Thursday, March 10, 2011

CenturyLink a Dividend Aristocrat Analysis

CenturyLink (CTL) is another one of the Dividend Aristocrats that we have in our business world.  They have consistently paid dividends for over 35 years straight and they are in the Telecommunications industry.  I am a huge follower of dividend aristocrats and I am excited to see some financials this company has to offer.

Price to Earnings Ratio or P/E: CTL closed today at $40.35.  They have earnings per share in the amount of $3.13.  Therefore, 40.35/3.13 = 12.89 P/E Ratio.  Relatively lower than the overall S&P 500, showing a possible undervaluation.  I then went to my usual Morning Star source to see how they compare with their industry as a whole, as they go up against other phone and internet providers such as AT&T.  It turns out the industry average is roughly 15.9; thus Century Link is undervalued compared to it's competitors.  Let check out some appreciation.

CenturyLink's 52 week high, as of today, is $46.87.  From solely this figure, they could have $6.52 of room to grow or a little over 16%.  Therefore, there is some room to grow, but that isn't what we are really here for.  I mean of course we want a company that has growth, but we need some cash flow.  Lets go see their yield.

Dividend Yield & Payout: They pay a quarterly dividend of $0.725 per common share.  Over four quarters this amounts to $2.90 annually per common share of stock.  Therefore, CenturyLink's dividend yield is an enormous ($2.90/$40.35) 7.18%.  Wow!  An over 7 percent dividend yield to their investors, this is double the amount of 10 year treasury interest yields and of course much higher than the stock market as an average.  Well, I have done some history on them, and a few years ago (2007) that $2.90 used to only be $0.26.  That's right, only 26 cents per share PER YEAR.  They would only raise it a smidge every year.  However, after 2007 they skyrocketed their dividend.
Century Link's payout ratio is 2.90/3.13 = 92.6%.  This is pretty high.  It isn't uncommon to have a high payout ratio for telecommunication companies, but I don't really enjoy the looks of an over 90% payout ratio.

Conclusion:  Though CenturyLink is an aristocrat, there are a few flags that stand out.  That dividend payout is extremely high.  How long can they sustain such a high rate?  Do they have the earnings to grow the company further?  With only a 12B market cap and with competitors that are humungous, where do they go?  Their dividend yield is extremely attractive and you do also have to give a nod to the fact they have raised dividends for over 35 years straight, and not many can fall into this category.   Also to note - their current ratio (current assets dividend by current liabilities) is barely 1.  I like to see at least 2, to show their solvency.  One would have to consult, without a doubt, a further analysis on CenturyLink before deciding to take any action.

-Lanny B.

Disclosure: I do not recommend anything, please consult your own research. This is actual data, analysis, however I base no investor recommendation.  Thank you for your understanding.

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Sunday, March 6, 2011

McDonald's Corporation Stock Analysis (Member of Dividend Aristocrat List)


McDonald's Corporation (MCD) is a proud and long-term member of the Dividend Aristocrat list.  As we all know, they are a giant in the food industry and do an extremely large amount of business inside and outside our United borders.  During economic turmoil, people that want a cheap/quick meal head to the good old golden arches and munch on Dollar Menu items.  Their growth is still there as they explore further emerging market strategies.  Let's get to the analysis..

P/E Ratio: McDonald's current share price is $76.03 with an earnings per share of $4.58.  P/E breaks down to (76.03/4.58) 16.6.  Not incredible higher than the "15" that I like, it does fit in my range.  MorningStar places it against other in their industry with an average of 22.1.  Extremely undervalued when you compare it to it's top competitors.  Very attractive to an investor.

Potential Appreciation: McD's 52 week high stands at $80.94.  This currently gives it a ((80.94-76.03)/76.03) 6.5% appreciation upside based on the past history.  However, I wouldn't add MCD for appreciation to my portfolio.  I would add it based on the brand-sake and their beautiful dividend yield and consistency in that growth, to which I break into next..

Dividend Yield & Payout: Now McDonalds has consecutively paid and increased Dividends for over 34 years now and continues to do so at a nice increasing rate.  Their current yield of ($0.61*4) 3.21% is extremely attractive as it is over the 3% mark that I enjoy.  The payout ratio of $2.44/$4.58 = 53.27%; almost smack down in the middle of my 40-60% range = another thumb's up in my book.  Last increase  from 55 cent to 61 cents per share provided an 11% increase alone.  They paid a 33% increase back at the end of 2008 aka during one of the worst financial time periods we have endured.  Wow.  Really solid if I may say.

Conclusion: McDonald's is a great choice/pick to add to your portfolio.  With a market capitalization of close to $80Billion, no one comes close to them.  They currently are expanding their international business and are consistently increasing that beautiful dividend that us, as investors, love to see.  McDonald's, at any time, is a great way to start your dividend portfolio.  With their above 3% yield and consistent increases of over 10% to their payout, while maintaining a medium pay-out ratio, is extremely attractive.  Our waistlines may not enjoy the "Golden Arches" but our portfolio's sure do : )  Enjoy!

-Lanny B.

Disclosure: I do not recommend anything, please consult your own research. This is actual data, analysis, however I base no investor recommendation.  I am LONG MCD.  Thank you for your understanding.

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Saturday, March 5, 2011

Southern Copper Corporation Stock Analysis

Southern Copper Corporation (SCCO) is a large mining/producer of precious metals such as silver, gold, copper, etc.. and do a lot of business in Peru and Mexico (where large reserves are).  I wanted to keep this in line with the silver/oil/food discussion I spoke about earlier.  Analysis is as follows:

P/E Ratio: SCCO's Price currently is at $42.05 with earnings per share (EPS) at $1.83.  Therefore, the P/E stands at 22.98; higher than the S&P 500 average.  When comparing this to their industry of involvement (Basic Materials) on MorningStar, they are above the average of 17.  Therefore, it isn't as attractive in these terms.  However, there has been a declination in overall ounces of silver and the price of the metal has sky rocketed.  I am mixed on these stats.  Also to note - Morningstar shows the forward P/E is 12...

Potential Appreciation: SCCO's 52week high stands at $50.35, giving it a potential of ((50.35-42.05)/42.05) = 19.7% appreciation.  This has a lot of upside given its recent history.   Pair that with the increase of value of an ounce of silver, I can see this going above those marks.  **Note: past performance is not an indication of future performance

Dividend Yield & Payout: They pay 4 dividend payments per year.  Based on the last four, totaling 1.83, their yield is 4.35%.  This is much higher than the average of the market and provides a good incentive/attractiveness to potential and current investors.  Their current payout ratio: $1.83/1.83 = 100%.  This is how much they pay in dividends over how much they earn per share.  This is obviously extremely high and causes caution to investors.  Their last increase from 43 cents to 58 cents marks a 34% dividend increase.

Conclusion: I do like silver.  I have done a lot of research on the metal and it shows the declination of amount of silver that we have in stock today.  Silver value is increasing at an tremendous rate and I like to see what companies are in the trenches to mine this stuff out.  I like their yield and dividend payments, along with the industry they are in, but I will have to see what their next earnings release shows for the EPS; morningstar shows a forward P/E of 12.  Any thoughts on Silver/Oil/Food?  What companies do you like as we battle through this volatile market?  Please comment or message!

-Lanny B.

Disclosure: I do not recommend anything, please consult your own research. This is actual data, analysis, however I base no investor recommendation. Thank you for your understanding.

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Saturday, February 26, 2011

ConAgra Foods Stock Analysis

ConAgra Foods Inc (CAG) is a very large consumer and commercial food manufacturer for products such as Hunt's, Slim Jim, Orville Redenbacher popcorn and many others.  This is another company I wanted to analyze as food prices begin to rise, along with oil and precious metals.  Now lets begin the analysis.

P/E Ratio: Their current share price is $23.00 flat with a $1.54 EPS according to Google Finance.  This brings us to a (23/1.54) 14.94 P/E ratio, which is under my 15 on average that I like.  Compared to the S&P 500, ConAgra is undervalued, according to this metric.  On Morning star's website, the industry average is 17 for the market they specifically operate in, thus ConAgra is currently undervalued against it's current competition.  Thumbs on this metric.

Capital Appreciation: Solely based on the prior 52 weeks, ConAgra's high is $26.32, which breaks down to ((26.32-23)/23) 14.4% upside possibility.  Again, this would just be an additive to the main focus of my blog = their divided.

Dividend Yield & Payout Ratio: Their dividend per year, currently stands at (.23*4) $0.92 per share.  The yield, therefore, is (0.92/23) exactly at 4%.  4% is extremely solid, much higher than what I like and is very attractive.  Their payout ratio is 0.92/1.54 = 59.74%.  Boom, just barely under my 60% ceiling on the average that I like to see.  Also, their annualized dividend growth (according to my sources) is 9.23% and they have been paying a dividend since 1985; over 25 years of dividends!  The yield, ratio and growth rate receive another thumbs up in my book.

Conclusion: For the long-term investor, this seems like a stock priced to buy at the moment.  With rising food prices, money flowing into the market and a track record of dividends - proves it could be a staple in a portfolio.  Their dividend yield is exceptionally attractive, they have potential upside with a very acceptable level of payout on their earnings, I see this being a stock to fit well in any portfolio.  I can see the price of ConAgra to hit above $26 range in 3-4 months.  I suggest you do your own analysis and consult an advisor or other sources before making a decision.  Thank you!

-Lanny B.

Disclosure: I do not hold nor recommend anything. This is actual data, analysis, however I base no investor recommendation. Thank you for your understanding.

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Wednesday, February 23, 2011

Monsanto Stock Analysis

Monsanto (MON) is involved the agricultural industry and was spoken to me by my good friend in Chicago.  He is very excited about this company, given the economic climate circumstances with food and agricultural products current and upcoming rise in price.

P/E Ratio: Current Price of $70.91 with earning per share of $2.05.  This P/E equates out to 70.91/2.05 = 34.59.  This looks extremely high, I know.  The market has brought this down a few dollars as well, hopefully it continues.  HOWEVER, the industry average according to Morning Star is 34.3.  Therefore, this industry may have a higher price relative to their earnings.  I would like to see the price tick down a bit more though : )

Price Appreciation Potential: Their 52 week high is 77.28, providing a ((77.28-70.91)/70.91) 9% potential capital appreciation.  Their low is $44.61, showing they have come from a loooong way.  It's tough to dictate this, as food prices are going up and this could push the price over their high.  However, I haven't done that thorough of an analysis to decide.  I will reiterate - I'd like to see this come down a bit.

Dividend Yield & Payout: Their dividend payout per year is $1.12 per share or (1.12/70.91) 1.58%.  This yield is under the S&P on average.  If the price came down, this would push the yield up. Their payout ratio is (1.12/2.05) 54.63%.  It is perfectly in the range that I like to see.  That yield could be a little higher, but that is me being selfish I assume.  They have paid dividends for 10 years and based on a few resources, they have increased dividends by 20% annually.  Not too shabby on that end.

Conclusion: Things I like: They are at their average for P/E.  The Industry is going in an upward direction.  Dividend Payout is nice.  They do pay a dividend yield with an annual increase of 20% on average.  Thins I dislike: Uneasy with an appropriate conclusion on that P/E.  It is still high for my taste and would like price to creep down.  With a price decrease, their yield would also be more attractive.  However, I haven't done an intense analysis on Monsanto and may do so in the upcoming hours/days.

-Lanny B

Disclosure: I do not hold nor recommend anything. This is actual data, analysis, however I base no investor recommendation. Thank you for your understanding.

Tuesday, February 22, 2011

PPL Corp Dividend Analysis

Today on my agenda is PPL Corporation (PPL), a Utility Company based in Pennsylvania and also is involved internationally.  One reason why I like the Utility Industry is that we always will be using some sort of energy to carry out our daily activities, I mean what is going to brew that coffee as you are reading my blog!?

To begin - P/E Ratio: Price currently as of market close is $25.02 and their earnings are $2.23 per share, according to my pals at Google Finance.  This equates out to a: $25.02/2.23 = 11.22, well under the S&P 500 average.  This tells me that this utility company may be undervalued.  Morning has shown that the industry average P/E is 11.1.  Therefore, they are right on with the industry.  There may be other companies that are more undervalued than others, which would need more analysis.

Appreciation from current price: Their 52 week high is $30.05.  Therefore, based on that historical fact and with them trading at $25.02, there is ((30.05-25.02)/25.02) = 20.1% appreciation possibility with the stock.

Dividend Yield & Payout Ratio:  Their dividend payout per year currently stands at (0.35*4) $1.40 annually per share.  $1.40/$25.02 = 5.60%.  This yield is very attractive and offers a great DRIP opportunity.  Most utility companies do offer a generous yield, and this one doesn't stray to far from the tree.  The payout ratio breaks down to 1.4/2.23 = another 63%er.  This isn't too alarming, just out of my 60% range.  Most utility companies pass on most of their earnings down to their investors, therefore this doesn't "turn me off" in the least bit, and they have been doing so for over 25 years.

Conclusion: If you don't own a utility company in your portfolio, this could be a great company to look at.  With usage of energy always being there and also an international protection, this could be a long-term stock one would hold.  They offer a great dividend yield and I believe they have room for appreciation.  Again, consult your own analysis and advisers to see if it fits your strategy.

-Lanny B.

Disclosure: I do not hold nor recommend anything. This is actual data, analysis, however I base no investor recommendation. Thank you for your understanding.

Oil and Food Companies

Intelligent Conversations...

I had a very intelligent conversation with an analyst at work yesterday and he proposed that we move into oil, food and precious metals over this time period.  I believe he is right.  I am making this post to see what all the viewers believe about this.  With money flooding into the market/economy, it is weakening the dollar and pushing up prices on our necessary items, such as food and oil.

What companies do you believe to be undervalued in the food and oil industry that have solid dividend yields (Preferably over 3 percent, with a good track record)?  Companies like Exxon, TOTAL, Chevron, Smuckers, Kellogg, PG and the like?  Also - Do you like SLV for silver or is there silver companies that investors are enjoying the benefits of currently?

Lastly - what do YOU all thing is happening with this market currently?  What strategies are you all implementing into your portfolios currently?  Do you believe in "active-trading"?  I will look forward to comments, emails and the like!


Lanny B.