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Magnificent 7 Earnings Reports Not Bad Thus Far

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By Brian Nelson, CFA   Shortly after Trump’s Liberation Day, where the President unveiled lofty tariffs on numerous countries, we released our wait-and-see outlook for the equity markets, which thus far has proven to be the right move, with the markets largely recovering from the depths reached in April. The S&P 500 (SPY), for example, is down just 3.3% year-to-date, excluding dividends.   A lot has happened since Liberation Day, including easing of tariffs to a 10% baseline for most, if not all, countries, with the key exception of China, where tariffs remain extremely elevated and prohibitive. Many countries are now reportedly negotiating trade agreements with the White House, and we expect China to be added to that list soon, even if … Read more

Trump Tariffs Higher than Expected; What We’re Doing

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By Brian Nelson, CFA The Trump tariff increases came in larger than what we were expecting, and it remains to be seen how they will flow through the global economy, as we monitor potential retaliatory tariffs from other countries. As it relates to the equity markets, we’re taking a wait and see approach at the moment as we monitor new policy changes related to trade, immigration, fiscal (tax), and regulations. In short, we’re not overreacting to the sell off as we won’t have a great handle on the tariff impact to companies for a few quarters when they report results post-tariff increases. That said, we’re expecting continued market volatility, with meaningful risk to the downside, before trade uncertainty alleviates in … Read more

An Important Measure of Leverage for Dividend-Growth and Income-Oriented Shareholders, One That Is Dividend-Adjusted

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As more and more investors rely on company dividends for income, dividends, in our view, have become more debt-like commitments in nature, especially from the perspective of dividend-growth or income-oriented shareholders. Years ago, we rolled out a measure of financial leverage that considers both the company’s debt and the present value of its future expected cash dividend obligations, which, in the eyes of die-hard dividend-growth or income-oriented shareholders, may be implicitly assumed to be debt-like commitments in substance. We think this leverage ratio can be used in conjunction with the Dividend Cushion ratio to gain additional insight into the dividend-paying financial health of an entity. Note: There is often great confusion with respect to published measures of financial leverage, and … Read more

Toll Brothers Expects Demand to Remain Solid Into 2025

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Image: Toll Brothers stock has done quite well during the past couple years. By Brian Nelson, CFA Luxury homebuilder Toll Brothers (TOL) recently reported fiscal third quarter results with revenue and non-GAAP earnings per share coming in better than expectations. Home sales revenues advanced 2% from the same period a year ago, while pre-tax income came in at $503.6 million, down from $553 million in last year’s quarter. Fiscal third quarter earnings per diluted share was $3.60 compared with $3.73 in the same period a year ago, but it exceeded the consensus forecast of $3.31 per share. Net signed contract value was $2.41 billion in the quarter, up 11% from last year’s period, while contracted homes were also up 11% … Read more

You Already Own Whatever Your Investment Will Pay You in Dividends

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“Business owners across the world know that their business is not more or less valuable because they paid themselves a higher distribution this quarter.” – Brian Nelson, CFA Image Source: Images Money Stocks are generally valued on the present value of all their future free cash flows, which already include future dividend payments. A company’s dividend policy may impact an investor’s eagerness to pay a higher price for shares on the basis of a higher yield, but the dividend is a symptom of future free cash flows (and therefore intrinsic value), not a driver behind it. where A (t) is an Enterprise Free Cash Flow (1) at year t,                 B (0) is a Total Debt at time 0,                 … Read more

3 Substantial Benefits of Dividend Growth Investing

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Dear members: There are three primary benefits of a well-executed dividend growth strategy, one that is carried out with prudence and care and one that pays careful attention to the intrinsic value of the stock and its critical cash-based components. Albert Einstein is reported to have called compound interest the “eighth wonder of the world,” but dividend growth investing has the potential to offer long-term investors so much more! Let’s explain. 1) Reinvested Dividends Compound Over Time Over the past decade, I have grown to appreciate the compounding dynamics of reinvested dividends on appreciating stocks even more than historical studies have revealed. The strategy of dividend growth investing not only benefits from the reinvestment of dividends into the purchase of … Read more

Latest Report Updates

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Select the company’s link below to access their stock webpage where their 16-page stock report (pdf) can be downloaded. The stock webpage also houses the company’s dividend report (pdf), where applicable, as well as the latest company/industry commentary and news. For companies updated this week, their stock webpages will reflect the new data this weekend. American Tower (AMT) AutoZone (AZO) Best Buy (BBY) BHP Billiton (BHP) Bristol-Myers Squibb (BMY) ConocoPhillips (COP) Crocs (CROX) Cisco (CSCO) Cintas Corp (CTAS) CubeSmart (CUBE) Dollar Tree (DLTR) DocuSign (DOCU) Estee Lauder (EL) Ford (F) FedEx (FDX) Fiserv (FI) First Solar (FSLR) General Electric (GE) General Motors (GM) Global Payments (GPN) Leggett & Platt (LEG) Eli Lilly (LLY) Lululemon (LULU) McDonald’s (MCD) MercadoLibre (MELI) 3M … Read more

Home Depot’s Comparable Store Sales Continue Declines, Big Ticket Purchases Slow

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By Brian Nelson, CFA Home Depot (HD) is one of the most resilient companies across the retail arena. The firm weathered the Great Financial Crisis [GFC] well and it handled the vicissitudes of the COVID-19 pandemic and aftermath flowingly as it juggled supply chain issues, changing consumer buying preferences, and increased demand as consumers remodeled and upgraded their working and living spaces while cocooning at home. The company’s second-quarter 2023 results, released August 15, came in better than expected, but comparable store sales fell 2% both in aggregate and in the U.S. Though comparable store sales declines improved from bigger declines in the first quarter, Home Depot’s guidance for comparable sales to fall 2%-5% for all of fiscal 2023 indicates … Read more

Latest Report Updates Concentrated in Mining & Chemicals and Healthcare Industries

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———- In our 16-page equity research reports, we offer a fair value estimate for each company based on a rigorous and transparent discounted cash flow process, assess the attractiveness of a stock based on a firm-specific margin of safety, and provide a relative valuation comparison in the context of the company’s industry and peers. Each report includes detailed pro forma financial statements, explicit fundamental forecasts, and scenario analysis. A cross section of the ValueCreation and ValueRisk ratings provides a financial assessment of a company’s business quality (competitive position), while the ValueTrend and Economic Castle ratings offer insight into the trajectory of a firm’s economic profit creation (ROIC versus WACC). Included in each 16-page report is a company’s rating on the Valuentum Buying Index (VBI), a methodology that combines rigorous financial and valuation analysis … Read more

Our Reports on Stocks in the Mining & Chemicals Industry

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Dividend Yield: Estimated on a forward-looking annualized basis. VBI: The Valuentum Buying Index, a timeliness indicator that overlays a price-to-fair-value estimate consideration. Fair Value Estimate: Derived by Valuentum’s enterprise valuation process. Dividend Cushion ratio: A ratio assessing the health of the dividend (the higher, the better). Data as of the date of this article. Individual company reports may have been updated subsequent to the publishing of this article, so please download a company’s stock and dividend report for its latest information and data. Note: The data in the tables of each of the below companies’ respective stock pages is updated the weekend after the publishing of this update. Please click on a company name below to view the corresponding equity … Read more