CenturyLink a Dividend Aristocrat Analysis

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

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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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Walmart Stock Analysis

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Walmart (WMT) has paid dividends for 36+ years.  Walmart is one of the large and mighty powerful Dividend Aristocrats, meaning they have paid dividends and increased them for over 25 years.  A great stock if you ask me to have in your portfolio!  

Their price: as of January 20th 2011 (before the market has opened) the price is at $55.03. Their 52 week high is $56.27, giving just a 2.2% appreciation on the pricing giving its most recent high. Their low is $47.77 over the prior 52 weeks. Therefore, it is verrry close to the 52 week high.  Since they are extremely close to that 52 week high, I would personally like to see them drop a dollar or two.  However, since their track record shows, a dividend increase/raise for 25+ years hints to me that Walmart isn't a bad buy at anytime.  That is just my perspective, simply because I invest for cash flow from these companies : ) 

Price to Earnings Ratio: Walmart currently has a current 13.7 P/E ratio (According to Google Finance), which of course is a tad below the S&P average and according to Morning star is below the 14.8 P/E for the industry average. Therefore, Walmart's stock is relatively cheap to its earnings and is currently undervalued against the average of both the industry and S&P index.

Dividend Yield: Let us talk about their cash flow back to investors!  Their current dividend yield when trading at $55.03 is 2.20%.  I know what you all are thinking - THIS IS THE LOWEST out of all my analysis' that I have completed thus far.  However, it is STILL above the average of the S&P 500 and again - it is a Dividend Aristocrat, giving a pay/dividend raise for 25+ years.  Now if their price went down to say, $52 for example - their yield would be 2.32%, a little higher and a little cheaper.  Here is why this dividend yield doesn't turn my face away -  their dividend yield growth rate is an incredible 24.36% according to my analysis since 1974.   A 24.36% raise on average.  That is extremely high and definitely keeps their shareholders happy.  

Payout Ratio: Their dividend is $1.21 per year and their EPS is $4.02. Therefore, 1.21/4.02 = 30%, just below my 40-60% range that I like.  What this means is that they tend to retain most of their earnings, to help grow their company, expand their stores and market and possible acquire other companies. As an investor, 30% payout isn't too bad, though I would like to see them provide back more of their earnings to their shareholders.  

Conclusion: Walmart is an extremely sound company to add to your portfolio.  Given it's current price, I would like to see it maybe 2-3 dollars cheaper, but then again - that dividend growth rate on average of over 24% is amazing and the fact that they are an aristocrat with a proven track record of dividend increases is a plus.  The reason I like that is because even during a recession (which we just had) they still increase their dividends.  I also ask myself this - is Walmart going anywhere?  Most likely not, therefore this is a stock to hold for an extremely long-term in my perspective.  Thank you for reading this brief analysis, good luck and take care.  

-Lanny B.

Disclosure: I do not hold nor recommend anything. This is actual data, analysis, however I base no investor recommendation. However, I personally would add/start a position on this firm, however my direction is different from anyone else's. Thank you for your understanding.