PEP

Peltz’s Reasons for Breaking up Pepsi Do Not Hold Water

by

Our team took a read of Barron’s cover story over the weekend on Pepsi (PEP) that goes into activist investor Nelson Peltz’s thesis for breaking up the firm into two pieces: a soda group and a snacks group. Nelson Peltz’s Trian Partners holds ~$1.2 billion of Pepsi’s shares, so he has a relatively large voice on the future direction of the company. Barron’s seemed to take the opinion that a break-up makes sense, but after reading the article, we were left with little economic reason to believe that a split should be pursued. For background, the thesis on breaking up Pepsi goes something like this: “a split would allow both beverages and snacks to operate more entrepreneurially. ‘The goal is … Read more

Coca-Cola Expanding Its Dominance; SodaStream in Play

by

Coca-Cola (KO) has recently become a savvy asset manager, and we think recent moves speak volumes about the company’s strategy to retain dominance in the non-alcoholic beverage space for decades to come. Coca-Cola’s management is capitalizing on what we’d describe to be the ‘Hidden Advantage‘—something more commonly witnessed in activist dealings in which small initial stakes turn into large gains once news is made public. In February, for example, Coca-Cola scooped up 10% of Green Mountain at $74.98 per share (it subsequently increased its stake to 16%). With shares of Green Mountain (GMCR) now trading at ~$115 each, the deal for just a small portion of Green Mountain looks incredibly savvy—especially in the event Coca-Cola ends up buying Green Mountain … Read more

Earnings from 5 Dividend Growth Giants

by

Let’s evaluate the recent quarterly results of five traditional dividend growth plays. Please be sure to access the 16-page reports and dividend reports of the firms included in this article. If you are interested in receiving the valuation models of companies, please let us know. Coca-Cola (KO) There are few companies fundamentally stronger than Coca-Cola. The firm boasts a number of competitive advantages: its brands, financial strength, distribution system, global reach, and a deep executive bench. It has raised its dividend in each of the past 50+ years, and we expect dividend growth to continue at a high-single-digit annual pace for the foreseeable future. Though the strength of Coca-Cola’s competitive position is undeniable, we don’t expect the ‘cola wars’ with … Read more

Valuentum Economic Castleâ„¢ Rating Update

by

Read: Keeping the Horse Before the Cart: Valuentum’s Economic Castle™ Rating The Economic Castle Focuses on the Magnitude of Economic Value Creation The Valuentum Economic Castle™ rating is an enhancement of the competitive advantage framework (commonly known as economic moat analysis) that has become widespread and ubiquitous within the investing world. Whereas an economic moat framework evaluates a firm on the basis of the sustainability and durability of its competitive advantages, Valuentum’s Economic Castle™ rating evaluates a firm on the basis of the firm’s future economic profit spread (return on invested capital less its weighted average cost of capital). The companies with the strongest Valuentum Economic Castle™ ratings are poised to generate the most economic value for shareholders in the … Read more

Dividend Increases for the Week Ending May 9

by

Below we provide a list of firms that raised their dividends during the week ending May 9. 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 AAON (AAON): now $0.13 per share semi-annual dividend, was $0.10. Ametek (AME): now $0.09 per share quarterly dividend, was $0.06. Argo Group (AGII): now $0.18 per share quarterly dividend, was $0.15. Arsenal Energy (AEYIF): now $0.065 per share quarterly dividend, was $0.06. Assurant (AIZ): now $0.27 per share quarterly dividend, was $0.25. Autoliv (ALV): now $0.54 per share quarterly dividend, was $0.52. Baker Hughes (BHI): now … Read more

The Cola Wars: Currency Headwinds Intensify; Snacks Looking Better

by

We live in a thirsty world. Global non-alcoholic ready-to-drink (NARTD) consumption is expected to advance at nearly a 6% compound annual growth rate over the next four years. Since the beginning of this decade, NARTD retail value has increased by $135 billion, and the market is expected to grow by another $300 billion before the end of 2020. The global beverage industry is fueled by a number of global macro trends: 20% growth in urban population, 70% increase in personal expenditure per capita, 50% growth in middle class, and 1 billion teens today. Coca-Cola (KO) and Pepsi (PEP), which both reported results last week, are poised to benefit from these strong market demand trends, and Pepsi has a faster-growing snacks … Read more

Update: Digging Into the Valuentum Dividend Cushion

by

Sign Up to Receive our Dividend Growth Newsletter! Add the High Yield Dividend Newsletter to Your Membership! History has revealed that the best performing stocks during the previous decades have been those that shelled out ever-increasing cash to shareholders in the form of dividends. In a recent study by Ned Davis Research, S&P 500 stocks that initiated dividends or grew them over time registered roughly a 9.6% annualized return since 1972 (through 2010), while stocks that did not pay out dividends or cut them performed poorly over the same time period.  Such analysis is difficult to ignore, and we believe investors may be well-rewarded in future periods by finding the best dividend-growth stocks out there. As such, we’ve developed a rigorous dividend investment … Read more

Coca-Cola Remains Strong; Green Mountain Deal Shakes Up Beverage Industry

by

Though many investors are focused on the relatively weak global volume performance in Coca-Cola’s (KO) fourth-quarter results, released February 18, we’re not worried about the beverage giant’s fundamental strength. Excluding the impact of structural changes, comparable currency-neutral net revenues advanced 4% in the period, while comparable currency-neutral operating income jumped 6%, in line with its long-term growth target. Comparable currency-neutral earnings per share jumped 7% in the fourth quarter, roughly in-line with the full-year pace. This isn’t terrible performance by any stretch of the imagination, and the company continues to achieve global value share gains in nonalcoholic ready-to-drink beverages. Coca-Cola’s cash flow from operations declined modestly during the year, but greater scrutiny with respect to capital spending facilitated free cash flow … Read more

Deciphering Valuentum’s Dividend Lingo

by

On January 25, Barron’s published an article called “Get Lucky: IQT’s Lucky 13 Portfolio.” In it, the publisher talked about the reasoning behind why 13 dividend-paying stocks were highlighted in the article. Let’s walk through the reasoning behind these 13 stocks and how the assessment of some of these dividend picks applies the Valuentum Dividend Cushion framework (click here), in part or in whole. Valuentum’s Brian Nelson also gives his quick thoughts on the comments of each company as if he were training a new analyst on how to interpret the article from an analytical standpoint. Abbott Labs (ABT): “a solid anchor position for any portfolio…Free operating cash flow is three times its dividend.” Nelson’s thoughts: Abbott is clearly a … Read more

Merger Chatter Heating Up for the New Year

by

With corporate news slow as the New Year’s week unfolds, merger chatter has heated up to fill the void. On Monday, StreetInsider reported that the New York Times (NYT) may be catching the eye of a suitor. Chen Guangbiao, chairman of China Huangpu Renewable Resources Utilization Group Co, is reported to be interested in making a bid for the firm. The likelihood and the terms of an announcement, however, remain extremely vague, and we point to only one source. Newspaper outlets have certainly been of significant interest as of late, and the well-documented declines in newsprint circulation have done nothing to discourage buyers. For one, Amazon CEO Jeff Bezos recently acquired the Washington Post’s namesake earlier this year in what … Read more