SJI

Our Report on Stocks in the Utilities (Mid/Small) Industry

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Structure of the Utilities Industry Utilities provide an essential service, generally operate in a near-monopoly position, and benefit from significant barriers to entry due to the capital intensity of new projects and regulatory/environmental requirements. Regulatory frameworks differ across the grid, but most utilities benefit from an assured rate of return on capital investments through predetermined rate structures, where cost adjustments are made by authorities periodically. Most constituents benefit from stable operations and generally lower debt financing, though credit ratings should be monitored closely. We like the structure of the group. Please select here (pdf) to download the report on utilities in our coverage. —– Valuentum members have access to our 16-page stock reports, Valuentum Buying Index ratings, Dividend Cushion ratios, fair value … Read more

Dividend Increases/Decreases for the Week November 26

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Below we provide a list of firms that raised their dividends during the week ending November 26. 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 Alpine Income Property Trust (PINE): now $0.27 per share quarterly dividend, was $0.26. Amcor (AMCR): now $0.12 per share quarterly dividend, was $0.1175. American Equity (AEL): now $0.34 per share quarterly dividend, was $0.32. Brigham Minerals (MNRL): now $0.40 per share quarterly dividend, was $0.35. Central Pacific Financial (CPF): now $0.25 per share quarterly dividend, was $0.24. Chesapeake Energy (CHK): now $0.4375 per share quarterly dividend, … Read more

PPL Corp Updates Investors, Launches Share Buyback Program

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Image Source: PPL Corporation – Second Quarter of 2021 IR Earnings Presentation By Callum Turcan On August 5, PPL Corporation (PPL) posted second quarter 2021 earnings, and shares of PPL initially moved higher after the report. Though the gas and electric utility, which has a major regulated utility presence in Kentucky and Pennsylvania, missed both top- and bottom-line estimates, what investors were likely focused on most was the announcement that PPL Corp had approved a $3.0 billion share buyback program. The firm expects to spend $0.5 billion buying back its shares in 2021, and we view this as a solid use of PPL Corp’s capital given our fair value estimate sits at $45 per share of PPL, well above where the … Read more

ICYMI — Video: Exclusive 2020 — Furthering the Financial Discipline

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ICYMI — Video: Exclusive 2020 — Furthering the Financial Discipline — — In this 40+ minute video jam-packed with must-watch content, Valuentum’s President Brian Nelson talks about the Theory of Universal Valuation and how his work is furthering the financial discipline. Learn the pitfalls of factor investing and modern portfolio theory and how the efficient markets hypothesis holds little substance in the wake of COVID-19. He’ll talk about which companies Valuentum likes and why, and which areas he’s avoiding. This and more in Valuentum’s 2020 Exclusive conference call.   Note: This video was originally published August 2, 2020.    To watch the video >>   The Theory of Universal Valuation —– Valuentum members have access to our 16-page stock reports, … Read more

Utility PPL Is Pursuing a Major Transformation and Has a VBI Rating of 9

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Image Source: PPL Corporation – First Quarter of 2021 IR Earnings Presentation By Callum Turcan PPL Corporation (PPL) operates several utilities in the US and the UK, though the company is in the process of selling its UK utility business (Western Power Distribution) to National Grid plc (NGG). When including the assumption of approximately GBP£6.6 billion in debt, this deal has a transaction value of roughly GBP£14.4 billion and is expected to generate about USD$10.2 billion in net cash proceeds for PPL. Additionally, as part of this arrangement, PPL will acquire National Grid’s Rhode Island utility business in the US (Narragansett Electric Company). When including the assumption of approximately USD$1.5 billion in debt, this deal has a total transaction value … Read more

ICYMI: Valuentum’s Brian Nelson on the Latest Howard Marks’ Memo: “Something of Value”

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Valuentum’s President of Investment Research Brian Michael Nelson, CFA, explains why there are not really value and growth stocks, why most of the research in quantitative finance is spurious and needs to be redefined on a forward-looking basis, and why enterprise valuation (not the efficient markets hypothesis) should be the organizing principle of finance. Nelson explains his views about valuation, what it means to be a value investor, and investing in the context of Oaktree Capital Howard Marks’ latest memo, “Something of Value,” January 11, 2021. Please don’t forget to give the second edition of the book “Value Trap” a 5-star rating on Amazon here. Thank you for your membership! —– Tickerized for holdings in the IWM. Valuentum members have … 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

Dividend Increases/Decreases for the Week November 27

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Below we provide a list of firms that raised their dividends during the week ending November 27. 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 Alamos Gold Inc. (AGI): now $0.02 per share quarterly dividend, was $0.015. Becton, Dickinson (BDX): now $0.83 per share quarterly dividend, was $0.79. Bentley Systems (BSY): now $0.03 per share quarterly dividend. Brigham Minerals (MNRL): now $0.24 per share quarterly dividend, was $0.14. Cullen/Frost Bankers (CFR): now $0.72 per share quarterly dividend, was $0.71. Eaton Vance (EV): now $4.25 per share special dividend, was $0.375. First … Read more

Value Is Not Static and the Qualitative Overlay Is Vital to Our Process

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With prudence and care, the Valuentum Buying Index process and its components are carried out. Our analyst team spends most of its time thinking about the intrinsic value of companies within the context of a discounted cash-flow model and evaluating the risk profile of a company’s revenue model. We have checks and balances, too. First, we use a fair value range in our valuation approach as we embrace the very important concept that value is a range and not a point estimate. A relative value overlay as the second pillar helps to add conviction in the discounted cash-flow process, while a technical and momentum overlay seeks to provide confirmation in all of the valuation work. There’s a lot happening behind the scenes even before a VBI rating is published, but it will always be just one factor to consider. Within any process, of course, we value the human, qualitative overlay, which captures a wealth of experience and common sense. We strive to surface our best ideas for members.

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