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Norman Tweed
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Retiree interested in stocks and financial instruments, especially dividend producing stocks. In the 20th century, I was an electrical engineer with Dominion Resources. I use a dividend growth investment style. Quick rules of thumb for complex questions, like fair value p/e using the Gordon... More
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  • Comcast And The Merger War Of 2015

    The last time I reviewed Comcast (NASDAQ:CMCSA) was August 14, 2013. At that time the proposed merger with Time Warner had just started to hit the media. The stock was growing like gangbusters and it appeared to be a good long-term investment for my granddaughter.

    (click to enlarge)

    Since that time, the growth rate has fallen to 12.92%. I believe the battle to prevent the merger has had a slowing effect on price appreciation of the stock. Dana Blankenhorn has summed up rather well the FCC battle and "restart of the clock" on the merger. Comcast is no stranger to merger battles, having purchased NBC/Universal from GE in the last several years.

    I believe that 2015 will be a pivotal year for mergers and I need a consumer cyclical stock to balance my portfolio in that sector. My small 1/3 position has done rather well since 2009, but I haven't started dollar cost averaging into it because of other opportunities in high yield stocks, such as Prospect Capital (NASDAQ:PSEC), American Capital Agency (NASDAQ:AGNC), American Capital Mortgage (NASDAQ:MTGE) and my oil stock Linn Company (NASDAQ:LNCO). With the Federal Reserve talking about raising short term Federal Funds rates, this year may be unsettled for high yield stocks. Although all of these high yield stocks have cut their dividends over the last 2 years, I am holding all of them and dollar cost averaging into PSEC in my IRA. BDCs usually rise with increased interest rates, while the others do not. With RMDs staring me in the face, I need to add to my regular account and CMCSA pays a low dividend yield (1.57%) to keep taxes down. The P/E is 18.03 with a forward P/E of 14.02. My TweedFactor (yield + 5yr dividend growth rate -P/E) is 14.35. With these facts in mind I decided to update my dividend growth study for CMCSA to 7 years (Data from Finviz). I start with an initial investment of $10,000 on March 31, 2008 and reinvest the dividends through January 2015.

    Date of reinvestDiv Rate# SharesDividendDrip price# Shares purTotal ValueCurrent Yield
      586.76$2,075.37 69.70  
            
    01/05/15$0.23584.46$131.50$57.352.29$33,650.501.57%
    09/29/14$0.23582.05$130.96$54.162.42$31,654.561.66%
    06/30/14$0.23579.62$130.41$53.682.43$31,244.211.68%
    03/31/14$0.23577.02$129.83$50.042.59$29,004.001.80%
    12/30/13$0.20574.86$112.10$51.872.16$29,930.121.50%
    09/30/13$0.20572.39$111.62$45.122.47$25,937.711.73%
    07/01/13$0.20569.65$111.08$40.662.73$23,273.251.92%
    04/01/13$0.20566.98$110.56$41.382.67$23,572.321.88%
    12/28/12$0.16564.47$92.01$36.542.52$20,717.561.78%
    10/01/12$0.16561.88$91.59$35.382.59$19,970.771.84%
    06/29/12$0.16559.03$91.12$31.972.85$17,963.192.04%
    04/02/12$0.16556.01$90.6330.053.02$16,798.742.17%
    12/30/11$0.11553.37$62.53$23.712.64$13,183.001.91%
    10/03/11$0.11550.32$62.19$20.363.05$11,266.672.22%
    07/01/11$0.11547.91$61.91$25.732.41$14,159.701.76%
    04/04/11$0.11545.47$61.64$25.262.44$13,840.261.79%
    01/03/11$0.10543.17$51.60$22.372.31$12,202.211.70%
    10/04/10$0.10540.26$51.32$17.662.91$9,592.302.15%
    07/02/10$0.10537.34$51.05$17.462.92$9,432.922.18%
    04/05/10$0.10534.64$50.79$18.822.70$10,112.652.02%
    01/04/10$0.10531.66$50.51$16.972.98$9,072.792.24%
    10/05/09$0.07529.31$35.99$15.342.35$8,155.671.77%
    07/06/09$0.07526.74$35.82$13.902.58$7,357.471.96%
    04/06/09$0.07524.25$35.65$14.362.48$7,563.951.89%
    01/05/09$0.06522.32$32.91$17.031.93$8,928.061.48%
    10/06/08$0.06520.51$32.79$18.141.81$9,474.931.39%
    07/07/08$0.06518.74$32.68$18.461.77$9,608.701.37%
    03/31/08$0.06517.06$32.57$19.341.68$10,032.521.30%

    In addition, I have graphed these results:

    (click to enlarge)

    This study shows that the total value of the investment increased to $33,650 over the 7 years for 18.9% per year growth. By inspection it can be seen that there was a downdraft during 2008-2009 (Great Recession), and again in the second quarter of 2014. Earnings per share are projected to rise 17.33% over the next 5 years.

    Conclusion: In my opinion, now is the time to begin dollar cost averaging in my regular account in order to build this stock to a full position. There should be plenty of up and down action during 2015 as the merger battle is fought out, with the stock continuing to rise just as it has for the last 7 years. An investment in CMCSA appears less risky than one in high yield stocks at the present time, but it is an equity investment and the price can drop just as any other equity. The buyer should perform their own due diligence.

    Disclosure: The author is long AGNC, MTGE, LNCO, PSEC, CMCSA.

    Additional disclosure: One of my granddaughters has a position in CMCSA.

    Jan 03 10:34 AM | Link | 2 Comments
  • Church & Dwight: Is The Price Too High?

    The new year of 2015 is being born and the time has come to build up the college funds of my grandchildren. Although some of them have consumer staples stocks, like Kimberly Clark (NYSE:KMB) I believe most of the large cap consumer staples are over priced in the current environment. Instead, I feel a mid-cap company, similar to Church & Dwight (NYSE:CHD) (market cap $10.73B) would be an appropriate addition to their portfolios this year. The past year 2014 saw slow growth of the S&P 500 index and several sectors, like energy and basic materials fall precipitously. However, recently CHD has begun a rather steep price appreciation: (Data from Finviz)

    (click to enlarge)

    Price wise alone, it has appreciated from $59.89 to $80.18 or 34% in the past 52 weeks. Is it overpriced? The forward P/E ratio is 24.3 with a PEG ratio of 2.83. Earnings per share have grown 13.9% this year and are projected to grow 9.84% average over the next 5 years. The price/book value is 5.14 and even the price to sales ratio is 3.3. It has an acceptable debt/equity ratio of .5 and a dividend of 1.55% yield. My Tweed Factor (yield + 5yr dividend growth rate-P/E) is 22.06. With a fast growing stock, the dividend growth rate must be high to maintain the yield and Church and Dwight has done that.

    With the above in mind, I extended last year's dividend growth study:

    Date of reinvestDiv Rate# SharesDividendDrip price# Shares purTotal ValueCurrent Yield
      384.62$1,530.70 206.62  
    11/06/14$0.31383.00$118.73$73.041.63$28,093.001.70%
    08/08/14$0.31381.22$118.18$66.371.78$25,419.671.87%
    05/08/14$0.31379.48$117.64$67.731.74$25,819.951.83%
    02/13/14$0.31377.66$117.08$64.381.82$24,431.041.93%
    11/06/13$0.28376.04$105.29$64.661.63$24,419.711.73%
    08/08/13$0.28374.33$104.81$61.451.71$23,107.351.82%
    05/09/13$0.28372.67$104.35$63.031.66$23,593.981.78%
    02/13/130.28370.93$103.8659.621.74$22,218.811.88%
    11/07/120.24369.18$88.6050.561.75$18,754.311.90%
    08/09/120.24367.48$88.2052.041.69$19,212.091.84%
    05/10/120.24365.83$87.8053.191.65$19,546.501.80%
    02/16/120.24364.00$87.3647.511.84$17,380.772.02%
    11/09/110.17362.56$61.6442.951.44$15,633.591.58%
    08/11/110.17361.08$61.3841.411.48$15,013.611.64%
    06/02/112/1 split180.54$0.0040.75180.54$14,713.921.67%
    05/12/110.17180.17$30.6383.050.37$14,993.660.82%
    02/16/110.17179.75$30.5673.050.42$13,161.340.93%
    11/10/100.085179.52$15.2665.890.23$11,843.770.52%
    08/12/100.085179.27$15.2462.060.25$11,140.950.55%
    05/13/100.07179.09$12.5466.60.19$11,939.620.42%
    02/08/100.07178.88$12.5260.570.21$10,847.200.46%
    11/05/090.07178.66$12.5157.40.22$10,267.630.49%
    08/11/090.07178.44$12.4957.270.22$10,231.900.49%
    05/07/090.045178.30$8.0254.480.15$9,721.550.33%
    02/05/090.045178.14$8.0252.50.15$9,360.500.34%
    11/06/080.045178.00$8.0156.170.14$10,006.270.32%

    I have graphed the results below:

    (click to enlarge)

    With an investment of $10,000 in quarter 4 of 2008, the current value would be $28,093 with dividends reinvested. This would be a total return of 2.8x for the 6 year period or 18.7% per year.

    I have also included a CHD update from Sure Dividend NASDAQ Dividend Achievers: Church & Dwight .

    Conclusion: I believe the global economy is starting to pick up and Church & Dwight has already started to climb in price. My studies show that it is still a good buy, even at the present price.

    Investors should know what they are buying and be careful, especially at times like these of global turmoil and market contraction in the energy sector.

    Disclosure: The author is long CHD, KMB, PG.

    Additional disclosure: My grandchildren have some of the above stocks, also.

    Dec 28 2:42 PM | Link | 3 Comments
  • Raytheon Just Keeps Growing

    I wrote an article on Raytheon last year Raytheon New Contracts make it a buy! Since that time, the growth rate had slowed down in 2014. Recently, with geopolitical instability and crashing oil prices, this trend has turned around:

    (click to enlarge)

    The forward P/E ratio is 15.77, while the PEG ratio is 1.82. Price to Sales is 1.51 while price to book is 2.9. It has a low debt/equity ratio of .4 and a projected earnings per share growth rate of 9.3% quarter/quarter. It has a 5 year dividend growth rate of 14.4% and a current yield of 2.19% for a Tweed Factor (yield + 5yr dividend growth rate-P/E ratio) of 2.35. Since I bought it in 2010, it has averaged 35.64% return per year and has grown into a ½ position on its own with only dividends reinvested. Due to the slow start this year, total return has only been 24%. However, I like its trend and there are again new contracts being added.

    I have updated my dividend growth study through 2014 and note that the last dividend for this year will be paid on February 5, 2015.

    Date of reinvestDiv Rate# SharesDividendDrip price# Shares purTotal ValueCurrent Yield
      227.95$2,318.35 39.95  
    09/29/14$0.61226.59$137.08$100.891.36$22,997.422.40%
    06/30/14$0.61225.11$136.19$92.251.48$20,902.622.62%
    03/31/14$0.61223.74$135.36$98.791.37$22,238.652.45%
    12/20/13$0.55222.39$122.31$90.431.35$20,232.822.43%
    09/27/13$0.55220.81$121.45$77.071.58$17,139.412.85%
    07/01/13$0.55218.99$120.44$66.101.82$14,595.663.33%
    04/01/13$0.55216.93$119.31$57.892.06$12,677.313.80%
    12/28/12$0.55214.84$118.16$56.702.08$12,299.853.88%
    10/01/12$0.50212.93$106.46$55.581.92$11,941.063.60%
    07/02/12$0.50211.04$105.52$55.981.88$11,919.773.57%
    04/02/12$0.50209.06$104.53$52.701.98$11,122.023.80%
    12/30/11$0.43207.22$89.10$48.381.84$10,114.353.56%
    10/03/11$0.43204.99$88.14$39.502.23$8,185.144.35%
    07/01/11$0.43203.24$87.39$50.111.74$10,271.913.43%
    04/04/11$0.43201.53$86.66$50.461.72$10,255.663.41%
    01/03/11$0.38199.90$74.96$46.091.63$9,288.333.25%
    10/01/10$0.38198.23$74.34$44.611.67$8,917.523.36%
    07/01/10$0.38196.69$73.76$47.731.55$9,461.673.14%
    04/01/10$0.38195.40$73.28$56.921.29$11,195.472.64%
    12/30/09$0.31194.25$60.22$52.181.15$10,196.002.38%
    10/02/09$0.31192.95$59.81$46.011.30$8,937.282.70%
    07/02/09$0.31191.57$59.39$43.011.38$8,298.632.88%
    04/03/09$0.31190.03$58.91$38.471.53$7,369.533.22%
    12/30/08$0.28188.99$52.92$50.671.04$9,629.042.21%
    10/03/08$0.28188.00$52.64$53.17.99$10,048.602.11%

    I have graphed these results:

    (click to enlarge)

    At the start of 2015, I feel that we are in a new era of surveillance and automated warfare including drones and cyber war as demonstrated recently against Sony. Raytheon is in the forefront of cyber security and military defense and I think there will be plenty of work for them in the future.

    Conclusion: Raytheon is a great long-term buy and will grow on its own with dividends reinvested. During times of market swoon due to commodity price collapse, you can't go wrong with a powerful defense company!

    Disclosure: The author is long RTN.

    Tags: RTN, Defense
    Dec 27 10:12 AM | Link | 7 Comments
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