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3 Strong Dividend Payers to Consider Within Consumer Staples

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By Brian Nelson, CFA Dividend growth may never go out of style. For one, there are tremendous compounding benefits to investing in dividend growers over the long haul, “3 Substantial Benefits of Dividend Growth Investing.” A focus on traditional cash-based sources of intrinsic value and dividend health is therefore essential to avoid tragic dividend cuts in your portfolio (see our walk-through of the cash-based sources of intrinsic value and how to find them in our article/video about Apple here). Three dividend growers that we do not include in the Dividend Growth Newsletter portfolio but that have recently-reported calendar first-quarter 2021 earnings and may be worth considering in a diversified equity portfolio are Kellogg (K), Colgate-Palmolive (CL) and Clorox (CLX). These three … Read more

Berkshire Hathaway Charging Higher

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Image Shown: Shares of Berkshire Hathaway Inc Class B stock are on a nice upward climb year-to-date, and we include BRK.B as an idea in the Best Ideas Newsletter portfolio. By Callum Turcan On Saturday, May 1, Berkshire Hathaway Inc (BRK.A) (BRK.B) reported first quarter 2021 earnings that impressed, in our view. We include Berkshire Hathaway Class B shares as an idea in the Best Ideas Newsletter portfolio and continue to be big fans of the firm and its management team, led by CEO and Chairman Warren Buffett and Vice Chairman Charlie Munger. Some big news came out recently as it concerns the eventual management transition at Berkshire Hathaway. Reportedly, Greg Abel, who runs Berkshire Hathaway’s non-insurance operations, would take … Read more

Coca-Cola Looks Ready to Break Out, Valuation Not Attractive Though

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Image Shown: Coca-Cola’s technicals look like they are carving out a nice cup-and-handle pattern, but its valuation leaves a lot to be desired, in our view. By Brian Nelson, CFA On April 19, Coca-Cola (KO) reported solid first-quarter results that showed net revenue increasing 5% and its operating margin advancing 2.5 percentage points from the year-ago period. Comparable earnings per share leapt 8%, to $0.55. Very few companies have as strong a brand name and dividend track record as Coca-Cola, but investors should be cautious about its valuation, in our view. On the basis of our discounted cash-flow modeling approach, the high end of our fair value estimate range of Coca-Cola stands at $48 per share, which reflects over 20x … Read more

SPACs Are Good for Markets, Not SPAC-tacular for Investors

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Image: Performance of the Defiance NextGen SPAC IPO ETF (SPAK), where “a 60% weighting is applied to IPO companies derived from SPACs and 40% is allocated to common stock of newly listed Special Purpose Acquisition Companies (“SPACs”), ex-warrants” has been roughly flat since inception in October 2020.   By Brian Nelson, CFA What a time to be an investor…ehem, speculator! Cryptocurrencies, non-fungible tokens (NFTs), and now the boom in Special Purchase Acquisition Companies, more commonly known as SPACs. First, the good: We like that SPACs will create more publicly listed companies to improve investor choice because the number of publicly traded companies has been dangerously shrinking in recent years…but that’s really all we like about them. A SPAC is just … Read more

ALERT: Raising Cash in the Newsletter Portfolios

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January 27, 2021 ALERT: Raising Cash in the Newsletter Portfolios We are raising the cash position in the simulated Best Ideas Newsletter portfolio and simulated Dividend Growth Newsletter portfolio to 10%-20%. — By Brian Nelson, CFA — Our research has been absolutely fantastic for a long time, but 2020 may have been our best year yet. You can read the 2020 recap here. With the S&P 500 trading within our fair value estimate range of 3,530-3,920 (and the markets rolling over while showing signs of abnormal behavior), we’re raising the cash position in the Best Ideas Newsletter portfolio and Dividend Growth Newsletter portfolio to 10%-20%. — For more conservative investors, the high end of this range may even be larger, especially … Read more

All I Want for Christmas Are Dividend Aristocrats

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Image Source: Five Furlongs It may not be as catchy as Mariah Carey’s Christmas hit, “All I Want For Christmas Is You,” but if you ask a dividend growth investor what they might want for Christmas as it relates to an investment, they might start singing about a long list of Dividend Aristocrats–a list of companies that have increased their dividends in each of the past 20-25+ years. Therefore, we wanted to do something special this Christmas for members. We’ve aggregated a list of every non-financial Dividend Aristocrat in our 16-page stock report coverage universe and made a list conveniently available below, including some key data and links directly to their 16-page stock reports (pdf). To access the 16-page stock … Read more

Walking Through the Calculation of the Dividend Cushion Ratio

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A cow for her milk, A hen for her eggs, And a stock, by heck, For her dividends. An orchard for fruit, Bees for their honey, And stocks, besides, For their dividends. – John Burr Williams, “The Theory of Investment Value” (1938) Executive Summary: We believe the Dividend Cushion ratio is one of the most helpful tools an income or dividend growth investor can use in conjunction with qualitative dividend analysis. The ratio is one-of-a-kind in that it is both free-cash-flow based, considers balance sheet health, and is forward looking. Since its development in 2012, we estimate its efficacy at ~90% in helping to forewarn readers of impending dividend cuts. For companies where Valuentum reports are available, the Dividend Cushion ratio can be found in a stock’s Dividend … Read more

Coca-Cola’s 3.3% Dividend Yield Not Bad

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Image: Coca-Cola By Brian Nelson, CFA There are few companies that have stood the test of time like Coca-Cola (KO). With consumer preferences seemingly changing at the drop of a hat, it is hard to believe that the first glass of Coca-Cola was served in Atlanta more than 100 years ago, in 1886. That’s just 10 years after the first commercially successful combustion engine was invented and more than 20 years before the first Model T Ford rolled off the production line. The next 100 years for Coca-Cola won’t be as easy as the first, in our view, given health trends against sugar consumption and efforts to combat the obesity epidemic, but ongoing innovation may continue to keep this beverage … Read more

ICYMI — Dividend Growth Strategies Struggle

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Image: A large cap growth ETF (orange) has significantly outperformed an ETF tied to a dividend growth strategy, the SPDR S&P Dividend ETF (SDY), which mirrors the total return performance of the S&P High Yield Dividend Aristocrats Index. — By Brian Nelson, CFA — To no surprise to many members, several dividend growth strategies have faced tremendous pressure during 2020. The Journal recently wrote a piece on the topic, but from our perspective, the problem with many dividend growth strategies is that they tend to be balance-sheet agnostic and pay little attention to traditional free cash flow expectations, focusing only on the yield itself, sometimes dismissing future fundamentals in favor of historical growth trends and the inferior EPS-based dividend payout ratio. — In many dividend-targeted … Read more