Earnings from 15 Dividend Growth Giants
April 25, 2014
History has revealed that the best performing stocks during the previous decades have been those that shelled out ever-increasing cash to shareholders in the form of dividends. In a recent study, S&P 500 stocks that initiated dividends or grew them over time registered roughly a 9.6% annualized return since 1972 (through 2010), while stocks that did not pay out dividends or cut them performed poorly over the same time period. Such analysis is difficult to ignore, and we believe investors may be well-rewarded in future periods by finding the best dividend-growth stocks out there. Let’s take a look at the recent performance of 15 high dividend payers and disclose their ‘valuation ratings’ and most recent Valuentum Dividend Cushion scores. Valuentum
Apple Is Back!
April 24, 2014
Apple (AAPL) is back, and we think this means all the difference in the world when it comes to driving price-to-fair value convergence. On Wednesday, the firm put up excellent fiscal second-quarter results. As the quarterly headline suggests, strong iPhone sales in emerging markets (thanks in part to China Mobile) drove record March quarter revenue and 15% earnings-per-share expansion. The $11.62 per share quarterly earnings number exceeded the consensus estimate by more than 14%, so it was a large beat. During the period, the company generated $13.5 billion in cash flow from operations and returned almost $21 billion in cash to shareholders through dividends and share repurchases. Apple also guided revenue in the fiscal third quarter to the range of
Perhaps Nothing Stronger Than Aerospace
April 23, 2014
In the world of investing, the strength of the industry in which a firm operates is sometimes as important as the company itself. A strong industry backdrop offers the potential for fundamental upside as the industry revenue pie grows. Said differently, it is much easier for a firm to do well in an expanding industry, where both the industry’s revenue pie is growing and market share opportunities are available, than it is for a firm to do well in a shrinking industry, where it may have to battle entrenched competitors in a pricing death match to gain share. Though commercial aerospace will always be cyclical (as it relates to order trends) and pricing competitiveness will always be present, the massive
Throwing In the Towel on Intuitive Surgical
April 23, 2014
Intuitive Surgical (ISRG) has admittedly been Valuentum’s worst call, and soon, it will be the only long position that will have been removed from the Best Ideas portfolio at a loss. We’ve been whipsawed around so much with this company that getting a pulse on the business has become near impossible. You can read about ‘The Curious Case of Intuitive Surgical…” here and our now-embarrassing note here about how happy we were to get back to even, but the final straw came in the past few weeks. We understand that the firm is navigating through a difficult market environment that was punctuated by the growing negative perception regarding robotic surgery, even if robotically-assisted minimally-invasive surgery is a favorable long-term trend
Big News in Big Pharma
April 22, 2014
Pfizer Held Talks to Acquire AstraZeneca “Pfizer Inc. (PFE), the world’s biggest drugmaker, held informal, now-discontinued talks with AstraZeneca Plc (AZN) about buying the London-based maker of asthma and heart drugs, said two people familiar with the matter… …The companies aren’t currently negotiating, said the people, who asked not to be identified. One said the talks happened several months ago and there are no plans to resume. The discussions were first reported yesterday by London’s Sunday Times, whose unnamed bank and industry sources said New York-based Pfizer made a tentative approach about a takeover valuing AstraZeneca at more than 60 billion pounds ($101 billion).” (Source: Bloomberg) To continue reading >> Valeant and Activist Investor Bill Ackman Pursue Allergan “Canada’s Valeant
Restaurant Industry Update
April 21, 2014
The fast-food (quick-service) breakfast wars have intensified. It has become a high-stakes game for all participants, and most have gone all-in to capture market share, to use poker parlance. The NPD Group, a leading global information firm, noted that the pace of expansion for fast-food breakfast across the restaurant industry has been a key bright spot, and executives across the industry are taking note: Quick service, which accounts for about 80 percent of total restaurant morning meals, showed the strongest increase in breakfast visits of all restaurant segments with a 4 percent increase in the year ending December 2013 period compared to year ago, reports NPD CREST, which every day tracks how consumers use restaurants and other foodservice outlets. Morning
The Cola Wars: Currency Headwinds Intensify; Snacks Looking Better
April 20, 2014
We live in a thirsty world. Global non-alcoholic ready-to-drink (NARTD) consumption is expected to advance at nearly a 6% compound annual growth rate over the next four years. Since the beginning of this decade, NARTD retail value has increased by $135 billion, and the market is expected to grow by another $300 billion before the end of 2020. The global beverage industry is fueled by a number of global macro trends: 20% growth in urban population, 70% increase in personal expenditure per capita, 50% growth in middle class, and 1 billion teens today. Coca-Cola (KO) and Pepsi (PEP), which both reported results last week, are poised to benefit from these strong market demand trends, and Pepsi has a faster-growing snacks
Dividend Increases for the Week Ending April 18
April 20, 2014
Below we provide a list of firms that raised their dividends during the week ending April 18. 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 CSX (CSX): now $0.16 per share quarterly dividend, was $0.15. Discover Financial Services (DFS): now $0.24 per share quarterly dividend, was $0.20. Donegal Group, Inc. (DGICA): now $0.1315 per share quarterly dividend, was $0.1275. Kinder Morgan (KMI): now $0.42 per share quarterly dividend, was $0.41. Kinder Morgan Energy Partners (KMP): now $1.38 per share quarterly dividend, was $1.36. LyondellBasell Industries (LYB): now $0.70 per share quarterly
Google’s First-Quarter Performance: Business as Usual
April 18, 2014
On Wednesday, Google (GOOG) reported decent first-quarter results. The search giant’s revenue increased across-the-board on a year-over-year basis: Google properties revenue advanced 21%, network revenues increased 4%, while other revenues jumped nearly 50%. This is impressive year-over-year performance for any firm regardless of its size, but the market had expected even more from the Internet behemoth. What spooked investors a bit was that Google’s revenue declined across-the-board on a sequential basis (from the December quarter to the March quarter), representing somewhat of a divergence from recent historical patterns. Nonetheless, we put greater weight on the year-over-year numbers because they correct for seasonality. While we liked what we saw in the first quarter, the market is not necessarily incorrect in its
IBM Continues to Lose Its Luster
April 17, 2014
Share buybacks are not always a good thing. We typically like a firm’s buyback program if it is executed at a level below that of the company’s cash-flow-derived intrinsic value estimate. The buyback activity at these levels creates value in the sense that the cash reduced on the balance sheet (as a result of the repurchases) is less than the positive impact of a lower share count (equity value is divided by shares outstanding to arrive at intrinsic value per share). Under a scenario where a company buys back stock above its intrinsic value estimate, management is effectively destroying shareholder capital – the cash reduced on the balance sheet (as a result of the repurchases) is more than the positive
