wallstwatcher

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    • ON: Sat Apr 5th 21:16 PM
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      McGraw-Hill Dividend Analysis: Attractively Valued
      It is quite easy to say this article is backward looking as it does focus almost exclusively on the history of dividends. But it is equally backward looking to harp on the problems of structured finance. That is yesterday's news. What we can be relatively certain of in the future is that Wall Street will continue to invent new ways to package securities and that ratings will play a large role in the acceptability of those packages. S&P and Moody's will continue to prosper simply because money mangers will continue to need the approval of ratings providers to cover their asses. When you buy an unrated issue based on your own research, you had better be right because you will be subject to enormous criticism if things turn sour. If S&P or Moody's rated the issue and it turns sour, well - you were not stupid, you were just guilty of believing the best people in the business.

      Furthermore, the fastest growth area for S&P is European ratings. And the reason is the inexorable change in financing of corporations which has been brought about by the adoption of the Euro. Previously Eurpoean markets were largely contained within country borders and corporate financing was largely accomplished by bank loans. The advent of the Euro has turned corporate finance into a multi-nation market and the bond is the new tool of financing. S&P has grown and will continue to grow at an impressive clip in this market. Anyone familiar with the company has watched them purchase small local debt rating companies in many European countries over the past decade and a half. Their position is now just as dominant in this burgeoning market as it is in debt rating here. They have also invested in ratings companies in Asia.

      Visability is not as great as it has been in the past. Earnings may slip. But the stock has a PE multiple of 12 and it has historically been closer to 18-20. That covers a pretty steep decline in earnings. When things are perfectly visable Wall Street reacts and moves market prices up and down quickly. When things are cloudy Wall Street drop prices far beyond rationale levels because money managers hate the risk of having to buy on their own research. No guts, no glory.
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