Exclusive Analysis for the Discerning Investor
Let’s take a sneak peek at President Brian Nelson’s slides for this weekend’s presentation in Chicago! Firms mentioned: MSFT, GOOG, AIR, BRCM, CSCO, SPY, AAPL, QCOM, MA, DPZ, SVU, RNDY, DDE, STRA, EXC, CLF, PBI, CTL, JCP and others. <select image to download the slide deck>
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
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
On Thursday, Dollar General (DG), Kroger (KR) and Costco (COST) reported quarterly results. Dollar General’s third-quarter report showed same-store sales advancing 4.4%, which propelled total sales 10.5% higher during its third quarter (ending November 1). Kroger’s third-quarter report showed 3.5% identical supermarket sales growth, without fuel, during the period ending November 9, while Costco’s fiscal first-quarter results (ending December 1) revealed same-store sales expansion of 3% during the quarter. Dollar General’s quarterly performance not only bested that of Kroger and Costco, but it also stood head-and-shoulders above that of Wal-Mart (WMT), which reported a comparable store sales decline in Walmart US and only a 1.1% increase at Sam’s club, and Target’s (TGT) third-quarter performance, where US comparable store sales advanced only … Read more
Sears There’s not much to say about Sears’ (SHLD) operational performance during its third quarter (results issued Thursday), except that it was atrocious. The firm lost more money in the most recently-reported quarter ($534 million) than it did through the first nine months of last fiscal year ($441 million). CEO Eddie Lampert has his hands full with the company’s multi-year transformation, but we think investors are hanging on to shares largely on hopes the firm will be able to monetize its real-estate portfolio in the future. Image Source: Sears But it seems that (lately) too many investors have been buying into this line of thinking, and the ‘real estate’ thesis continues to proliferate among investor psyches, particularly (now) with J.C. … Read more
What you are witnessing with the Valuentum Dividend Cushion is not a normal occurrence in finance. I personally have never seen a metric with such a high level of efficacy in predicting dividend cuts. Last week, the Valuentum Dividend Cushion not only added CONSOL Energy (CNX), but it also added Weight Watchers (WTW) to the growing list of firms that it highlighted the significant risk of a dividend cut before it happened. Weight Watchers suspended its quarterly cash dividend to generate annual cash savings of about $39 million October 30. Both CONSOL Energy and Weight Watchers were highlighted in the October 1 edition of our Dividend Growth Newsletter (on page 12) as yields to avoid (download pdf here). A Valuentum Dividend Cushion … Read more
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
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
Last week, organic grocery store chain Whole Foods (click ticker for report: ) reported wonderful third quarter results, again outperforming its peers. Revenue surged 12% year-over-year to $3.1 billion, in-line with consensus estimates. Earnings per share rose 20% year-over-year to $0.38, also in-line with consensus expectations. Free cash flow totaled $115 million, equal to 4% of sales. How Did Whole Foods’ Peers Do? The grocery business certainly is not a bull market. Competitor SuperValu (click ticker for report: ) reported weak results for its fiscal year 2014 first quarter. Revenue from continuing operations declined 1.5% year-over-year to $5.2 billion, as retail food same-store sales declined 3% year-over-year while Save-A-Lot same-store sales declined 1.5% year-over-year. Continuing operations also posted a loss … Read more
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