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Recent Articles
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Lumen’s Dividend Cut Highlights Effectiveness of Valuentum’s Dividend Methodology and Uniqueness of Dividend Cushion Ratio
Nov 3, 2022
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A lot of times investors only focus on the dividend payout ratio – dividends paid per share divided by earnings per share – or free cash flow coverage of the dividend, but the balance sheet is so very important to the sustainability of the dividend, too – something that the Dividend Cushion ratio embraces but other dividend health metrics do not. For example, Lumen’s dividend payout ratio was 50% ($0.75 in dividends dividend by $1.50 in earnings per share during the first three quarters of the year), and its free cash flow was enough to cover its cash dividends paid during the first nine months of 2022, too. However, the company held a massive ~$25 billion net debt position at the end of the quarter, which pushed its Dividend Cushion ratio deep into negative territory, raising a huge red flag with respect to the sustainability of the payout. Ignoring the balance sheet both with respect to intrinsic value and dividend analysis could be a recipe for disaster.
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ALERT: Replacing DLR with XLE in DGN and HYDN Portfolios; Public Storage Remains One of Our Favorite REITs
Nov 2, 2022
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Image: Public Storage's one-time dividend issued this year has been fantastic for income investors. Image Source: Public Storage.
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 (DGN) portfolio and High Yield Dividend Newsletter (HYDN) portfolio and replace it 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.
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Phillips 66: A Huge Winner in 2022
Nov 1, 2022
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Image Source: Phillips 66.
Shares of Phillips 66 have soared more than 40% this year, and we believe there is still upside on the basis of the high end of our fair value estimate range ($140 per share). The company’s equity has been mighty volatile this year, however, sporting a 52-week range of ~$67-$111, so investors should continue to expect large swings. Right now, things in the energy markets are favorable, and we see no reason to sour on PSX shares at the moment. The company yields ~3.7% at the time of this writing.
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Enterprise Products Partners Reports Strong 3Q, Impressive ~7.5% Distribution Yield
Nov 1, 2022
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Image Source: Enterprise Products Partners.
The Alerian MLP ETF has faced considerable pressure during the past 10 years, generating a paltry annualized return, but shares of many constituents have improved during 2022 as energy resource prices have bounced back. Though we generally shy away from MLPs, more generally, Enterprise Products Partners is one of our favorites given the increased transparency it provides to investors when it comes to cash-flow metrics. Since its IPO, Enterprise Products Partners has raised its distribution 24 years in a row. Shares yield ~7.5% at this time.
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