Brian Nelson

Cisco: Not the Best Idea in Big Cap Tech

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It’s hard not to like Cisco’s (CSCO) strong free cash flow generation, solid cash balance, and dominance in the communications networking market, but fiscal fourth-quarter results (ended July 26), released Wednesday after the close, weren’t great. We continue to prefer Apple (AAPL) in the Best Ideas portfolio and Microsoft (MSFT) in the Dividend Growth portfolio as the large cap technology exposure, among others. The Best Ideas portfolio seeks to find firms that have good value and good momentum characteristics and typically holds each idea from a Valuentum Buying Index rating of a 9 or 10 (consider buying) to a rating of a 1 or 2 (consider selling). The goal of the Best Ideas portfolio is to generate a positive return … Read more

Kinder Morgan Grows Leery of MLP Structure; Consolidates Holdings

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Kinder Morgan is the largest midstream and the fourth-largest energy company (based on combined enterprise value) in North America. The entity owns an interest in or operates ~80,000 miles of pipelines and 180 terminals. The firm’s publicly-traded companies include Kinder Morgan (KMI), Dividend Growth portfolio holding Kinder Morgan Energy Partners (KMP), Kinder Morgan Management (KMR) and El Paso Pipeline (EPB). KMI owns the general partner and limited partner interests in both KMP and EPB. KMP is one of the largest publicly traded pipeline master limited partnerships in America. KMR is a limited liability company and its only significant assets are the partnership units it owns in KMP. EPB is a publicly traded pipeline master limited partnership. — source The convoluted … Read more

Rio Tinto Remains One of Our Favorite Ideas for Commodities Exposure

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Firms in commodities-driven industries are notoriously difficult to value–not only is there execution risk related to their cost structures but the price they receive for the respective commodities that they produce is cyclical—and driven by external factors beyond their individual control. For example, BHP Billiton (BHP) can’t necessarily raise its prices on standard-grade iron-ore at a high-single-digit pace unless the market colludes (others follow along with its price hike). This is unlike a company such as Hershey (HSY) that can hike prices almost at will to offset rising cocoa costs. That’s why commodities firms can only carve out competitive advantages by being the low-cost provider (their prices are set by the marketplace). Though it is more difficult for a commodities-producing … Read more

Dividend Increases for the Week Ending August 8

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Below we provide a list of firms that raised their dividends during the week ending August 8. 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 Alon (ALJ): now $0.10 per share quarterly dividend, was $0.06. Aqua America (WTR): now $0.165 per share quarterly dividend, was $0.152. Arsenal Energy (AEYIF): now $0.07 per share quarterly dividend, was $0.065. Avnet (AVT): now $0.16 per share quarterly dividend, was $0.15. Badger Meter (BMI): now $0.19 per share quarterly dividend, was $0.18. Bank of America (BAC): now $0.05 per share quarterly dividend, was $0.01. Carlisle … Read more

Energy Transfer Partners’ Solid Distribution Coverage Ratio

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By Brian Nelson, CFA We understand that to many dividend growth investors the dividend/distribution isn’t everything–it is the only thing. That’s why we spend a considerable amount of time assessing the health and growth potential of dividends/distributions. To us, a master limited partnership’s (MLP) distribution is inherently risky. One of my former colleagues at Morningstar, Jason Stevens, emphasized in an April 2013 research piece on the group what Valuentum has been telling investors for a while: Another implication of MLP distribution policies that is important to understand is the impact of high distribution payouts on MLPs’ capital spending. Unlike corporations, which can use retained earnings and excess cash for growth purposes, MLPs retain very little of the cash generated each … Read more

M&A Environment Cracks: Sprint and Fox

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One of the most important concepts for any investor to accept is the following: price is different than value. Price is what you pay for shares of a company. Price is driven by buying and selling and the collective monetary-driven outcome of all investors’ opinions. Price can be influenced by dividend payments, news, rumors and other dynamics that influence the buying and selling of stock. Value, on the other, is based purely on future expectations of a company’s entire future free cash flow stream (and the firm’s non-operating, excess net cash on the balance sheet). Value considers a company’s competitive advantages (patents, intellectual property, network effect and the like) and compresses these complex qualitative variables into a future free cash … Read more

Big Oil Round Up: Earnings Portal

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Our take on the major oil and gas space remains little changed as a result of second-quarter results from the majors. We continue to expect rising energy prices over the long haul, and we highly encourage new readers to take a look at our comprehensive outlook for oil and gas prices. Please access it at the following link: ‘Our Comprehensive Outlook for Crude Oil and Natural Gas Prices.’ We have a very unique thesis on the group, and for holders of exploration and production entities, we expect a long-term tailwind in investors’ favor. Generally,it’s difficult not to like many entities in the large oil and gas space. ConocoPhillips continues to execute nicely, while Exxon remains a consistently strong economic-value generator … Read more

Dividend Increases for the Week Ending August 1

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Below we provide a list of firms that raised their dividends during the week ending August 1. The dividend reports of covered firms on this list will be updated shortly with the new information. To access the dividend reports please use the ‘Symbol’ search box in the website header. Firms Raising Their Dividends This Week Acme United (ACU): now $0.09 per share quarterly dividend, was $0.08. Alliance Resource Partners (ARLP): now $0.625 per share quarterly distribution, was $0.611. CBOE (CBOE): now $0.21 per share quarterly dividend, was $0.18. CorEnergy (CORR): now $0.13 per share quarterly dividend, was $0.129. Crane (CR): now $0.33 share quarterly dividend, was $0.30. Healthcare Trust of America (HTA): now $0.145 per share quarterly dividend, was $0.14375. Host … Read more

Procter & Gamble Wraps Up a Strong Fiscal Year 2014

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Procter & Gamble (PG) reported strong fiscal fourth-quarter results Friday. The April-June quarter revealed organic sales expansion of 2% thanks to strong pricing expansion and core earnings-per-share growth of 20%, to $0.95. Excluding the negative impact of foreign exchange, currency-neutral core earnings per share increased 25%. We continue to like the pricing power of Procter & Gamble’s brands, and the pace of earnings growth was fantastic during the last quarter of its fiscal year. Management continues to deliver on its top and bottom-line commitments. P&G’s brands include Tide, Ariel, Gillette, Venus, Bounty, Charmin, Pantene, Olay, Pampers, Crest, Oral-B, Duracell, and Vicks. These brands aren’t going away anytime soon, in our view. Though management indicated that it will shed some lower-margin brands, … Read more