The Dividend Cushion Ratio Measures the Magnitude of Potential Dividend Increases
October 27, 2015
On October 26, Hi-Crush (HCLP) and Legacy Reserves (LGCY) became the latest two companies that the Dividend Cushion ratio warned about regarding a distribution cut, both serial “cutters.” Just a reminder, a raw, unadjusted Dividend Cushion ratio below 1 indicates significantly higher risk of the sustainability of the payout. The Dividend Cushion ratio, however, does so much more than warn investors of the risk of potential dividend cuts. Perhaps it is our own fault, as we have noted on several occasions the efficacy of the Dividend Cushion ratio in warning investors of a dividend cut in advance, that readers are focused on the metric primarily as a warning system instead of a generator of ideas that have fantastic dividend growth
Coach Back on Track?
October 27, 2015
Coach (COH) has been somewhat of a black mark on the “hit rate,” or percentage of ideas outperforming the broad market return, in the Dividend Growth Newsletter portfolio, and while we continue to encourage readers to evaluate the weightings we ascribe to positions in the newsletter portfolios for insight on our level of conviction, that Coach resides in there at all means it had been one of our top ideas, added September 19, 2014 at $37.55. Coach currently yields ~4.5%. When we first added Coach to the Dividend Growth Newsletter portfolio, we were aware of the fashion risks and the troubling signs in its North American women’s handbag business. What we liked most about the company, however, was its fantastic
BABA Bounces Big! GMV Growth Solid, Monetization Rate Better
October 27, 2015
Best Ideas Newsletter portfolio holding, Chinese e-commerce giant Alibaba (BABA), reported solid fiscal second-quarter results for the period ending September 30. The report was welcome news after effectively a bear raid on the company’s shares from a widely-read publisher, the note of which effectively marking the company’s trading bottom. We continue to believe shares of Alibaba are a bargain even after the spike. Please be sure to access the company’s 16-page report for its cash-flow derived fair value estimate and fair value estimate range. Management added upbeat commentary in the press release, noting “strong growth across the board and particular outperformance in mobile.” Gross merchandize volume (GMV) in the company’s China retail marketplaces grew to $112 billion in the period,
If It Happened to AbbVie, Could It Also Happen to Gilead?
October 26, 2015
The Valeant (VRX) and Citron saga is not all the drama happening in biotech these days. On October 22, federal health officials warned doctors and patients that two of AbbVie’s (ABBV) hepatitis C treatments can cause life-threatening liver injury in advanced stage patients. The Food and Drug Administration announced October 22 that it will require AbbVie to add new warnings to its Viekira Pak (1) and Technivie (2) drugs after deaths and liver transplants have been reported in patients who already had liver damage caused by the disease. During the second quarter, global sales of Viekira were $385 million, on pace for blockbuster status. Viekira is one of AbbVie’s top drugs, trailing only Humira in sales during the six months
Consumer Staples Giants Demonstrate Pricing Strength
October 25, 2015
The strengthening US dollar continues to muddy quarterly results for multinational corporations. Coca-Cola (KO), Kimberly-Clark (KMB), and Procter & Gamble (PG) were no exception in the calendar third quarter. The consumer staples giants demonstrated the strength of their scale and pricing power in the quarter, though reported results could not overcome the significant pressure of foreign-exchange headwinds in economies around the globe with varying growth levels. Coca-Cola, Kimberly-Clark, and Procter & Gamble hold some of the most well-known consumer staples brands in the world. Coca-Cola, for one, has perhaps the most-recognizable soft-drink portfolio of any company, Kimberly-Clark boasts a wide range of trusted consumer staples brands from Huggies to Kleenex, and Procter & Gamble has one of the most diverse
Flash: Dividend Growth Newsletter Portfolio Holding Microsoft Surges!
October 23, 2015
We’ve been huge fans of Microsoft’s (MSFT) investment merits for some time now. We’ve traveled around the US, from Chicago to San Jose to Milwaukee/Madison and Cleveland highlighting the Dividend Growth Newsletter portfolio holding to investors that were open to learning more about the Dividend Cushion ratio. Please view one of the slide decks from our presentation in San Jose , for example. Not only has Microsoft been a tremendous valuation opportunity for much of the past few years, but its dividend growth prospects, as measured by its solid Dividend Cushion ratio, have simply been pristine since the company initiated the payout. Following Microsoft’s release of solid first-quarter fiscal 2016 results October 23, the company’s shares have converged to our
Alphabet (Google) and eBay Power Best Ideas Newsletter Portfolio!
October 23, 2015
It’s no secret that the Internet and the companies that operate within the Internet space are always changing. There must be continuous innovation and re-discovery to keep up with the competition to amaze society with the next great development. Consumers have become accustomed to many of the Internet giants doing just that, pushing the envelope and enriching their lives with a better, faster, or more convenient way of content consumption. One of the many struggles that Internet-based entities have is not only how to create these new products, devices, or programs, but also how to monetize such breakthrough endeavors successfully. In a fast-changing environment, it is never easy to deliver sustainable, profitable and innovative growth. Let’s take a look at
Nelson: Time to Consider Buying Kinder Morgan?
October 22, 2015
“Buy and hold investing has done more to turn perfectly decent people into the worst sort.” As others are poo-pooing Kinder Morgan’s (KMI) third-quarter report, we wanted to share a few observations. Our $29 per share fair value estimate for the corporate is unchanged, as we note the low end of our fair value range is $23 per share. We’re reiterating our “neutral” view on the company. First, we were beyond pleased to see Executive Chairman Richard Kinder come to terms with emphasizing the fact that Kinder Morgan is not totally immune to commodity price impacts. He said as much in the press release. Though top analysts on Wall Street are well-aware of this (or they should be), there are
Flash: Kinder Morgan Cuts Dividend Growth Outlook
October 21, 2015
Per the company’s third-quarter report, released October 21, 2015: “while we are at the beginning of our budget process for 2016, we currently expect to increase our declared dividend for 2016 by 6 to 10 percent over the 2015 declared dividend of $2.00 per share.” The previous target had called for a 10% increase versus the lowered midpoint of 8%.
Valeant Crushed by “Short-Seller” Research Report
October 21, 2015
Additional uncertainty has surfaced around the biotech firm. We can’t say we are surprised, but the company’s share-price decline has been a monumental one. Despite Valeant’s strong reported performance in recent quarters, the Valuentum Buying Index kept us away from such a risky stock. Please understand why paying attention to the information contained in prices is an important component to any value-, growth- or income-based strategy. Valeant Pharmaceuticals’ (VRX) shares have taken a major shellacking as a result of a research report accusing the firm of Enron-like activities. These are some serious accusations, and Valeant has since defended itself, which has given its shares a sizable bounce. We can’t say we’re surprised there was a material drop in Valeant’s share
