Brian Nelson

AT&T Is Not a Position in Valuentum’s Dividend Growth Portfolio

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Sometimes it’s difficult to entertain a variant perspective on a tried-and-true investment. But that’s what we think investors should do when they think about AT&T’s dividend growth potential. AT&T’s Valuentum Dividend Cushion score is below 1 (meaning that the sum of our expectations of the company’s future dividend payments and existing debt balance overwhelms the sum of its future expected free cash flow and existing cash balance). We don’t expect this telecom bellwether to cut its dividend anytime soon (especially given its shareholder base, which comprises mostly of investors holding shares for the dividend payment), but we think there are many other more attractive places for long-term dividend growth than AT&T’s equity. The historical track record of a company’s dividend … Read more

Chipotle’s Fourth Quarter Was Impressive; Shares Still Expensive

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On January 30, Chipotle (CMG) registered arguably one of the best reports during fourth-quarter earnings season. The burrito maker grew revenue nearly 21% in the quarter, as comparable restaurant sales jumped more than 9% thanks to increased traffic, significantly better than the market’s expectations. Though Chipotle had previously announced that its fourth-quarter comp would be better than the 6.2% pace it registered in the third quarter, the performance exceeded expectations by a material margin. We saw similar strength at Starbucks (SBUX) with respect to the composition of its same-store sales growth in the period (mostly traffic expansion), and we think each firm benefited from strategically convenient locations as the industry battled one of the worst winters in the US on … Read more

PotashCorp’s 2014 Earnings Will Decline Due to Pricing Pressure

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On January 30, PotashCorp (POT) reported fourth-quarter and full-year 2013 results. The fertilizer giant faced challenging market conditions during much of the year, and PotashCorp CEO Bill Doyle was quick to note that “this past quarter was a difficult one. Pricing headwinds – most notably in potash – weighed on (its) performance, although there were signs as the quarter came to a close that the uncertainty in global markets was beginning to abate. (Its) focus remain(s) on those things (it) can influence, and (it) took important steps to enhance (its) competitive position across all three nutrients and prepare the company to deliver better performance.” Unfortunately, the most important “thing” is something that PotashCorp cannot control: pricing. Competitive pressures and a … Read more

Previewing Yum! Brands’ Fourth Quarter Results

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Yum! Brands (YUM), the owner of KFC, Pizza Hut, and Taco Bell, will report its fourth-quarter results after the market close Monday. The quick-service restaurant giant is a global powerhouse with solid brands and strong cash-flow generating capacity. Yum! Brands has generated cash flow from operations of $1 billion or more in each of the past 10 years, with the firm pulling in more than $2 billion in each of the past two years. The company’s greatest growth opportunity resides with its KFC brand in China. Per one million people, there are just 3 KFC units in China. In other Asian countries, this ratio is closer to 20 to 1, implying significant long-term expansion in the country. China’s consumer class … Read more

Valuentum’s February Edition of Its Dividend Growth Newsletter!

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Attention! by Brian Nelson, CFA We need your attention! The markets have had quite a run from the March 2009 depths of the Great Recession, and we need you today more than ever to apply your faculties to your investments. Though we highlighted the coming contraction in earnings multiples (stock prices) December 24, if you missed that warning, there is no point in our being happy (Here’s the note: /20131224_1). Remember, we only do well when you do well—our interests are tied 100% given our members-only business model. In light of recent emerging market fears, if you’re not already visiting our website more frequently and/or following us on Twitter (if you have an account) for real-time updates (@Valuentum), we encourage you … Read more

Google Shows Why Patience and Perspective Are Important

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By Brian Nelson, CFA The equity markets are an interesting beast. In October 2012, we pounded the table on adding Google (GOOG) to the Best Ideas portfolio (see email transaction alert archive here), which followed the September 2012 edition of the Best Ideas Newsletter, where we highlighted the company as the latest example of the power of the Valuentum Buying Index (see edition here), our stock-selection methodology. Part of the reason why I wanted to bring this up is not to pat ourselves on the back, but instead to reiterate the importance of ‘patience’ and ‘perspective’ in investing, regardless of the process you pursue. Let’s look at the following chart of Google from the date of the release of the … Read more

Chevron’s Balance Sheet Slowly Losing Luster

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Energy giant Chevron (CVX) posted lackluster fourth-quarter results Friday. Though we were largely expecting the results (given the preannouncement earlier this month), we were quite disappointed with the performance of the company’s balance sheet, as the firm has now swung from a net cash position to a net debt position. Part of the reason we hold Chevron in the portfolio of the Dividend Growth Newsletter originates from its pristine balance sheet, which we view as a necessity for us to hold onto a commodity-producing entity through the course of the economic cycle (especially for dividend growth). However, we can’t really say Chevron’s balance sheet is pristine anymore, as its $16.2 billion in cash at the end of 2013 now falls … Read more

Mattel’s Results Fail to Impress; Awaiting Hasbro’s Earnings in February

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On Friday, toy maker Mattel (MAT) reported disappointing fourth-quarter financial results that sent tremors through much of the physical toy industry. The firm noted that worldwide net sales fell 6% from the prior-year quarter, with North American gross sales down 10% and ‘International’ sales roughly flat with the same quarter a year ago. Weakness across its core brand portfolio was startling: Barbie down 13%, Hot Wheels down 8% and Fisher Price down 13%. The only core brand that advanced was American Girl, which nudged just 3% higher. Adjusted earnings per share came in at $1.07 versus the $1.12 mark in last year’s quarter. Though the bottom-line results missed expectations by $0.13, it didn’t stop the board from raising the dividend … Read more

Visa Boasts One of the Best Business Models on the Market Today

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Global payments technology company Visa (V) showed us why we continue to like the company when it reported fiscal first-quarter results Thursday. The firm is not a bank and does not issue cards or extend credit or set rates/fees for account holders of Visa-branded cards, but it does operate one of the most advanced processing networks, and we can think of few other business models that generate a stronger competitive advantage. Visa takes on no credit risk–unlike American Express (AXP) and Discover Financial (DFS)–but remains an integral part of the secular trend toward a cashless society and online consumption, where most transactions are not made with cash. Visa is the largest retail electronic payments network in the world based on … Read more