Lumen’s Dividend Cut Highlights Effectiveness of Valuentum’s Dividend Methodology and Uniqueness of Dividend Cushion Ratio
November 3, 2022
Image Source: Valuentum By Brian Nelson, CFA The Dividend Cushion ratio considers the company’s net cash on its balance sheet (total cash less long-term debt) and adds that to its forecasted future free cash flows (cash from operations less capital expenditures) over a five-year period and divides that sum by the company’s future expected cash dividend payments over the next five years. At its core, the Dividend Cushion ratio tells investors whether the company has enough cash to pay out its dividends in the future, while considering its debt load (capital structure). If a company has a Dividend Cushion ratio above 1, it can cover its dividend, but if it falls below 1, trouble may be on the horizon. The
ALERT: Replacing DLR with XLE in DGN and HYDN Portfolios; Public Storage Remains One of Our Favorite REITs
November 2, 2022
“The REIT space has had a difficult time this year. Public Storage, which reported results November 1, remains one of our favorite REITs, but we are making a change to remove DLR in the simulated Dividend Growth Newsletter portfolio and High Yield Dividend Newsletter portfolio and replace its “weighting” with the Energy Select Sector SPDR (XLE). The changes will be reflected upon the release of each newsletter’s next edition. We continue to monitor the REIT space cautiously as interest rates rise, and as investors seek out alternatives for income, including I-Bonds yielding 6.89% and certificates of deposit approaching 4% yields.” — Brian Nelson, CFA By Brian Nelson, CFA This year has not been kind to real estate investment trusts (REITs),
Phillips 66: A Huge Winner in 2022
November 1, 2022
Image Source: Phillips 66 By Brian Nelson, CFA The refining industry continues to mint profits these days, and Phillips 66 (PSX) has been no exception. We warmed up to the stock earlier this year, and we continue to like shares. The high end of our fair value estimate stands at $140 per share, and we would not be surprised to see the company reach those levels, given sentiment regarding energy equities these days. Phillips 66’s portfolio spans operations across ‘Midstream,’ ‘Chemicals,’ ‘Refining’ and ‘Marketing and Specialties,’ and the big driver in the company’s third-quarter report, released November 1, was its ‘Midstream’ division, which saw adjusted pre-tax income advance to $645 million from $292 million in the year-ago period. Though most
Enterprise Products Partners Reports Strong 3Q, Impressive ~7.5% Distribution Yield
November 1, 2022
Image Source: Enterprise Products Partners By Brian Nelson, CFA There are now only 15 holdings in the ALPS Alerian MLP ETF (AMLP) as the number of master limited partnerships (MLPs) on the market continues to shrink. According to data from ALPS Advisors, the Alerian MLP Infrastructure Index, on a total return basis, has advanced just 0.74% during the past 10 years. During the past half-decade or so, the group has undergone a considerable number of distribution cuts, as energy markets have waned. The ALPS Alerian MLP ETF is having a much better year during 2022, however. The performance so far during 2022 won’t make up for the collapse in the sector during the past decade, but it will help. Year-to-date,
Newmont Reports Challenging 3Q, But the Stock Is a Key Diversifier in the Dividend Growth Newsletter Portfolio
November 1, 2022
Image Source: Newmont Mining By Brian Nelson, CFA Gold has not necessarily lived up to its merits as an inflation hedge recently, with the SPDR Gold Trust ETF (GLD) falling nearly 10% so far this year, but that doesn’t mean it still doesn’t have valuable diversification qualities; the market, as measured by the SPDR S&P 500 Trust ETF (SPY), is down over 19% through November 1. Our favorite gold miner and Dividend Growth Newsletter portfolio holding, Newmont Corp (NEM) has fared worse this year, but we still like it as a key diversifier in the newsletter portfolio. Newmont Corp reported third-quarter results November 1 that weren’t great, but management noted that it remains on track to “achieve full-year guidance of
Recent Fair Value Estimate Changes
October 31, 2022
Let’s have a look at recent fair value estimate changes across our coverage universe. ——————————————— About Our Name But how, you will ask, does one decide what [stocks are] “attractive”? Most analysts feel they must choose between two approaches customarily thought to be in opposition: “value” and “growth,”…We view that as fuzzy thinking…Growth is always a component of value [and] the very term “value investing” is redundant. — Warren Buffett, Berkshire Hathaway annual report, 1992 At Valuentum, we take Buffett’s thoughts one step further. We think the best opportunities arise from an understanding of a variety of investing disciplines in order to identify the most attractive stocks at any given time. Valuentum therefore analyzes each stock across a wide spectrum of philosophies,
Honeywell Jumps on Third-Quarter Report, Strong Guidance
October 27, 2022
Image Source: Honeywell By Brian Nelson, CFA On October 27, Dividend Growth Newsletter portfolio holding Honeywell International (HON) reported solid third-quarter performance and provided higher guidance for the full-year 2022. We continue to like the company as an idea in the simulated Dividend Growth Newsletter portfolio, as we expect robust dividend growth in the coming years. The high end of our fair value estimate of Honeywell stands at $224 per share. Shares yield ~2.2% at the time of this writing. During the third quarter of 2022, Honeywell reported organic sales growth of 9%, pointing to a double-digit pace of expansion in ‘Honeywell Building Technologies,’ ‘Performance Materials and Technologies,’ and ‘Aerospace.’ The firm’s operating margin also advanced 90 basis points higher,
McDonald’s, Chipotle’s Third-Quarter Results Were Solid, Strong Comp Performance
October 27, 2022
Image Source: Valuentum By Brian Nelson, CFA On a day where a high-profile stock such as Meta Platforms (META) is down more than 20%, it’s difficult to focus on the positives. But we are – we recently replaced Meta Platforms with McDonald’s (MCD) in the simulated Best Ideas Newsletter portfolio, and we’re not looking back. McDonald’s is popping nearly 4% during the trading session October 27, and we continue to point to the high end of the fair value estimate range for shares as a reasonable intermediate term target ($300 per share). We’ve been quite concerned about the macro environment during the past several months as inflation changed from a positive catalyst to business pricing and strong equity returns in
