Brian Nelson

Earnings from 5 Dividend Growth Giants

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Let’s evaluate the recent quarterly results of five traditional dividend growth plays. Please be sure to access the 16-page reports and dividend reports of the firms included in this article. If you are interested in receiving the valuation models of companies, please let us know. Coca-Cola (KO) There are few companies fundamentally stronger than Coca-Cola. The firm boasts a number of competitive advantages: its brands, financial strength, distribution system, global reach, and a deep executive bench. It has raised its dividend in each of the past 50+ years, and we expect dividend growth to continue at a high-single-digit annual pace for the foreseeable future. Though the strength of Coca-Cola’s competitive position is undeniable, we don’t expect the ‘cola wars’ with … Read more

How We Add Incremental Value to Your Research and Analysis on Apple

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There’s a lot we can talk about with respect to Apple’s solid fiscal third-quarter results–and we will–but the most important takeaway from this article is how we strive to add incremental value to your research and analysis of the iPhone giant. First of all, we don’t play the quarterly earnings beat-or-miss game at Valuentum. You can read about how we think about near-term forecasts and what we think are the most important drivers behind a firm’s long-term intrinsic value here. Most sell-side analysts and commentators spend the majority of their time analyzing factors that impact the company’s financial performance (not necessarily its stock price) over the next couple years, a time frame that generally accounts for ~20% of a company’s total … Read more

Holy Guacamole! McDonald’s Wishing It Had Kept Chipotle

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Very few investors probably remember that Chipotle (CMG) used to be owned in part by McDonald’s (MCD). McDonald’s had originally taken a stake in Chipotle in February 1998, when Chipotle had but 14 restaurants in Denver. The maker of the Big Mac would go on to own 90% of the subsidiary and eventually spin it off in an initial public offering in January 2006. McDonald’s would receive ~$1.5 billion from the sale, but with Chipotle’s market capitalization now at over $20 billion, it’s clear the burger-and-fries behemoth exited way too early. The most recently-reported results by both restaurants tell the diverging story quite well. McDonald’s reported relatively disappointing second-quarter results Tuesday. The performance can best be described as flat. Global … Read more

Altria Raises Lower End of 2014 Earnings Guidance Range

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Tobacco giant Altria (MO) reported second-quarter results Tuesday. The firm is one of the most widely-followed stocks on our website and is included in both the Best Ideas portfolio and Dividend Growth portfolio. Though Altria’s revenue expanded modestly, net of excise taxes, in the quarter thanks to the firm’s tremendous pricing power, cigarette smoking continues its steady and expected decline in the US. The company’s second-quarter adjusted domestic shipment cigarette volume dropped ~4% in the period, though its core brand Marlboro continues to increase its retail share of the total cigarette category (up 0.3 retail share points in the second quarter). Altria’s smokeless products segment fared better, growing both the top-line and operating income at a faster clip than the … Read more

Yum! Brands, McDonald’s: ‘Big Trouble in Little China’

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Source: Dragon TV 00:27 / 08:28 Source: Dragon TV 00:35 / 08:28 Source: Dragon TV 01:19 / 08:28 The pictures above are allegedly from a Chinese plant of Shanghai Husi Food, owned by OSI Group, which is based in Aurora, Illinois. This link source will take you directly to the actual news footage from local Dragon TV (it is not translated to English, but the video is of high quality). Shanghai Husi Food is a key local meat supplier in China to KFC, owned by Yum! Brands (YUM), and McDonald’s (MCD)—as well as Starbucks (SBUX), but to a lesser extent. All three US-based restaurants have since halted buying meat products from the company. What makes this story worse is that … Read more

Still Not Worried about Hasbro

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It was December 2011, and our team was considering adding either Mattel (MAT) or Hasbro (HAS) to the Dividend Growth portfolio. We could only add one due to diversification considerations (both are consumer discretionary physical toy makers), and both had strong dividends and were undervalued. Hasbro, however, had a slightly better Dividend Cushion score, and we opted to include its shares in the portfolio instead of Mattel’s. Though we discussed a great many different things about both of the companies, we’ve been very pleased with the selection of Hasbro into the portfolio, and we credit the Dividend Cushion methodology for providing the incremental relative insight into the stock-selection process. Since its addition, Hasbro has leapt more than 60%, excluding dividend … Read more

RE: Silly Rabbit, Dividends Do Matter…

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From: Brian Nelson, CFADate: July 21, 2014 12:47 pmTo: Readers of ‘Silly Rabbit, Dividends Do Matter…’ and ‘Dividends Don’t Matter…’ — Seeking Alpha  There is truth to both — that dividends do matter and that dividends don’t matter. For valuation experts, and in the context of a free cash flow to the firm (FCFF) model, the only thing that matters is what a firm generates in enterprise free cash flow (FCFF), not how that enterprise free cash flow leaves the business, per se (1). I’ll list the many different definitions of cash flow at the bottom of this memo. When calculating intrinsic value, dividends and/or distributions do not matter to valuation (other than when a dividend and/or distribution is paid, the … Read more

IBM Still Reporting Low-Quality Earnings

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Warren Buffett doesn’t seem to care, as he owns 6% of the firm. But we think it’s worth pointing out that IBM’s (IBM) second-quarter results, released July 17, continue to fit the theme of low-quality earnings that we brought to light after its fourth-quarter 2013 performance (click here). Please don’t misunderstand–IBM is a fantastic company with significant competitive advantages. But that doesn’t make it immune to independent, objective financial analysis. Let’s have a look at the quarterly results. For earnings growth to be sustainable, the top line must be expanding, as cost cuts, by definition, are finite. In IBM’s second-quarter report, revenue dropped 2%, while its services backlog—a key indicator of future revenue performance—dropped 1%, after adjusting for its divested customer … Read more

Dividend Increases for the Week Ending July 18

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Below we provide a list of firms that raised their dividends during the week ending July 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 Bassett Furniture (BSET): now $0.08 per share quarterly dividend, was $0.06. CIT Group (CIT): now $0.15 per share quarterly dividend, was $0.10. Education Realty Trust (EDR): now $0.12 per share quarterly dividend, was $0.11. Fidelity Southern (LION): now $0.09 per share quarterly dividend, was $0.08. Goodyear (GT): now $0.06 per share quarterly dividend, was $0.05. Greene County Bancorp (GCBC): now $0.18 per share quarterly dividend, was … Read more