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Tim McAleenan Jr.  

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  • Zoetis: Great Dividend Growth Post-Pfizer Swap
    Thu, Mar. 26 ZTS 7 Comments

    Summary

    • Zoetis currently only has a dividend payout ratio of 20%, well below the industry norm of 40-60%.
    • Zoetis has been a stand-alone company since 2013, and it is common for new companies to set the payout ratio low so that shareholders can receive significant hikes thereafter.
    • However, the current yield of Zoetis is only 0.71% and this may be too low for many income investors.
  • Some Straight Talk On Linn Energy's Finances
    Wed, Mar. 25 LINE, LNCO 39 Comments

    Summary

    • Linn Energy recently announced a $1 billion strategic partnership with Quantum to fund oil and gas acquisitions in coming years.
    • This partnership was likely a necessity because of Linn's poor balance sheet and inability to fund growth initiatives on its own, either through cash on hand or borrowing.
    • Linn has $10 billion in debt and only $1 million in cash, and this puts the company in a weak position in the event of an extended commodities bear market.
  • Priceline: Strong Balance Sheet, Strong Revenue Growth, Fair Valuation
    Wed, Mar. 25 PCLN 6 Comments

    Summary

    • Priceline has a strong balance sheet with over $6 billion in cash.
    • Priceline has a strong record of 15% annual revenue growth over the past ten years.
    • Priceline is only trading at 22x earnings, in line with the company's typical valuation post-recession.
  • Merck's Dividend Has Recovered From Pre-Recession Problems
    Wed, Mar. 25 MRK 11 Comments

    Summary

    • Merck found itself in a precarious position in 2007 when it was making $1.49 in profits and paying out $1.52 in dividends.
    • Because Merck chose not to cut its dividend, it has taken quite a few years for the company to get its dividend payout ratio down to a manageable level.
    • Now that Merck is again retaining half of its profits to invest for the future, there is reason to believe that Merck's future will be better than the early 2000s.
  • Why Has Altria Become Overvalued?
    Wed, Mar. 25 MO 23 Comments

    Summary

    • Altria has increased its market share to 51% of the U.S. tobacco market.
    • Because of its UST purchase, it owns a portfolio of smokeless tobacco products that offer profits in the 60% range and provide double-digit sales growth.
    • Additionally, Altria has grown its operating margins from 14% to 20% in the past three years.
  • Eli Lilly: The Dividend Growth Is Once Again At Risk
    Tue, Mar. 24 LLY 6 Comments

    Summary

    • Eli Lilly's dividend payout ratio is now north of 70%, a generational high for the company.
    • Eli Lilly is a company that typically has a dividend payout ratio in the low 40% range.
    • The company has felt significant profit and revenue loss as Cymbalta and Evista have lost their exclusive patent protection in the past year.
  • You Should Feel Safe About The Phillips 66 Dividend
    Tue, Mar. 24 PSX 10 Comments

    Summary

    • Phillips 66 has a well-covered dividend payout ratio that only accounts for 28% of the company's current profits.
    • The company's refining operations are actually expected to grow profits to $7.15-$7.35 this year, giving dividend investors an additional layer of security beyond the low payout ratio.
    • Phillips 66 has profit margins of over 12%, and this efficiency explains why PSX does an excellent job of generating high profits so that it can reliably pay dividends.
  • The Advantages Of Finding Dividend Growth Early
    Sun, Mar. 22 BAC 66 Comments

    Summary

    • Investing in companies that are on the verge of increasing their dividend payout ratio can give investors excellent income and capital gains.
    • Bank of America is a likely potential candidate for this type of investment success because the dividend payout ratio is only 12.5% and could increase to the 40-50% range.
    • Arriving early to dividend growth allows investors to capture the capital gains that come with increased certainty as the business develops a sound dividend growth track record.
  • Celgene: An Absolutely Excellent Company With An Absolutely Terrible Valuation
    Fri, Mar. 20 CELG 55 Comments

    Summary

    • Celgene is an excellent company with double-digit revenue growth and an excellent track record of making investors wealthy.
    • The company is repurchasing about 4% of its stock per year and is experiencing almost 20% annual revenue growth from Revlimid.
    • However, the company is trading at over 50x earnings and this will likely cause trouble for investors over the long haul when the P/E ratio comes down to 25x earnings.
  • Want An Energy Company With High Profits Right Now? Check Out Valero
    Fri, Mar. 20 VLO 20 Comments

    Summary

    • Valero is one of the least affected energy companies in the sector, with annual profits of $2.8 billion only experiencing a modest decline from the $3.6 billion of last year.
    • The company recently raised its dividend 45% and the current payout ratio is still in the 25-30% range.
    • Valero has been an excellent stock since 2004, with 18% annual returns despite a stock price that fell from the $70s to $15 during the Great Recession.
  • Myth Vs. Reality With Apple's Stock Buyback
    Fri, Mar. 20 AAPL 93 Comments

    Summary

    • Apple announces grandiose plans like $90 billion in capital returned by the end of 2015, and it is useful to study how much money actually goes toward retiring Apple stock.
    • A closer look at Apple's buyback program indicates that about $80 billion of the company's buyback program from 2012-2015 is used to actually reduce the share count.
    • Apple's buyback program, which started during the 2012-2013 year, retires about 4%-6% of the company's stock per year.
  • Dim Expectations For The Conoco Dividend
    Fri, Mar. 20 COP 95 Comments

    Summary

    • Conoco is going to pay out $3.5 billion in dividends this year while making around $1.5 billion in profits, assuming the price of oil does not rise.
    • Conoco's fundamentals put the dividend growth in jeopardy and the company has a corporate culture of freezing the dividend during the lean years.
    • The good news is that Conoco still delivered 11% annual returns from 1990-2001 (that was the last extended period of trading for the stock that experienced frequent dividend freezes).
  • Chevron Stock At The Magic 4% Yield Mark
    Fri, Mar. 20 CVX 61 Comments

    Summary

    • Chevron has delivered returns greater than 10% anytime the stock was bought with a 4% yield or greater in the 1970s, 1980s, 1990s, or 2000s.
    • The company makes almost $9 billion in profits this year, enough to cover the dividend payments at the bottom of the business cycle.
    • The possible drawbacks are that Chevron has ceased repurchasing its own stock now that it is cheap, and it has also limited some of its E&P projects.
  • Will Royal Dutch Shell Cut Its Dividend?
    Thu, Mar. 19 RDS.B 34 Comments

    Summary

    • Royal Dutch Shell's current dividend payout ratio is over 90%, putting the safety of the dividend in question.
    • The good news for investors is that the company is sitting on $21 billion in cash, and likely has the ability to continue paying its dividend throughout continued low prices.
    • The bad news for investors is that Royal Dutch Shell's reserve replacement rate is only 47%, and this will affect the company's long-term earnings power for producing oil.
  • Autozone's Stealth Dividend Is Great For Taxable Investing
    Tue, Mar. 17 AZO 6 Comments

    Summary

    • Autozone has been reliably retiring shares every year and even managed to reduce the share count by 15% during the 2008-2009 period.
    • The combination of revenue growth, new stores, and same store sales growth explain why this stock delivers 20% annual returns.
    • Same store sales even grow at 5% annually, which makes Autozone superior to other companies that rely on stock repurchases to build shareholder wealth.
  • Is The Jury Ready? Time To Evaluate AbbVie Post-Spinoff
    Sat, Mar. 14 ABBV 77 Comments

    Summary

    • AbbVie's excellent performance since becoming a standalone company is primarily due to a significant increase in valuation.
    • The company's dividend payout ratio has increased twenty percentage points because the dividend growth is exceeding the earnings growth.
    • Sales gains at Humira have been in the double digits, and these gains should finally drive earnings per share growth higher.
  • Buy The Dividend Company That Manages All The Real Estate
    Sun, Mar. 8 CNS 23 Comments

    Summary

    • Cohen & Steers has a perfect balance sheet with no liabilities because it relies on human capital and therefore has high returns to fund future growth.
    • Despite a $1.9 billion market capitalization, Cohen & Steers only has 247 employees and a return on capital rate of over 30.5%.
    • This company that specializes in making real estate investments pays a dividend roughly double what people think because it has a pattern of special, one-time dividends.
  • Why AmTrust Financial Is An Excellent Growth Stock
    Sun, Mar. 8 AFSI 11 Comments

    Summary

    • AmTrust is an excellent company with 31% annual returns since 2006.
    • AmTrust Financial has excellent human capital in the form of insurance adjusters with an average of 19 years of experience.
    • One concern is the company's current valuation which is 1.9x book value compared to 1.5x book value historically.
  • Bank Of The Ozarks: An Explanation For The Low Dividend Yield
    Sun, Mar. 8 OZRK 6 Comments

    Summary

    • Bank of the Ozarks has a seemingly low dividend payout ratio of 30% and a dividend yield of around 1.5%.
    • The rationale for the low payout ratio involves a loan portfolio growing at 8.5% annually that converts to 19.0% annual earnings per share growth.
    • The company was one of the few banks that did not cut its dividend during the financial crisis, and the low dividend payout ratio granted flexibility to weather the storm.
  • Church & Dwight: So Expensive You Might Want To Sell
    Sat, Mar. 7 CHD 16 Comments

    Summary

    • Church & Dwight's current valuation of 27x earnings is higher than the company's valuation during the excesses of the late 1990s.
    • Even assuming high growth, a P/E reversion towards 20 will still result in minimal gains five years from now.
    • Church & Dwight has a great history, but it is important to understand that an unusually high valuation means that a great business will not be a great stock.
  • Albemarle: That Wildly Ignored Dividend Stock With 12% Annual Growth
    Sat, Mar. 7 ALB 4 Comments

    Summary

    • Albemarle is an excellent dividend growth stock with consistent earnings growth of 12% annually throughout the past two decades.
    • The company's profits are somewhat sporadic, and this lack of linear growth deters some investors from this dividend growth stock.
    • Albemarle is not for everyone, as the price of the stock fell from $45 to $15 during The Great Recession of 2008-2009.
  • A Peek Inside The Fidelity Contrafund
    Fri, Mar. 6 FCNTX 29 Comments

    Summary

    • The Fidelity Contrafund has been an excellent performer, with 12.5% annual returns since inception.
    • It has large positions in companies like Berkshire Hathaway, Google, and Apple, which have $200+ billion in cash between them.
    • The one concern about this fund is the annual turnover rate of 45% which means the average stock is only held for a little over two years.
  • Getting Past Google's High P/E Ratio
    Fri, Mar. 6 GOOG, GOOGL 27 Comments

    Summary

    • Although Google is trading at a higher than usual P/E valuation, it also has over $60 billion in cash and strong earnings per share growth.
    • The company has managed 6% declines in costs per click well, as revenues have increased 7% in spite of this.
    • The company is set for double-digit growth, so that even P/E compression can still deliver good returns for investors.
  • Rate Increases May Come, But Realty Income Dividends Keep Piling Up
    Mon, Feb. 23 O 37 Comments

    Summary

    • Realty Income is an excellent REIT that has been compounding at almost 17% annually since 1994.
    • However, some of that compounding is the result of P/FFO valuation expansion, and this trend will likely reverse course in the coming years.
    • The likely defense of P/FFO compression for Realty Income investors comes from a rising profit base and monthly dividend payments that soften the blow.
  • Yes, The Dividend At Reynolds American Is Safe
    Dec. 24, 2014 RAI 19 Comments

    Summary

    • In 2012, Reynolds American ran into trouble when its dividend payouts exceeded its profits per share.
    • In the past two years, the company has used price increases and share buybacks to reduce the dividend payout ratio to 79%.
    • The stock does have risks, however, as it heavily relies on menthol sales, and the acquisition of Lorillard will only increase Reynolds' reliance on menthol brands.
  • The Difference Between Coca-Cola And Anheuser-Busch
    Dec. 24, 2014 BUD, KO 17 Comments

    Summary

    • Coca-Cola and Anheuser-Busch are similar in that both companies are struggling to achieve organic revenue gains.
    • A difference, however, is that Anheuser-Busch is much more efficient at cutting costs than Coca-Cola is.
    • Anheuser-Busch is able to achieve earnings per share growth without meaningful revenue gains, a feat Coca-Cola has been unable to accomplish.
  • Diageo At The 3% Dividend Sweet Spot
    Dec. 24, 2014 DEO 27 Comments

    Summary

    • Historically, investors that acquire Diageo stock with a starting dividend yield of 3% earn double-digit returns from that point forward.
    • This stock is not for investors who insist upon conservatively managed balance sheets, as the company carries over $15 billion in current debt.
    • This stock is a great consideration for IRA accounts, due to the American tax treaty with Britain and the rapidly rising yield on cost of dividends over time.
  • Monsanto's Buyback Has Become Quite Substantial
    Dec. 24, 2014 MON 2 Comments

    Summary

    • During the first decade and a half of its corporate history, Monsanto was not a company that repurchased its own stock in any meaningful way.
    • Between 2014 and 2015 combined, however, Monsanto will be retiring over 60 million shares of stock.
    • The forward valuation of the stock is under 20x earnings, which is historically cheap and is a fair starting valuation for a company with double-digit growth.
  • Is Procter & Gamble's Tightened Focus Hitting The Bottom Line?
    Dec. 23, 2014 PG 21 Comments

    Summary

    • Procter & Gamble has indicated a desire to sell non-core brands, and the transfer of Duracell to Berkshire Hathaway is the greatest example so far.
    • The company is struggling to achieve bottom-line growth, because the core brands are only growing revenues at 2% annually.
    • The company's payout ratio is at the highest point in the past twenty years, and a lack of retained earnings may make growth difficult in the near future.
  • Some Perspective On Halliburton's Stock Buyback And Business Model
    Dec. 23, 2014 HAL 9 Comments

    Summary

    • Although Halliburton reduced its share count by 8.61% between 2012 and 2013, shareholders shouldn't expect significant buybacks going forward.
    • Even without buybacks, Halliburton is an attractive stock after dropping from the $70s this summer to a little over $40 now.
    • The company is growing profits 25% in its Latin American segment, and that should propel significant profit growth in the coming years.
  • The Philosophical View Of General Electric's 4.5% Dividend Hike
    Dec. 23, 2014 GE 47 Comments

    Summary

    • To fully appreciate GE's recent dividend hike, it is important to keep in mind the transformation of the conglomerate's business over the past generation.
    • As the role of GE Capital diminishes, the renewed focus on the industrial division does mean that GE's short-term earnings will be more volatile.
    • The recent 4.5% dividend hike is not a concession that the industrial division will grow slowly, but rather, a recognition that the dividend payout ratio must be conservatively managed.
  • The Mixed Signals From The M&T Bank Dividend
    Dec. 23, 2014 MTB 3 Comments

    Summary

    • M&T Bank served investors well during the financial crisis by boosting the $2.60 dividend in 2007 up to $2.80 in 2008, and maintaining it throughout the financial crisis.
    • That steady dividend is now a source of criticism as the company has not increased the $2.80 payout since 2008.
    • To fully appreciate M&T Bank, it is important to note the growing amount of retained profits and low level of default for the bank's current portfolio.