Valuentum Exclusive Analysis for the Discerning Investor

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Oct 25, 2023

We Will Be Removing CubeSmart and Adding Altria to the High Yield Dividend Newsletter Portfolio
Image: Entities with large net cash positions and substantial free cash flow generation have outperformed not only the broader stock market, but also key high yield areas, including REITs, mortgage REITs and master limited partnerships during the past 10 years. We’re going to continue to lessen our exposure to the equity REIT space, removing CubeSmart from the High Yield Dividend Newsletter portfolio on November 1 and replacing it with Altria. We’re going to keep CUBE-rival Public Storage in the High Yield Dividend Newsletter portfolio for now, but the self-storage space has come under some pressure as consumers may be balking at storage prices as they reassess their spending habits amid higher inflation. Altria doesn’t have a great balance sheet, but the firm does comfortably cover cash dividends paid with free cash flow generation, and the firm does have sizable stakes in Anheuser-Busch-Inbev and Cronos that offer it considerable financial flexibility. Shares of Altria look cheap, too. The swap out of CubeSmart and swap in of Altria within the High Yield Dividend Newsletter portfolio will be effective upon the release of the November edition of the High Yield Dividend Newsletter on November 1.

Oct 23, 2023

Philip Morris Raises Adjusted Diluted EPS Outlook
On October 19, Philip Morris reported excellent third-quarter 2023 results that showed currency-neutral revenue advancing 16.4%, and non-GAAP adjusted diluted earnings per share beating the consensus forecast, increasing more than 20% to $1.67 per share. The company continues to benefit from strong pricing across its combustible tobacco portfolio, its integration of its purchase of Swedish Match, and the popularity of its nicotine pouch ZYN, where shipment volume in the U.S. increased ~66% from the year-ago period.

Sep 20, 2023

ICYMI: Questions for Valuentum’s Brian Nelson
Valuentum's President Brian Nelson, CFA, answers your questions.

Sep 6, 2023

Latest Report Updates Reveal Tremendous Dividend Strength at Walmart
Our latest report updates showcased one very big observation, and that was the tremendous dividend strength of Walmart. The big box retailer’s Dividend Cushion ratio is rock-solid, and improved inventory management has worked wonders on operating cash flow this year, driving it to $18.2 billion during the six months ended July 31 from $9.24 billion in the same period a year ago, all the while organized retail theft remains a huge industry-wide problem. Though shares of Walmart are widely followed and are fairly valued on the basis of our discounted cash-flow process, we stand in awe of the company’s resurgence in free cash flow generation and believe that the firm offers a nice foundation to the markets. Walmart is on a short list of entities that we’d be looking to add to the Dividend Growth Newsletter portfolio at the right price, near the lower end of our updated fair value estimate range.

Aug 25, 2023

Dividend Increases/Decreases for the Week of August 25
Let's take a look at firms raising/lowering their dividends this week.

Aug 3, 2023

Not Expecting Much From Consumer Staples Stocks
Image: Kellogg is representative of many consumer staples stocks that have considerable net debt positions. Image Source: Kellogg’s second-quarter press release. Though consumer staples equities have shown tremendous resilience in the face of adversity and their dividend yields can make sense in certain portfolios, the group is overflowing with net debt positions, meager long-term growth prospects, and free cash flow generation that is largely absorbed by growing per-share dividend liabilities. On the other hand, big cap tech and large cap growth have tremendous net cash positions and substantial future expected free cash flow generation, paving the way for what could be considerable long-term return potential. As with the last decade, we expect cash-based sources of intrinsic value to prevail, and for that, we continue to point to big cap tech and large cap growth as areas for consideration.

Jul 24, 2023

Philip Morris’ Cash-Flow Dividend Coverage Resilient, ZYN Performance Impressive
Image Source: Philip Morris. Our fair value estimate for Philip Morris stands at $105 per share, and we don’t expect to make any material changes to our valuation of the company following the quarterly report. Philip Morris’ combustible tobacco revenue continues to be strengthened by pricing power, while its smoke-free momentum, particularly with ZYN, continues. Though adjusted financial measures continue to look good at Philip Morris, more and more we’re paying closer attention to reported diluted earnings per share, which will face material pressure in 2023 ($5.36-$5.45 per share) compared to $5.81 per share in 2022. The company’s free cash flow remains robust, but its total debt levels are not ideal, in our view. Philip Morris is trading just shy of $100 with a dividend yield of ~5.2% at the time of this writing.

Apr 20, 2023

Philip Morris’ First-Quarter 2023 Results Just Okay
Image: Philip Morris’ smoke-free product portfolio. Image Source: Philip Morris 2022 Form 10-K. We like that Philip Morris has raised its quarterly dividend by more than 170% since it became a public company in 2008, reflecting a compound annual growth rate of ~7.5%, and further growth in the dividend payout should ensue. The company’s Dividend Cushion ratio stands at 1.0, but the mediocre ratio is more of a function of the company’s large net debt position than anything else, as free cash flow generation remains robust. Shares of Philip Morris yield ~5% at the time of this writing.

Mar 23, 2023

The Dividend Cushion Ratio: Unadjusted Is Less Subjective, Adjusted Is More Subjective
Image Source: Mike Lawrence. Question: I'm a subscriber. I'm looking at your Dividend Report for Enterprise Product Partners. It says your Valuentum Adjusted Dividend Cushion ratio for EPD is 1.8 (a ratio that includes future expected proceeds from capital raising endeavors in the coming years), but several lines below it says the Unadjusted Dividend Cushion ratio, which is your regular normal ratio (a ratio that does not include future expected proceeds from capital raising endeavors in the coming years), is 0.22. Please explain the difference between the two ratios, and what is considered a good ratio for the Unadjusted Dividend Cushion ratio, what is an excellent score, what is neutral and what is poor? Also, how much relative importance should I give to each ratio? Also, further down in the section on Unadjusted Dividend Cushion, the chart of EPD has a large negative number in the blue bar, and your text says: "Generally speaking, the greater the 'blue bar' to the right is in the positive, the more durable a company's dividend, and the greater the 'blue bar' to the right is in the negative, the less durable a company's dividend." So that means that EPD's dividend isn't durable, yet your report earlier says that EPD's Dividend Safety rating is GOOD. Can you elaborate?

Feb 20, 2023

Phillip Morris’ Acquisition of Swedish Match Accelerates Smoke-Free Push
Image Source: Phillip Morris. On February 9, Phillip Morris reported fourth-quarter 2022 results. The company’s performance continues to be impacted by the War in Ukraine. Net revenue growth came in at 0.6% for the quarter, while operating income fell 0.8%. However, excluding sales in Russia and Ukraine, net revenue growth advanced 7.9% in the quarter, while operating income growth advanced 10.3%, a much better showing on an adjusted basis. Smoke-free products accounted for ~36.0% of total net revenue in the period. We continue to like Phillip Morris as an income idea, with shares yielding ~5% at the time of this writing. Our fair value estimate stands at ~$105 per share.