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  • McDonald's: Price Breaks $100 Again, Now What?
    Mon, May. 26 MCD 6 Comments

    Summary

    • Management plans to improve European performance and continue to explore strong growth in emerging markets.
    • Valuations relative to those of peers and overall market are inexpensive.
    • Current price implies 4.5%-5% annual dividend growth rate while MCD has capacity to sustain up to 9% annual growth.
    • Floor price is ~$95 given a likely dividend yield ceiling at ~3.6%.
  • Johnson & Johnson: Buy Now Or Wait For A Better Entry?
    Mon, May. 26 JNJ 8 Comments

    Summary

    • Fundamentals are healthy with improved outlook for the MD&D segment.
    • Valuations remain reasonable relative to those of peers and overall market.
    • Current valuation implies 6.0%-6.5% dividend growth rate and JNJ will have sufficient capacity to sustain dividend growth at above 6.0%.
    • With a pessimistic dividend yield assumption, downside risk is only ~12%.
  • Pfizer Is A Buy Below $30
    Fri, May. 23 PFE 13 Comments

    Summary

    • Pfizer's robust free cash flow can comfortably support 8%-plus annual dividend growth.
    • The current valuation trades at a solid discount to peers and overall market despite the higher dividend yield and healthy dividend prospects.
    • Price floor should be at $26.
    • Given the current state, maximum downside would be 9% from the current level after factoring in the dividend income.
  • General Electric: Price Floor Is At Around $24
    Thu, May. 22 GE 13 Comments

    Summary

    • GE can comfortably support an annual dividend growth at 10%+.
    • Current valuation implies only 8% dividend growth rate.
    • Technical ceiling for dividend yield should be in the range of 3.8%-4.0%.
    • The share price is poised for solid upside, driven by organic and acquisitive growth, while price downside is very limited, making GE a buy.
  • IBM: Don't Ignore The Cheap Valuation
    Wed, May. 21 XLK, VGT, TECL 5 Comments

    Summary

    • Due to market's concern on IBM's transition, valuation has tanked.
    • Current valuation implies an annual growth for dividend per share at just 7.5%.
    • Based on fair assumptions, IBM can sustain a ~15% annual per share dividend growth while still has ~$10B per annum for share buyback over the next few years.
  • National Oilwell Varco Is Poised For Ample Upside Potential
    Tue, May. 20 NOV 6 Comments

    Summary

    • On a pre-spinoff basis, NOV can support 10% annual dividend growth while still has $1B cash capacity for M&A and/or share buyback over the next few years.
    • NOV trades at a slight discount to peers despite its healthy profitability, pristine balance sheet, and higher dividend yield.
    • Near-term positive catalysts including separation of the Distribution segment and re-segmentation of NOV's remaining businesses.
  • Enterprise Products Partners: Distribution Growth Potential Is Underestimated
    Mon, May. 19 EPD 4 Comments

    Summary

    • EPD enjoys solid fundamentals with sufficient capex backlog to support healthy distribution growth.
    • Distribution per unit will likely to rise by 7%-8% over the coming 3 years.
    • Given the healthy distribution coverage ratio, funding from debt and equity issuance would be less than $2.3B per annum in the next 3 years.
    • Current valuation seems to imply just 5% annual growth for per unit distribution.
  • Transocean: Should You Chase The Potential 7% Dividend Yield?
    Fri, May. 16 RIG 4 Comments

    Summary

    • Management continues to see a challenging industry environment.
    • Current valuation has priced in about 5% annual dividend growth, based on the proposed annual dividend of $3.00 per share.
    • RIG will need a notable number of extra sources on top of free cash flow to fund its proposed dividend commitment, presenting sustainability risk.
  • Silver Wheaton: Free Cash Flow Could Double In 2 Years
    Thu, May. 15 SLW 6 Comments

    Summary

    • Q1 results suggest SLW is on-track with its growth plan.
    • Even with conservative assumptions, operating cash flow and free cash flow will grow at CAGRs of 17% and 53%, respectively, from 2014 to 2016.
    • Management may raise dividend at 15%+ annual rate over the next few years.
    • Valuation remains cheap relative to the growth potential, making SLW a buy.
  • Chesapeake Energy: The Price Is Far From Peak
    Wed, May. 14 CHK 6 Comments

    Summary

    • Turnaround plan is on track as reflected by strong Q1 performance.
    • Free cash flow will experience notable growth in the coming years and funding requirement from asset sale and debt borrowing would be minimal.
    • The stock still trades at high discount to peers, making it a buy.
  • Exxon Mobil: Chevron And ConocoPhillips Are Better Picks
    Tue, May. 13 COP, CVX, XOM 6 Comments

    Summary

    • XOM's recent 9.5% dividend increase is not sustainable.
    • Free cash flow will likely to grow at about 6% over the coming 3 years.
    • XOM could grow dividend at well above 6%, but that requires notable debt borrowing.
    • CVX and COP are better income picks due to their similar/better dividend growth potential and higher yields.
  • Kinder Morgan: Valuation Matches Fundamentals
    Mon, May. 12 KMP 6 Comments

    Summary

    • Healthy backlog accumulation will continue to drive distribution growth.
    • Current state suggests distribution can grow at almost 5% per annum from 2014 to 2016.
    • Current valuation implies ~4.5% distribution growth.
    • Return downside is likely below 10%.
  • ConocoPhillips: The Uptrend Will Not End Here
    Mon, May. 12 COP 3 Comments

    Summary

    • Improving cash margins and lower capital spending over time will drive notable free cash flow growth.
    • Although asset sale is still required to partially fund dividend commitment over the next few years, the funding need is limited.
    • There will be sufficient capacity to support a 6-7% annual dividend growth.
    • Current valuation reasonably reflects the dividend prospects.
  • Linn Energy: Upside From Permian Divestiture Is Underappreciated
    Fri, May. 9 LINE, LNCO 7 Comments

    Summary

    • Current valuation implies negative distribution growth ahead.
    • Recent M&A activities suggest limited selling risk for the Permian divestiture plan.
    • Coverage ratio will be notably improved following the divestiture of Permian assets even with conservative assumptions.
  • Chevron: 8%-10% Dividend Growth Is Deliverable
    Thu, May. 8 CVX 5 Comments

    Summary

    • Stabilized capex and completion of major LNG projects should help cash flow growth.
    • Strong balance sheet allows for higher leverage to fund capital deployment.
    • The company has sufficient resources to support 8%-10% annual dividend growth.
    • Current valuation reflects 6%-7% dividend growth.
    • The stock also trades favorably to its global peers.
  • Windstream: Still A Lucrative Buy Even With Dividend At Risk
    Tue, Apr. 22 WIN 16 Comments

    Summary

    • WIN will have sufficient capacity to maintain the current dividend level in near term.
    • A dividend cut is very likely over a longer term as current payout ratio cannot be sustained by the declining revenue trend.
    • Current valuation appropriately reflects the dividend risk.
    • Potential dividend cut is likely insignificant, suggesting dividend yield would remain compelling.
  • Frontier Communications: Valuation Looks Stretched
    Mon, Apr. 21 FTR 11 Comments

    Summary

    • FTR has made some progress in offsetting secular declining trend.
    • Dividend should be secure in near term.
    • Current valuation implies perpetual dividend and free cash flow growth which seems optimistic.
    • Dividend yield has dropped below 7.0%, which appears low relative to historical level.
  • Shell: 7%+ Dividend Growth Is Possible
    Sat, Apr. 19 RDS.B, RDS.A 23 Comments

    Summary

    • Management's updated strategy plan will improve free cash flow profile.
    • 7%+ annual dividend growth and cumulative $7.5B share buyback through 2016 is achievable.
    • Current share price only reflects 4-5% dividend growth potential.
    • Valuation gap to global oil majors should shrink if capital return can be improved.
  • Coca-Cola: Downside Is Less Than 5%
    Editors' Pick • Thu, Apr. 17 KO 37 Comments

    Summary

    • Improved volume trend should sustain strong cash generation.
    • KO has sufficient capacity to support ~8% dividend growth and $1-$2B share buyback per annum.
    • Dividend growth and yield ceiling should limit price downside, and $37 appears to be the bottom price.
    • Current valuation is reasonable relative to S&P 500's level and only reflects less than 6% annual dividend growth rate.
  • Kodiak Oil & Gas: Don't Miss A 20%+ Upside Opportunity
    Wed, Apr. 16 IXC, IPW, BARL 9 Comments

    Summary

    • Healthy production prospects and improved capital efficiency should drive strong cash flow generation.
    • Free cash flow should turn positive by 2015/2016.
    • Conservative DCF model suggests a 20%+ upside.
    • Valuation multiple should expand on higher visibility for deleveraging potential.
  • BP: Dividend Outlook Is Better Than What Is Being Reflected
    Tue, Apr. 15 XLE, ERX, OIH 24 Comments

    Summary

    • As reorganization is approaching an end, BP will soon see improved cash flow generation.
    • BP's discounted valuation is exaggerated given its cash flow profile, sustainable dividend yield, and well-contained exposure to Macondo litigation.
    • BP is able to grow dividend by 5% per annum through 2018, while current valuation only implies 3-4%.
  • Potash Corp.: Improved Potash Prices And Dividend Growth To Drive Upside
    Fri, Apr. 11 POT 5 Comments

    Summary

    • Global potash prices continue to recover and potential Uralkali/Belarus union would further strengthen the prices.
    • With conservative assumptions, POT has capacity to drive an 8%-10% annual dividend growth through 2016.
    • POT trades at a reasonable valuation relative to its peers, making the stock a buy.
  • Seadrill: Valuation Doesn't Make Sense If You Believe In The Stock
    Thu, Apr. 10 SDRL 40 Comments

    Summary

    • There are multiple reasons suggesting that Seadrill can safely navigate through the current industry downturn.
    • Trading at a large discount to the market and a modest premium over peers, valuation appears to be attractive on relative basis.
    • Current valuation implies about 1% dividend growth rate, which is too pessimistic.
  • Microsoft: A Technology Dividend Champ With Sustainable 20%-Plus Dividend Growth
    Wed, Apr. 9 MSFT 1 Comment

    Summary

    • Transition to cloud-based offerings should ensure continued strong cash flow generation and improve financial visibility.
    • Even with conservative assumptions, the company has a capacity to support 20% annual dividend growth and $25B share buybacks through fiscal 2016.
    • Trading at a large discount to market, the stock is a solid buy as the valuation gap is expected to shrink.
  • AT&T: Still Solid But Better Opportunities Elsewhere
    Mon, Apr. 7 T 21 Comments

    Summary

    • Share buyback in 2014 will drop largely due to large dividend commitment and limited borrowing capacity (owing to leverage target).
    • The total authorized 425M share repurchase plan will likely take at least 3 years to complete.
    • Debt level may increase modestly over the coming years due to large cash distribution commitment and spectrum acquisitions.
    • Trading at 20% discount to S&P 500, the shares are inexpensive but better value can be found elsewhere.
  • Verizon: Valuation Is At Buy Level, Supported By Dividend And Deleveraging
    Sun, Apr. 6 VZ 8 Comments

    Summary

    • Given multiple opportunities, Verizon should see healthy wireless growth ahead.
    • Conservative assumptions show that Verizon can continue driving 3%+ annual dividend growth and $10-$15B debt reduction through 2016.
    • Trading below market and AT&T's valuations, Verizon offers great value at current level.
  • Altria Is In Buying Zone With High Visibility On Cash Distribution
    Fri, Apr. 4 MO 31 Comments

    Summary

    • Altria has long been a robust cash generator with 20%+ free cash flow margin.
    • Solid fundamentals and growth prospects should support 8%+ annual dividend growth and $1B share buyback through 2015.
    • Valuation trades favorably relative to the market and peers, making this dividend champ a strong buy.
  • Johnson & Johnson: Here Is How Healthy Dividend Growth Can Be Sustained
    Thu, Apr. 3 JNJ Comment!

    Summary

    • JNJ is a cash flow champ with free cash flow margin growing by almost 200 bps to 19.4% in 2013.
    • Annual dividend growth from 2013 to 2016 is expected to be at least 5-6% even with very conservative financial estimates.
    • JNJ's valuation still trades below market and peer average, making the stock a solid dividend buy.
  • Schlumberger: The 28% Dividend Growth Is Repeatable
    Tue, Apr. 1 SLB 2 Comments

    Summary

    • The company's operating cash flow growth would be buttressed by strong business and industry fundamentals.
    • A scenario of 20%/10% annual dividend/share buyback growth through 2016 is sustainable even with very conservative growth assumptions.
    • Relative valuation remains inexpensive, supporting a strong buy thesis.
  • SolarCity: Fears Are Overblown And Valuation Is Inexpensive
    Tue, Apr. 1 SCTY 24 Comments

    Summary

    • The price of SolarCity has plummeted by almost 29% since February, presenting a buying opportunity.
    • Concerns over higher operating expense and government policies on net metering and tax incentives are overdone.
    • Valuation is inexpensive from a retained value perspective.
  • First Solar: Upside Momentum To Continue
    Sun, Mar. 30 FSLR 14 Comments

    Summary

    • FSLR's strong fundamental trend (i.e. efficiency improvement and cost reduction) should ensure healthy organic growth.
    • Balance sheet strength provides significant capacity for future M&A which would drive incremental growth that has not been factored in.
    • Trading below peer average on EV/EBITDA basis, FSLR's valuation is inexpensive and the stock is a buy.
  • Goldcorp: Buy The Gold Champ On The Pullback
    Thu, Mar. 27 GG 6 Comments

    Summary

    • Goldcorp has leading fundamentals among senior gold miners in North America.
    • There remains a good chance for the potential acquisition of Osisko to be closed.
    • Trading at a modest premium over its peers, Goldcorp offers long-term shareholder value.