RNDY

The Valuentum Dividend Cushion Predicts CONSOL’s Dividend Cut

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Coal and natural gas firm CONSOL (CNX) became the latest company whose dividend cut Monday had been successfully predicted by the Valuentum Dividend Cushion. With a Valuentum Dividend Cushion score of -3.5 before the board’s decision to conserve cash and slash the payout, it appeared to us that the move was inevitable (a measure below 1 is suspicious, while a measure that is negative is highly concerning). Out of our 1,000+ company coverage universe, CONSOL’s dividend was assessed by us to be among the 10 weakest. We make available the most-visited ‘Dividend Yields to Avoid’ article on the left column of our home page under ‘Stock Screens,’ and we update the list of firms that receive the dubious honor periodically. … Read more

Safeway Misses But Will Sell Unprofitable Chicago Business

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Thursday afternoon, grocery retailer Safeway (click ticker for report: ) posted lackluster third quarter results that were overshadowed by the firm’s decision to sell its unprofitable Chicago-area Dominick’s stores. Revenue increased just 1.1% year-over-year to $8.6 billion during the period, a touch better than consensus estimates. Operating earnings per share, net of Dominick’s, were $0.10, down 38% year-over-year and well short of consensus expectations. Still, free cash flow has nearly doubled year-to-date to $382 million, equal to 1.5% of total revenue. Goodbye Chicago Perhaps the most encouraging news from the third quarter came from the announcement that Safeway will exit its Chicagoland Dominick’s business by early 2014. The firm bought Dominick’s for $1.2 billion in 1998, but the acquisition hasn’t … Read more

Kroger: The Model for Competing with Wal-Mart and Target?

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Thursday morning, grocery giant Kroger (click ticker for report: ) reported strong second quarter results, proving it is possible for a traditional retailer to do battle with Wal-Mart (click ticker for report: ) and Target (click ticker for report: ). Revenue increased 4.6% year-over-year to $22.7 billion, modestly exceeding consensus estimates. Earnings per share jumped 18% year-over-year to $0.60, a penny above consensus expectations. Free cash flow year-to-date was solid at $1.5 billion, equal to 2.9% of revenue. Source: Company Filings As one can see from the chart shown above, Kroger has dramatically outperformed Safeway (click ticker for report: ) during the past two years as competition from the likes of Wal-Mart, Target, and Meijer has intensified. Kroger’s same-store sales … Read more

RR Donnelley’s Dividend Isn’t Safe

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Every month in our Dividend Growth Newsletter, we identify firms that may need to cut dividend payments in the future. Timing the dividend cut is difficult (and somewhat arbitrary) as companies can do a number of things to prop up dividends until cash flow situation becomes dire, as we’ve seen at firms like SuperValu (click ticker for report: ) and Roundy’s (click ticker for report: ). However, our forward-looking Valuentum Dividend Cushion has caught a number of dividend cuts during the past year, including JC Penney’s (click ticker for report: ), CenturyLink (click ticker for report: ), and Exelon (click ticker for report: ). We’re not sure RR Donnelley’s (click ticker for report: ) dividend will be the next to go, but … Read more

Wisconsin Deteriorates But Chicago Stands Out at Roundy’s

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  Grocery store chain Roundy’s (click ticker for report: ), which operates under several banners in Wisconsin, Minnesota, and Illinois, reported solid fourth quarter results late last week. Sales increased 1.4% year-over-year to $982 million, roughly in line with consensus expectations. Earnings weren’t as strong, falling 37% year-over-year to $0.19 per share—a figure that excludes the impact of a few one-time events. The trend we saw at Roundy’s throughout 2012 continued in the fourth quarter: Chicago’s Mariano’s chain did fantastically well, “exceeding” sales and profit expectations while posting double digit same-store sales growth. On the other hand, the core business in Minnesota and Wisconsin continues to struggle, dragging total same-store sales down 2.1%. These markets, once underserved by Target (click … Read more

Roundy’s: A Cheap Stock in a Terrible Industry

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After going public in early 2012, we profiled Midwestern grocery chain Roundy’s (click ticker for report: ). Earnings momentum has moved materially against the company, and as we predicted, the firm had to slash its enormous dividend payout. In a typical post-IPO period, management was optimistic about future prospects, and competition in the firm’s core Wisconsin market looked weak at best. What CEO Bob Mariano didn’t see coming was that Wal-Mart (click ticker for report: ) would enter Wisconsin in a big way, Woodman’s would keep growing, and Roundy’s-owned Copps would be thrown into a major price war, crushing same-store sales and margins. Our initial thesis included a stable, or even slightly declining core business, but not the 3.6% decline … Read more

Dear Valuentum Member

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In such a short time that you’ve known us, you have seen us do so much: from generating more than 25 percentage points of outperformance in our Best Ideas portfolio since inception (May 2011) to delivering on our high-single-digit return goal of our Dividend Growth portfolio during 2012 to the Valuentum Dividend Cushion score predicting the dividend cuts of JC Penney (JCP), SuperValu (SVU), Roundy’s (RNDY), and others. You’ve seen us identify a triple in EDAC Tech (EDAC) and predict the bankruptcy of the parent of American Airlines (AMR). These are tremendous accomplishments. There’s an old saying in the market that if your winners are outperforming your losers, you’re doing a great job. Through November of last year, 87% of … Read more

Why Dividend Growth Investing Needs to be Forward Looking

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Shares of Exelon (click ticker for report: ) have been tumbling lately due to the possibility of a dividend cut. The utility company needs rates to increase in order to keep up its current payout. That may not occur, and CEO Chris Crane noted that the firm may have to cut its dividend in order to keep its strong credit rating standing, which is fundamental to running Exelon’s business. In the aftermath of the announcement, both Jefferies and Argus cut the ratings on the stock, but we think both firms were a bit late to the party. Inside our Valuentum Dividend Report for Exelon, we can see what we thought about Exelon on October 30. The fact that Exelon’s dividend … Read more