Dividend Increases/Decreases for the Week Ending September 2
September 5, 2016
Below we provide a list of firms that raised/lowered their dividends during the week ending September 2. The dividend reports of covered firms on this list will be updated shortly with the new information. To access our dividend reports use the ‘Symbol’ search box in our website header. Firms Raising Their Dividends This Week Bank of America (BAC): now $0.075 per share quarterly dividend, was $0.05. Bank of Nova Scotia (BNS): now C$0.74 per share quarterly dividend, was C$0.72. Broadcom (AVGO): now $0.51 per share quarterly dividend, was $0.50. Brookfield Infrastructure Partners (BIP): now $0.59 per share quarterly dividend, was $0.57. Campbell Soup (CPB): now $0.35 per share quarterly dividend, was $0.31. Capital Southwest (CSWC): now $0.11 per share quarterly
Apple Handed Huge Tax Bill; We’re Not Worried
September 1, 2016
By Kris Rosemann The Competition Commission of the European Union has ordered Apple (AAPL) to pay up to ~$14.5 billion in back taxes plus interest to the government of Ireland after concluding that the country unjustly allowed the firm to pay an effective corporate tax rate between 0.005% in 2014 and 1% in 2003 on its European profits. The total amount deemed owed by the EU is 40 times the largest amount previously demanded in such a case. While $14.5 billion is certainly a meaningful sum of cash, if there is a company equipped to handle such a situation, it is Apple. As of the end of the third quarter of its fiscal 2016, it had ~$231.5 billion in cash,
Dividend Growth Giant Medtronic Reiterates Expectations
September 1, 2016
Image source: Medtronic investor presentation By Kris Rosemann As it is a core holding in the Dividend Growth Newsletter portfolio, it is no surprise we are high on Medtronic’s (MDT) free cash flow generating ability. The company remains committed to churning out dozens of billions of dollars in free cash flow generation in coming years, and we like management’s strategy on the allocation of the capital it expects to generate. Medtronic reported a solid first quarter of fiscal 2017 (ended July 29) on August 25. Though revenue fell 1% as-reported, revenue increased more than 5% on a constant-currency, year-over-year basis when ignoring the extra selling week in the comparable period of fiscal 2016. The firm’s ‘Cardiac and Vascular Group,’ ‘Minimally
The Banking Industry Is All About Confidence
August 29, 2016
Image Source: 401(K) 2012 The “5 Cs of credit” — character, capacity, capital, collateral, and conditions — is a widely-followed framework and generally-accepted guideline for lending to consumers, but for corporate entities, we think another C is much more important: confidence. By Brian Nelson, CFA The financial sector, and the underlying banking industry in particular, is distinctly different than most other sectors like industrials, retail, or healthcare, for example. Unlike the latter industries, banks use money to make money (net interest income), instead of using operating assets like property, plant and equipment (PPE) and raw materials to drive revenue and resulting free cash flow. This means that continued access to money and credit is the primary source of banks’ economic returns
Dividend Increases/Decreases for the Week Ending August 26
August 29, 2016
Below we provide a list of firms that raised/lowered their dividends during the week ending August 26. The dividend reports of covered firms on this list will be updated shortly with the new information. To access our dividend reports use the ‘Symbol’ search box in our website header. Firms Raising Their Dividends This Week Aceto Corporation (ACET): now $0.065 per share quarterly dividend, was $0.06. Altria Group, Inc. (MO): now $0.61 per share quarterly dividend, was $0.565. Cementos Pacasmayo (CPAC): now S/0.285 per share annual dividend, was S/0.28. Expedia (EXPE): now $0.26 per share quarterly dividend, was $0.24. FFW Corporation (FFWC): now $0.17 per share quarterly dividend, was $0.15. First Connecticut (FBNK): now $0.08 per share quarterly dividend, was $0.07.
Garmin Navigating Competitive Pressures
August 26, 2016
By Kris Rosemann Little has changed at Garmin (GRMN) as of late from an operational standpoint. The lion’s share of the pressures weighing on the company’s shares are external forces, in our opinion. The firm is executing soundly, and recent product launches were key drivers of improved results through the first half of 2016 and gave management the confidence to raise its top- and bottom-line guidance for full-year 2016. Free cash flow generation has rebounded nicely thus far in 2016 as well. Through the first six months of the year, the company reported free cash flow of more than $250 million, compared to free cash flow generation of -$55 million (negative $55 million) in the comparable period of 2015. Garmin
Alert: Adding General Motors; Talking Amazon
August 26, 2016
Image Source: Michael Kumm General Motors may be one of the best deals on the market today, and we’ll be adding it to the portfolio of the Best Ideas Newsletter. Let’s also talk Amazon, and why shares of the giant are “uninvestable” from our perspective. By Brian Nelson, CFA Just a couple things this morning. First, we’re adding a 2% weighting of General Motors (GM) to the portfolio of the Best Ideas Newsletter. We continue to be enamored by the auto giant’s valuation opportunity, and we encourage members to read our take on the company’s investment considerations at the following, “Major Automakers: Fundamental Uncertainty But Potential Investment Opportunity…Soon (August 5, 2016).” Soon is today. Though we’re fully aware of the
Amazon Is Uninvestable
August 25, 2016
Image Source: Claudio Toledo By Brian Nelson, CFA Amazon is uninvestable – there we said it. Let’s learn why though. We can’t make such a blanket statement without backing it up with some serious financial analysis and valuation logic. The following is for educational purposes only and represents an excerpt from Valuentum’s Financial Statement Analysis seminar. I say this because the models included in the below exercise are not our most recent ones of the respective companies. Those models are available on a per-request basis. So reach out to us! Here’s what I want you to do: 1) Open the Amazon (AMZN) financial model excel file . Go to the ‘Model’ tab. 2) View fair value estimate of $439 in
GAAP or Non-GAAP, No Matter — It’s Free Cash Flow
August 25, 2016
Image Source: Christopher Accounting representation of earnings per share, whether GAAP or non-GAAP, is not as important to the valuation context as future free cash flow. Let’s talk about this concept a bit more within our valuation processes. By Kris Rosemann Q: I have been considering investing in Facebook (FB). Your projected five-year operating margin for Facebook is 58%. Currently it is around 40% and has averaged about 38% the last three years. I was wondering if you would be willing to elaborate on those expectations. A: Thank you for the question. What you have noticed in our operating margin assumptions is the discrepancy on the income statement between GAAP and non-GAAP reporting. While our historical data is pulled on a
Walmart’s Core Operating Income Falls 7%+; Target’s Comparable Store Sales Drop
August 23, 2016
Image Source: Mike Mozart By Brian Nelson, CFA Warren Buffett’s Berkshire Hathaway (BRK.A, BRK.B) isn’t the only firm that has become less bullish on Walmart (WMT). The company that the Oracle of Omaha built recently reduced its stake in Walmart to 40.2 million shares from 55.2 million shares, but Valuentum is equally worried about the big box giant’s long-term picture. Target (TGT) is not faring much better, if it is faring better at all. The structural headwinds impacting both companies aren’t going away anytime soon, and while you wouldn’t know it by the market’s positive reaction to Walmart’s second-quarter report, total operating income, adjusted for the gain from the sale of Yihaodian, fell more than 7% in the period. A
