MDLZ

Use Both the Dividend Cushion Ratio (Probability of a Dividend Cut) and the Qualitative Dividend Ratings in Your Assessment of the Payout

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The Dividend Cushion ratio is one of the most powerful financial 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 and forward looking. Since its creation in 2012, the Dividend Cushion ratio has forewarned readers of approximately 50 dividend cuts. We estimate its efficacy at ~90%. By Brian Nelson, CFA Dividend investing has probably never been as popular as the past couple years. Remember, however, the dividend is capital appreciation that otherwise would have been achieved had the dividend not been paid. If you had a stock that was $10, and it paid a $1 dividend, you don’t have a $10 stock and … Read more

Investors Likely Overreacting to Long-Run Impact That Weight-Loss Drugs Will Have on Snack and Food Stocks

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Image: Domino’s stock has slumped recently due to weakening same-store sales expansion and concerns that weight-loss drugs will have on snack and food demand. By Brian Nelson, CFA The American eater continues to fight the “battle of the bulge” as many seek improved lifestyles and the health benefits from losing weight and getting in shape. The healthcare industry is delivering on this front, too, with diabetes drugs from Novo Nordisk (NVO) and Eli Lilly (LLY) called GLP-1 agonists that also have weight-loss benefits. Though we applaud what looks to be a solution in part for the obesity epidemic that has overtaken the U.S., investors are growing concerned that snack and food stocks will see slackening demand. The retail sector, for … Read more

Dividend Increases/Decreases for the Week of September 29

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Below we provide a list of firms that raised their dividends during the week ending September 29. The dividend reports of covered firms on this list will be updated shortly with the new information. To access our dividend reports use the ‘Symbol’ search box in our website header. Firms Raising Their Dividends This Week                          Accenture (ACN): now $1.29 per share quarterly dividend, was $1.12. Bancolombia S.A. (CIB): now $0.892 per share quarterly dividend, was $0.852. Bankinter, S.A. (BKNIY): now $0.1105 per share quarterly dividend, was $0.0818. Barratt Development plc (BTDPY): now $0.5893 per share semi-annual dividend, was $0.2535. Bid Corporation Limited (BDDDY): now $0.266 per share semi-annual dividend, was $0.240. CenterPoint (CNP): now $0.20 per share quarterly dividend, … Read more

ICYMI: Questions for Valuentum’s Brian Nelson

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Valuentum’s President Brian Nelson, CFA, answers your questions. Q: What Is Valuentum? A: In short, it is a strategy that combines the concepts of value and momentum within individual stocks. We measure value through the cash-based sources of intrinsic value – net cash on the balance sheet and future expected free cash flow. We measure momentum rather simply, generally via relative strength or other technical and momentum indicators. We like stocks with strong net cash positions on the balance sheet, ones that are generating tremendous free cash flow, and have strong secular growth prospects such that the prospect for expectations of free cash flow can continue to be ratcheted higher. Today, most Valuentum stocks are included in the stylistic area … Read more

Our Latest Report Updates

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The data for these companies will be updated on their respective web pages this weekend. Download their updated 16-page reports (pdf) by selecting the link below. Chevron (CVX) ConocoPhillips (COP) Enbridge (ENB) General Mills (GIS) Keurig Dr Pepper (KDP) Kimberly-Clark (KMB) Kroger (KR) Mondelez Intl (MDLZ) Occidental Petroleum (OXY) Paramount Global (PARA)  Pioneer Natural Resources (PXD) T-Mobile (TMUS) ———- 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, … Read more

Not Expecting Much From Consumer Staples Stocks

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By Brian Nelson, CFA Within the discounted cash-flow [DCF] modeling process (also known as enterprise valuation, or the free cash flow to the firm model), there are two primary sources of cash-based intrinsic value: net cash on the balance sheet and future expected enterprise free cash flows. The sum of net cash on the balance sheet and the present value of future enterprise free cash flows divided by weighted average diluted shares outstanding results in a fair value estimate per share, which then can be divided by earnings to arrive at a value-derived price-to-earnings (P/E) ratio. Only when this value-derived P/E ratio is compared to the price-observed P/E ratio—the latter calculated as price divided by estimated earnings–can a company then be … Read more

Positive Pricing Elasticities Continue to Power Pepsi

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Image: Effective net pricing continues to be strong at Pepsi. Image Source: Pepsi By Brian Nelson, CFA  On July 13, PepsiCo, Inc. (PEP) reported excellent second-quarter 2023 results. The firm’s pricing power continues to impress as the executive team manages modest losses in organic volume with huge effective net pricing increases. For the 12 weeks ended June 17, 2023, organic volume dropped 2.5% while effective net pricing increased a whopping 15% (effective net pricing increased 14% in PepsiCo Beverages North America). Operating income surged more than 75% in the quarter. For the 24 weeks ended June 17, 2023, free cash flow of $506 million was 32% higher than the $383 million mark in the same period a year ago. Pepsi … Read more

How Much More Will Consumers Pay for McCormick Spices?

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Image: Pricing growth remains the story at McCormick, but for how long? Image Source: McCormick By Brian Nelson, CFA Those that know McCormick & Company (MKC) are aware of its dominance in spices and seasonings, but just how much more can the consumer pay for its products? So far so good it seems, but we have doubts consumers are going to keep paying up and up ad infinitum for its flavors. Something’s got to give eventually, and that could result in a big quarterly miss, in our view. When McCormick reported second-quarter fiscal 2023 results on June 29 for the period ending May 31, 2023, all its sales growth came from pricing actions, with McCormick experiencing a 0.9% decline in … Read more

Call Me Unconcerned

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Image: Large cap growth has dominated returns the past five years. The Best Ideas Newsletter portfolio continues to have significant exposure to this area. By Brian Nelson, CFA When it comes to the financial markets, the debt ceiling debate is nothing to worry about. Countries (sovereigns) cannot generally default on debt that is denominated in their own currency. The concern that there will be any sort of calamity if the U.S. government doesn’t raise the debt ceiling is far overblown, in our view. The political will of the U.S. to pay its debt will only resolve itself in time, and any risk premium built into Treasuries as a result of the debt ceiling showdown will be fleeting. Of course, nobody … Read more

Nice! — NASDAQ-100 Follows Through on Breakout

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Image: NASDAQ-100 breaks through August 2022 resistance. NOW READ: There Are No Free ‘Income’ Lunches ———- It’s Here!  The Second Edition of Value Trap! Order today!   —– Tickerized for holdings in the QQQ. Brian Nelson owns shares in SPY, SCHG, QQQ, DIA, VOT, BITO, RSP, and IWM. Valuentum owns SPY, SCHG, QQQ, VOO, and DIA. Brian Nelson’s household owns shares in HON, DIS, HAS, NKE, DIA, and RSP. Some of the securities written about in this article may be included in Valuentum’s simulated newsletter portfolios. Contact Valuentum for more information about its editorial policies.         Valuentum members have access to our 16-page stock reports, Valuentum Buying Index ratings, Dividend Cushion ratios, fair value estimates and ranges, dividend reports and … Read more