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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
  • Buy Watsco (WSO) @ $57 0 comments
    Oct 15, 2011 11:01 AM | about stocks: WSO

     Have you ever wondered who made the repair parts for your air conditioner or other heating system? Chances are it is Watsco (NYSE:WSO). Founded in 1945, this company exports parts to Latin America and the Caribbean and supplies 36 states and Puerto Rico. With the economy about to take a down turn, this is a short term play for growth and a longer term play for dividend growth investment.

     

    From the growth standpoint, the earnings per share are projected to grow from $2.86 in 2011 to 3.36 in 2012 and $4.00 in 2013. This will provide a 17.48% earnings per share growth rate next year and 19% the year after that. There is only 38.2% debt to total assets and a 3.8% dividend yield. This Dividend Contender has 10 years on increasing dividends and a 5-yr dividend growth rate of 26.9% and 35.2% for the 10 year dividend growth rate. The current p/e of 22.4 is more than justified by the combination of the 5-yr dividend growth rate and the nearly 4% yield.

     

    The stock is a cyclical stock and when the business cycle ends, it drops. The 5-yr earnings per share growth rate is -9%.

     

    WSCO earnings per share

    Year

    $2.86

    2011

    $3.36

    2012

    $4.00

    2013

    Stocks: WSO
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