%36.9638.1814.0638.959.09
    Cisco Systems, Inc.CSCO22.4325.000.1903.0437%11.4614.003.0311.4111.76
    International Business MachinesIBM187.57190.061.1002.3225%1.333.09-0.560.5215.79
    Intel CorporationINTC25.9534.260.2252.6341%32.0234.6215.3438.410.00
    Microchip Technology Inc.MCHP44.7547.600.3552.9858%6.378.751.2411.810.85
    MicroSoft CorporationMSFT37.4146.410.2802.4141%24.0626.301.8731.6021.74
    Maxim Integrated Products, Inc.MXIM27.9030.670.2603.3964%9.9312.72-3.572.330.00
    National Instruments CorporationNATI32.0231.190.1501.9267%-2.59-1.19-6.322.137.14
    Oracle CorporationORCL38.2638.950.1201.2317%1.802.740.00-1.390.00
    QUALCOMM IncorporatedQCOM74.2575.060.4202.2432%1.092.795.577.6220.00
    TE Connectivity Ltd.TEL55.1158.800.2901.9731%6.708.270.801.6416.00
    Texas Instruments Inc.TXN43.9148.330.3002.4850%10.0712.1212.0923.637.14
    Seagate TechnologySTX56.1656.770.4303.0334%1.093.380.000.9513.16
    BHP Billiton plcBBL62.1256.551.1804.1747%-8.97-5.173.286.631.72
    Caterpillar Inc.CAT90.81100.380.7102.8345%10.5412.528.0924.7918.33
    Deere & CompanyDE91.3382.830.6002.9029%-9.31-7.630.24-0.4217.65
    E. I. du Pont de Nemours & Co.DD64.9772.500.4502.4845%11.5913.67-6.7310.060.00
    General Dynamics Corp.GD95.55127.700.6201.9433%33.6535.594.4337.1910.71
    General Electric CompanyGE28.0325.630.2203.4352%-8.56-6.21-1.753.2915.79
    Honeywell International Inc.HON91.3793.300.4501.9332%2.113.590.0012.939.76
    3M CompanyMMM140.25142.420.8552.4046%1.553.380.2711.2534.65
    Monsanto CompanyMON116.55113.070.4301.5233%-2.99-1.88-0.9516.860.00
    United Technologies Corp.UTX113.80105.240.5902.2434%-7.52-5.970.595.9510.28

    Average    2.3840 %7.669.541.8912.8614.93

    The SPY [S&P 500 EFT] is up 7.15% year to date.
    The SPY [S&P 500 EFT] - with unreinvested dividends - is up 8.61% year to date.
    With the 10 Treasury at 2.56% and the sector average yield [on Q3 Divs] at 2.38% - the spread is -18 basis points.
    * The change in the dividend is for the last twelve months and not year to date.

    Dividend dates are:

    ACN: 05-14-14ADI: 09-16-14APH: 09-30-14AAPL: 08-13-14AMAT: 09-10-14ADP: 09-30-14BRCM: 09-14-14
    CSCO: 10-21-14IBM: 09-09-14INTC: 08-31-14MCHP: 09-03-14MSFT: 09-10-14
    MXIM: 09-03-14NATI: 09-01-14ORCL: 07-29-14QCOM: 09-23-14TEL: 09-11-14TNX: 08-17-14STX: 08-21-14
    BBL: 9-22-14CAT: 08-19-14DE: 11-02-14DD: 09-11-14GD: 08-13-14
    GE: 07-24-14HON: 09-09-14MMM: 09-11-14MON: 10-30-14UTX: 09-09-14

    Price/Earnings Ratios 09-26
    Companies that have fiscal years that match calendar years: BRCM, IBM, INTC, NATI, TXN, CAT, DD, GD, GE, HON, MMM & UTX
    Companies that are already in fiscal 2015: ACN, ADP, CSCO, MCHP, ORCL, STX and BBL


     EPS / Share% EPS GrowthPrice/EPS14 EPS RangeYearEnd
    Co.2011201220132014201511-1212-1313-1414-15201320142015HighLowRange

    ACN3.403.844.214.534.8712.949.647.607.5118.8317.5016.285.014.775.30%Aug
    ADI2.792.132.142.392.83-23.660.4711.6818.4123.3820.9317.682.472.345.44%Oct
    APH3.053.473.854.424.9413.7710.9514.8111.7626.4523.0420.614.654.347.01%Dec
    AAPL3.956.315.686.337.2059.75-9.9811.4413.7417.7415.9213.996.656.226.79%Sep
    AMAT1.300.750.591.061.36-42.31-21.3379.6628.3036.8520.5115.991.071.051.89%Oct
    ADP2.522.722.893.143.527.946.258.6512.1028.5826.3023.463.553.491.91%Jun
    BRCM2.792.922.722.843.274.66-6.854.4115.1414.9314.3012.422.992.6511.97%Dec
    CSCO1.621.852.022.042.1514.209.190.995.3912.3812.2511.632.272.0013.24%Jul
    IBM13.3815.2516.2817.9119.8213.986.7510.0110.6611.6710.619.5918.1117.682.40%Dec
    INTC2.452.131.892.182.31-13.06-11.2715.345.9618.1315.7214.832.282.117.80%Dec
    MCHP2.351.891.892.452.82-19.570.0029.6315.1025.1919.4316.882.872.764.49%Mar
    MSFT2.692.732.652.723.201.49-2.932.6417.6517.5117.0614.503.152.4725.00%Jun
    MXIM1.721.571.771.621.65-8.7212.74-8.471.8517.3318.9318.591.801.4819.75%Jun
    NATI0.940.780.640.891.12-17.02-17.9539.0625.8448.7335.0427.850.950.8313.48%Dec
    ORCL3.203.712.682.873.0615.94-27.767.096.6214.5313.5712.733.252.8912.54%May
    QCOM3.203.714.515.315.5515.9421.5617.744.5216.6414.1413.525.405.046.78%Sep
    TEL3.122.863.233.784.25-8.3312.9417.0312.4318.2015.5613.843.803.751.32%Sep
    TXN2.201.641.912.412.75-25.4516.4626.1814.1125.3020.0517.572.492.327.05%Dec
    STX1.246.755.315.045.32444.35-21.33-5.085.5610.6911.2610.675.904.9518.85%Jun
    BBL8.546.424.425.043.19-24.82-31.1514.03-36.7112.7911.2217.734.702.2748.21%Jun
    CAT6.798.905.796.287.2131.08-34.948.4614.8117.3415.9813.926.516.185.25%Dec
    DE6.637.639.098.376.8015.0819.13-7.92-18.769.119.9012.188.558.055.97%Oct
    DD3.953.333.884.024.64-15.7016.523.6115.4218.6918.0315.634.103.934.23%Dec
    GD7.236.487.037.558.10-10.378.497.407.2818.1716.9115.777.837.455.03%Dec
    GE1.371.521.641.681.8210.957.892.448.3315.6315.2614.081.781.638.93%Dec
    HON4.044.484.975.546.1610.8910.9411.4711.1918.7716.8415.155.565.501.08%Dec
    MMM5.916.326.727.488.266.946.3311.3110.4321.1919.0417.247.557.392.14%Dec
    MON2.963.704.565.216.0225.0023.2414.2515.5524.8021.7018.785.285.142.69%Aug
    UTX5.485.356.216.867.50-2.3716.0710.479.3316.9515.3414.036.936.752.62%Dec

    Average    17.021.0412.629.2919.8817.3215.76   

    To calculate the single price implied CAGR that I have historically displayed - I take the RRR and subtract the yield. What justifies that formula? When a stock is correctly valued AND the CAGR is not discounted, then the Yield + CAGR = RRR. Doing the kind of formula manipulation we learned in algebra, we can arrive at a formula for CAGR by subtracting 'Yield' from both sides of that equation. Doing that, we get to 'CAGR = RRR - Yield'. I would want the RRRs to be higher for the riskier stocks for such a formula to produce meaningful output.
    When it comes to P/E ratios, a low price/earnings ratio would logically belong to a stock with a lower CAGR or higher risk - and a high price/earnings ratio would logically belong to a stock with a higher CAGR or lower risk. My formula is 'Ratio - adjustment = CAGR'. I would want the adjustment to be lower for the riskier stocks (because risk would already be a factor in producing lower P/Es) for such a formula to produce meaningful output. This adjustment number pivots on the RRR of 10.5 - and is the mirror image (compared to the RRR - yield formula) of the difference from 10.5. A RRR of 11.5 (which is 1.0 higher than 10.5) produces an adjustment of 9.5 (which is 1.0 lower than 10.5). A RRR of 9.5 (which is 1.0 lower than 10.5) produces an adjustment of 11.5 (which is 1.0 higher than 10.5).
    Why do I provide two different price implied CAGRs? Using the 'CAGR = RRR - Yield' formula, the CAGR can not be greater than the RRR. There are some stocks with 5 year CAGRs above the 10% to 14% range I use for RRRs. Due to EPS' failing to grow in equally stair stepped increments, there are times when the 'PE ratio' based formula fails to produce meaningful output.

    Yield + CAGR Total Return Expectations


    CompanyQ3-14ConsensusTotalBondsEPSMyTotal RtnConsensusPrice Implied CAGRDivPrice
      YieldCAGRReturnRatingsAccrRRRs- RRRRatingsRRR-YldP/E/Earn/Earn

    Accenture PLCACN2.35%8.50%10.85%none1.5010.200.652.37.856.70%41.0617.50
    Analog Devices, Inc.ADI2.96%8.50%11.46%A-2.0010.201.262.37.4810.13%61.9220.93
    Amphenol CorporationAPH0.98%10.50%11.48%BBB+1.0010.500.982.59.7112.54%22.6223.04
    Apple Inc.AAPL1.87%10.00%11.87%AA+2.2011.000.871.99.275.92%29.7015.92
    Applied Materials, Inc.AMAT1.84%9.00%10.84%A-1.2010.500.342.38.6610.01%37.7420.51
    Automatic Data ProcessingADP2.32%8.00%10.32%none1.8010.50-0.182.68.1815.80%61.1526.30
    Broadcom Corp.BRCM1.18%8.50%9.68%A-2.0010.70-1.022.29.624.00%16.9014.30
    Cisco Systems, Inc.CSCO3.04%7.50%10.54%AA-1.709.001.542.46.280.25%37.2512.25
    International Business MachinesIBM2.32%8.30%10.62%AA-1.009.001.622.87.00-1.39%24.5710.61
    Intel CorporationINTC2.63%5.50%8.13%A+2.7010.50-2.372.67.875.22%41.2815.72
    Microchip Technology Inc.MCHP2.98%9.00%11.98%none1.009.002.982.26.027.43%57.9619.43
    MicroSoft CorporationMSFT2.41%7.50%9.91%AAA1.8010.20-0.292.57.796.26%41.1817.06
    Maxim Integrated Products, Inc.MXIM3.39%8.00%11.39%BBB+1.0011.000.392.57.618.93%64.2018.93
    National Instruments CorporationNATI1.92%6.50%8.42%none5.0012.00-3.582.310.2026.04%67.4235.04
    Oracle CorporationORCL1.23%8.70%9.93%A+1.0010.00-0.072.48.772.57%16.7213.57
    QUALCOMM IncorporatedQCOM2.24%9.80%12.04%A+1.0010.002.042.18.133.14%31.6414.14
    TE Connectivity Ltd.TEL1.97%10.50%12.47%A-1.5010.501.971.98.805.06%30.6915.56
    Texas Instruments Inc.TXN2.48%8.00%10.48%A+3.0011.00-0.522.78.5210.05%49.7920.05
    Seagate TechnologySTX3.03%10.00%13.03%none2.0013.50-0.472.410.473.76%34.1311.26
    BHP Billiton plcBBL4.17%6.00%10.17%BBB+5.0012.50-2.331.78.332.72%46.8311.22
    Caterpillar Inc.CAT2.83%9.00%11.83%A4.0011.200.632.68.816.18%45.2215.98
    Deere & CompanyDE2.90%7.00%9.90%A2.5011.00-1.103.28.54-0.10%28.679.90
    E. I. du Pont de Nemours & Co.DD2.48%6.50%8.98%A4.5010.00-1.022.77.527.03%44.7818.03
    General Dynamics Corp.GD1.94%8.00%9.94%A2.5010.50-0.562.08.756.41%32.8516.91
    General Electric CompanyGE3.43%7.50%10.93%AA+1.209.001.932.15.573.26%52.3815.26
    Honeywell International Inc.HON1.93%9.80%11.73%A1.0010.001.731.98.075.84%32.4916.84
    3M CompanyMMM2.40%11.00%13.40%AA-1.0010.003.402.48.228.04%45.7219.04
    Monsanto CompanyMON1.52%11.00%12.52%BBB+1.4010.502.021.98.9811.20%33.0121.70
    United Technologies Corp.UTX2.24%10.00%12.24%A1.8010.401.842.28.164.74%34.4015.34

    Average 2.38%8.56%10.93%    2.33   17.32

    Disclosure: The author is long AAPL, CSCO, IBM, QCOM.

    Sep 26 4:58 PM | Link | 2 Comments
  • Health Care / Pharma Stats 9-24-14

    This update is provided to those who require more evidence that a price-implied forward dividend CAGR can be extracted from P/E Ratios. This system is not perfect - but I believe the data shows the system is good enough. Due to my lacking data on historical EPS projection accuracy, my RRRs (Required Rate of Return) assessments lack the quality of those done in sectors where my tracking has been done for longer periods.

    There are some weirdly high (or high ratios from low growth large companies) and weirdly low P/E ratios in this sector. Something is going on here. It does not surprise me that there are high variances in the quality of earnings. For example - I am not tracking the percentage of earnings coming from specific drugs that are going 'off patient protection' in the next three years. I would not be surprised if such a metric is needed to understand valuations.

    Health Care / Pharma Stocks 09-24-14

    Yield in the spreadsheet below is based on the Q3-14 dividend. Spreadsheet header abbreviations: Div = dividend; EPS = earnings per share; LTM = last twelve months; YTD = year to date. The dividend to EPS ratio is a measure of dividend safety. At this point in time, companies that pay dividends once per year have had their payouts divided by four and encoded in this data is if they paid a quarterly dividend. RHHBY had a two for one stock split on 2-27-14 -- and that change is not reflected in the data below. BCR has raised its Q3-14 dividend by a penny.


      12-31-1309-24DivCurrentDiv/Div/Percent Change
    Company and tickerPricePrice/QuarterYieldEPS14EPS15PricePr+DivEPS14TargetDiv 1yrDiv 3yr

    AbbVie Inc.(NYSE:ABBV)52.8159.050.4202.8553%43%11.8214.20-0.3236.875.00na
    AmerisourceBergen Corporation(NYSE:ABC)70.3178.040.2351.2024%22%10.9912.005.4221.3011.9034.78
    Abbott Laboratories(NYSE:ABT)38.3342.630.2202.0639%36%11.2212.941.3621.0657.14-1.45
    Allergan Inc.(NYSE:AGN)111.08176.280.0500.113%2%58.7058.836.2375.040.000.00
    Amgen Inc.(NASDAQ:AMGN)114.08142.240.6101.7229%27%24.6826.292.8221.4029.7939.29
    AstraZeneca PLC(NYSE:AZN)59.3771.660.9505.3087%93%20.7025.50-5.7920.6135.7113.58
    Baxter International Inc.(NYSE:BAX)69.5572.160.5202.8840%39%3.755.250.5820.516.1222.58
    Bayer AG(OTCPK:BAYRY)142.00143.960.5261.4627%23%1.382.86-12.6025.0016.6310.23
    CR Bard Inc.(NYSE:BCR)133.94145.390.2200.6111%10%8.559.048.3416.634.765.26
    Becton, Dickinson and Company(NYSE:BDX)110.49113.720.5451.9235%32%2.923.910.3213.1810.1010.98
    Bristol-Myers Squibb Company(NYSE:BMY)53.1551.960.3602.7780%83%-2.24-0.211.136.062.863.03
    Covidien PLC(NYSE:COV)68.1089.390.3201.4332%29%31.2632.6715.1941.2423.0826.93
    GlaxoSmithKline PLC(NYSE:GSK)53.3947.030.7506.3895%91%-11.91-7.70-18.188.0135.6214.65
    Johnson & Johnson(NYSE:JNJ)91.59108.640.7002.5847%44%18.6220.911.5423.356.067.60
    Eli Lilly and Company(NYSE:LLY)51.0066.190.4902.9671%62%29.7832.67-1.0720.130.000.00
    McKesson Corporation(NYSE:MCK)161.40197.290.2400.4911%9%22.2422.53-0.4824.950.006.67
    Medtronic Inc.(NYSE:MDT)57.3963.770.3051.9132%30%11.1212.710.0028.858.938.50
    Merck & Co. Inc.(NYSE:MRK)50.0560.360.4402.9250%49%20.6023.240.2918.202.335.26
    Novo Nordisk A/S(NYSE:NVO)36.9548.000.2071.7347%42%29.9132.1529.9315.2230.3442.76
    Novartis AG(NYSE:NVS)80.3893.530.6802.9153%48%16.3618.05-5.8421.087.515.20
    Pfizer Inc.(NYSE:PFE)30.6330.310.2603.4346%46%-1.041.50-0.8811.918.3310.00
    Perrigo Company PLC(NYSE:PRGO)153.46152.890.1050.277%6%-0.37-0.17-6.348.8316.6716.67
    Roche Holding AG(OTCQX:RHHBY)70.2075.100.5492.9254%50%6.9810.11-4.9224.318.669.30
    St. Jude Medical Inc.(NYSE:STJ)61.9562.110.2701.7427%25%0.261.570.5019.158.009.52
    Stryker Corporation(NYSE:SYK)75.1482.130.3051.4926%23%9.3010.52-1.2416.1215.0923.15
    Teva Pharmaceutical Industries(NYSE:TEVA)40.0853.740.3472.5828%28%34.0836.687.1935.967.7615.89
    Thermo Fisher Scientific, Inc(NYSE:TMO)111.35123.510.1500.499%8%10.9211.322.8224.260.005.13
    Zimmer Holdings, Inc.(NYSE:ZMH)93.19103.630.2200.8515%14%11.2011.91-2.5826.4210.00na
    Zoetis Inc.(NYSE:ZTS)32.6936.580.0720.7919%17%11.9012.57-5.5624.9011.54na

    Average    2.0938%36%13.9215.650.6223.1213.1013.29

    With the 10 Treasury at 2.56% and the sector average yield [on Q3 Divs] at 2.09% - the spread is -47 basis points.
    The cap weighted ETF XLV is up 17.73% year to date - with dividends its total return is 18.92%.
    * The change in the dividend is for the last twelve months and not year to date.

    Dates used to credit dividends:

    ABBV : 8-14-14ABC : 06-01-14ABT : 08-14-14AGN: 09-04-14AMGN: 06-06-14AZN: 03-23-14BAX : 09-30-14
    BAYRY: yearlyBCR: 07-31-14BDX;: 09-29-14BMY;: 07-31-14COV: 08-18-14GSK: 10-01-14JNJ: 09-08-14
    LLY : 09-09-14MCK: 09-30-14MDT: 07-24-14MRK: 10-06-14NVO: yearlyNVS: 04-09-14PFE: 09-02-14
    PRGO: 09-15-14RHHBY: yearlySTJ: 07-30-14SYK: 10-30-14TEVA: 09-03-14TMO : 10-14-14ZMH: 07-24-14
    ZTS : 09-01-14

    The Predictive Power of the Dividend/EPS Ratio on Valuations: Dividend to EPS ratios range from as low as the teens to the 80s - and may look all too random. But this ratio - during most time periods - helps explain the variety of yields and P/E ratios. There is some correlation to YTD price changes as well.

    The following stocks had Q2-14 Dividend/EPS ratios of less than 25%: ABC , AGN , BCR , MCK , PRGO , TMO , ZMH , ZTS . Their YTD mean price gain = 16.77% and 2 of the 8 beat the sector mean yearly price gain [13.92%]. Their mean yield = 0.60% and they had an average price/earnings ratio = 21.89. Their mean LTM dividend growth = 8.03% and they had an average CAGR projection of 10.10.

    The following had Q2-14 Dividend/EPS ratios of more than 25% - but less than 40%: ABT , AMGN , BAYRY , BDX , COV , MDT , STJ , SYK , TEVA . Their YTD mean price gain = 14.03% and 3 of the 9 beat the sector mean yearly price gain. Their mean yield = 1.81% - and they sold at an average price/earnings ratio = 17.28. Their mean LTM dividend growth = 21.47% and they had an average CAGR projection of 7.99.

    The following had Q2-14 Dividend/EPS ratios of more than 40% - but less than 50%: BAX , JNJ , NVO , PFE . Their YTD mean price gain = 12.81% and 2 of the 4 beat the sector mean yearly price gain. Their mean yield = 2.66% - and they sold at an average price/earnings ratio = 18.19. Their mean LTM dividend growth = 12.71% and they had an average CAGR projection of 6.80.

    The following companies had Q2-14 Dividend/EPS ratios of more than 50%: ABBV , AZN , BMY , GSK , LLY , MRK , NVS , RHHBY . Their YTD mean price gain = 11.51% and 4 of the 8 beat the sector mean yearly price gain. Their mean yield = 3.51% - and they sold at an average price/earnings ratio of 19.59. Their mean LTM dividend growth = 9.80% and they had an average CAGR projection of 3.95.

    Earnings Growth & P/E Ratios 09-24

    Fiscal and calendar years are not in sync. MCK, MDT and PRGO are already in fiscal 2015.


     Earnings / ShareEarn. GrowthP/E Ratios14 EPS Range
    Co.200920102011201220132014201512-1313-1414-15201320142015HighLowRange

    ABBV0000314316391na0.64%23.73%18.8118.6915.103203103.16%
    ABC16721925127631438943713.77%23.89%12.34%24.8520.0617.863803683.08%
    ABT00017420122324615.52%10.95%10.31%21.2119.1217.3322919017.49%
    AGN00041447758082315.22%21.59%41.90%36.9630.3921.425755651.72%
    AMGN49152153365176084089916.74%10.53%7.02%18.7216.9315.828277904.40%
    AZN000641506439408-21.06%-13.24%-7.06%14.1616.3217.5650044113.44%
    BAX3803984314534675165343.09%10.49%3.49%15.4513.9813.515244916.40%
    BAYRY0006887457708988.28%3.36%16.62%19.3218.7016.037957950.00%
    BCR509560640657578831920-12.02%43.77%10.71%25.1517.5015.808318151.93%
    BDX4954905335375816256828.19%7.57%9.12%19.5718.2016.676296221.12%
    BMY0216228199182179174-8.54%-1.65%-2.79%28.5529.0329.861831688.38%
    COV284338397426372402440-12.68%8.06%9.45%24.0322.2420.324033942.24%
    GSK0003533733153305.67%-15.55%4.76%12.6114.9314.253633349.21%
    JNJ4634765005105525936358.24%7.43%7.08%19.6818.3217.116065784.72%
    LLY44247444133941527831622.42%-33.01%13.67%15.9523.8120.952842724.32%
    MCK4074624866386338351081-0.78%31.91%29.46%31.1723.6318.25109510455.99%

     Earnings / ShareEarn. GrowthP/E Ratios14 EPS Range
    Co.200920102011201220132014201512-1313-1414-15201320142015HighLowRange

    MDT2923223373463753824058.38%1.87%6.02%17.0116.6915.754094021.83%
    MRK325342377382349349359-8.64%0.00%2.87%17.3017.3016.813543384.58%
    NVO0000167178200na6.59%12.36%28.7426.9724.001891805.06%
    NVS0000501516569na2.99%10.27%18.6718.1316.445315123.68%
    PFE2022222312192222252241.37%1.35%-0.44%13.6513.4713.532302194.89%
    PRGO029340149956162074012.42%10.52%19.35%27.2524.6620.666266151.77%
    RHHBY027427932538440643618.15%5.73%7.39%19.5618.5017.224164003.94%
    STJ23430132823937640043257.32%6.38%8.00%16.5215.5314.384023951.75%
    SYK2953333724074234775293.93%12.77%10.90%19.4217.2215.534874752.52%
    TEVA336454497535501492491-6.36%-1.80%-0.20%10.7310.9210.9550739223.37%
    TMO004164945426937879.72%27.86%13.56%22.7917.8215.696996852.02%
    ZMH3944334805305756056448.49%5.22%6.45%18.0217.1316.096306014.79%
    ZTS00010814215317431.48%7.75%13.73%25.7623.9121.021611507.19%

    BDC Average     7.637.0310.3520.7419.3117.45  5.52

    To calculate the single price implied CAGR that I have historically displayed - I take the RRR and subtract the yield. What justifies that formula? When a stock is correctly valued AND the CAGR is not discounted, then the Yield + CAGR = RRR. Doing the kind of formula manipulation we learned in algebra, we can arrive at a formula for CAGR by subtracting 'Yield' from both sides of that equation. Doing that, we get to 'CAGR = RRR - Yield'. I would want the RRRs to be higher for the riskier stocks for such a formula to produce meaningful output.
    When it comes to P/E ratios, a low price/DCF ratio would logically belong to a stock with a lower CAGR or higher risk - and a high price/DCF ratio would logically belong to a stock with a higher CAGR or lower risk. My formula is 'Ratio - adjustment = CAGR'. I would want the adjustment to be lower for the riskier stocks (because risk would already be a factor in producing lower P/Es) for such a formula to produce meaningful output. This adjustment number pivots on the RRR of 10 - and is the mirror image (compared to the RRR - yield formula) of the difference from 10. For example, a RRR of 10 produces an adjustment of 10. A RRR of 11 (which is 1.0 higher than 10.0) produces an adjustment of 9.0 (which is 1.0 lower than 10.0). A RRR of 9 (which is 1.0 lower than 10.0) produces an adjustment of 11 (which is 1.0 higher than 10.0). Due to P/E ratios currently being high (something that logically happens when dividend growth is also high), the output of 'Ratio - adjustment' is multiplied by 0.9 to arrive at the price-implied CAGR.
    Why do I provide two different price implied CAGRs? Using the 'CAGR = RRR - Yield' formula, the CAGR can not be greater than the RRR. There are not that many stocks with 5 year CAGRs above the 10% to 14% range I use for RRRs - but there are some. Due to EPS' failing to grow in equally stair stepped increments, there are times when the 'PE ratio' based formula fails to produce meaningful output.

    Yield + CAGR Total Return Expectations


    CompanyQ3-14ConsensusTotalBondsEPSMyTotal RtnConsensusPrice Implied CAGRDivPrice
      YieldCAGRReturnRatingsAccrRRRs- RRRRatingsRRR-YldP/E/Earn/Earn

    AbbVie Inc.ABBV2.85%6.00%8.85%A2.009.50-0.651.86.797.37%53.1618.69
    AmerisourceBergen CorporationABC1.20%11.50%12.70%A-2.0010.502.202.19.309.51%24.1620.06
    Abbott LaboratoriesABT2.06%9.00%11.06%A+2.009.501.562.38.197.75%39.4619.12
    Allergan Inc.AGN0.11%4.00%4.11% 2.009.50-5.392.09.3917.90%3.4530.39
    Amgen Inc.AMGN1.72%8.00%9.72%A1.009.500.222.38.185.79%29.0516.93
    AstraZeneca PLCAZN5.30%2.00%7.30%AA-3.008.50-1.203.04.594.34%86.5616.32
    Baxter International Inc.BAX2.88%7.50%10.38%A2.009.500.882.46.783.14%40.3113.98
    Bayer AGBAYRY1.46%8.00%9.46% 2.009.000.461.07.756.93%27.3318.70
    CR Bard Inc.BCR0.61%9.20%9.81% 2.0010.50-0.692.89.927.20%10.5917.50
    Becton, Dickinson and CompanyBDX1.92%8.40%10.32% 3.0010.50-0.182.68.767.83%34.8818.20
    Bristol-Myers Squibb CompanyBMY2.77%3.00%5.77%A+1.009.00-3.232.46.3116.23%80.4529.03
    Covidien PLCCOV1.43%9.30%10.73% 2.009.501.232.58.0710.56%31.8422.24
    GlaxoSmithKline PLCGSK6.38%4.50%10.88%A+3.009.501.382.24.263.99%95.2414.93
    Johnson & JohnsonJNJ2.58%6.70%9.28%AAA2.008.300.982.45.875.96%47.2218.32
    Eli Lilly and CompanyLLY2.96%0.10%3.06%AA-2.008.50-5.442.45.5411.08%70.5023.81
    McKesson CorporationMCK0.49%12.00%12.49%A-2.0010.501.991.910.0112.71%11.5023.63
    Medtronic Inc.MDT1.91%6.50%8.41%AA-2.008.50-0.091.96.744.67%31.9416.69
    Merck & Co. Inc.MRK2.92%3.50%6.42%AA2.008.50-2.082.45.585.22%50.4317.30
    Novo Nordisk A/SNVO1.73%9.50%11.23% 2.0010.001.232.08.6715.27%46.6326.97
    Novartis AGNVS2.91%5.00%7.91%AA-2.008.50-0.592.25.795.96%52.7118.13
    Pfizer Inc.PFE3.43%3.50%6.93%AA2.008.50-1.572.35.331.77%46.2213.47
    Perrigo Company PLCPRGO0.27%12.00%12.27% 1.0010.002.271.99.7613.19%6.7724.66
    Roche Holding AGRHHBY2.92%7.50%10.42% 2.009.001.421.36.316.75%54.0918.50
    St. Jude Medical Inc.STJ1.74%8.90%10.64%A2.009.501.142.27.894.52%27.0015.53
    Stryker CorporationSYK1.49%8.80%10.29%A+2.009.500.792.08.016.05%25.5817.22
    Teva Pharmaceutical IndustriesTEVA2.58%5.00%7.58%BBB+3.0010.50-2.922.38.072.18%28.2110.92
    Thermo Fisher Scientific, IncTMO0.49%12.00%12.49%BBB2.0011.001.491.510.517.94%8.6617.82
    Zimmer Holdings, Inc.ZMH0.85%9.10%9.95%A-1.009.500.452.18.735.97%14.5517.13
    Zoetis Inc.ZTS0.79%11.00%11.79%BBB-3.0011.000.791.710.2913.42%18.9523.91

    Average 2.09%7.29%9.39%    2.13   19.31

    Disclosure: The author is long ABC, ABT, AMGN, BAX, NVO, STJ, SYK.

    Sep 25 9:24 AM | Link | Comment!
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