UBSI

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

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

Fed Might Slow After All, Bank Reports Just Okay

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Image shown: The yield curve is flattening. Source: Federal Reserve Bank, St. Louis. The biggest question with Fed policy is whether the FOMC will purposefully cause an inversion in the yield curve. If it thinks the market is manipulating long rates to influence its policy, it may very well go forward with rate hikes. If it doesn’t, it may very well slow the pace of rate hikes or even pause them. The behavioral implications of a yield-curve inversion may be more significant than the inversion, itself, however. No Changes to Simulated Newsletter portfolios Brian Nelson, CFA On January 10, President and CEO of the Federal Reserve Bank of St. Louis, James Bullard offered a number of perspectives on 2019 monetary policy. … Read more

Brace for More Volatility

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Image shown: The S&P 500 ETF (SPY) since August of last year. The markets have broken through key support levels, and now support has become resistance. Volatility remains heightened since the low-vol ETN blew up in February. This article is the introduction to both the Dividend Growth Newsletter and High Yield Dividend Newsletter, both of which will be released today due to the holiday January 1. By Brian Nelson, CFA Markets are facing big pressure on the trading session January 3. There’s more to the story than rising interest rates. There’s more to the story than the US-China trade war. There’s more to the story than concerns about the political environment. Price-agnostic (indexing and quant) trading, as I outline in … Read more

Dividend Increases/Decreases for the Week Ending November 10

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Below we provide a list of firms that raised their dividends during the week ending November 10. 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 Aaron’s Inc. (AAN): now $0.03 per share quarterly dividend, was $0.0275. Acadia Realty Trust (AKR): now $0.27 per share quarterly dividend, was $0.26. Assurant (AIZ): now $0.56 per share quarterly dividend, was $0.53. Atmos Energy (ATO): now $0.485 per share quarterly dividend, was $0.45. Automatic Data Processing (ADP): now $0.63 per share quarterly dividend, was $0.57. BorgWarner (BWA): now $0.17 per share quarterly dividend, was $0.14. … Read more

Prepared Remarks From Nelson Exclusive Conference Call June 30

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Read President of Investment Research Brian Nelson’s prepared remarks for the yearly roundup conference call, held for Nelson Exclusive members. If you would like to subscribe to the Nelson Exclusive publication, please learn more about the publication here. The Nelson Exclusive publication does not reflect real performance. Performance is hypothetical and does not represent actual trading. Ladies and Gentlemen, Thank you very much for joining us on the first conference call for members of the Nelson Exclusive publication. The first year of the publication has surely been an exciting one for all involved. When I first wrote the introductory letter of the Nelson Exclusive on July 1, 2016, we were well-aware the market had laid down the gauntlet for this publication. … Read more

Valuentum’s 3 Breakthroughs in the Field of Finance and More

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Valuentum’s President Brian Nelson pauses for a picture before speaking at the CFA Society of Houston in March 2017. By Valuentum Editorial Staff Let’s cover Valuentum’s 3 major breakthroughs in the field of finance. The first one is big and may challenge you to rethink everything you think you know about investing. 1. On a logical framework, Valuentum has debunked John C. Bogle’s landmark syllogism that has paved the way for the concept of index investing. Index investing has been built on a logical shortcoming, whether supported by evidence or not. We think it is important that the investment community know of this. Read (pdf): The “Luck” and “Randomness” of Index Funds (2018), Brian Nelson, CFA See video documentation: /FALLACY_of_Index_Funds To … Read more

The Coming “Goldman Sachs Era”

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Valuentum covers recent developments in the financials sector, including hopes for a relaxation of certain prohibitive Dodd-Frank rules that, if repealed, could pave the way for improved economic returns across the banking sector during the Trump administration. A look back at the month of September 2008, and how Goldman Sachs may very well shape the financial markets during the next few years are two other areas in the piece. Financials stocks have come roaring back since Trump was elected the 45th President of the United States. We’ve participated. By Brian Nelson, CFA It’s been more than 8 years now. The month of September 2008 shaped my view of the financials and banking sector more than any other month possibly could–The … Read more

Podcast: Why ETFs and Roasting the Banks

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The Valuentum analyst team talks about why we don’t like the business models of banking entities, why they are currently destroying economic value, but also why the team includes exposure in the Best Ideas Newsletter portfolio. What gives? Find out in this ~9 minute podcast. If you cannot view the video, please view the transcript that follows. Tickerized for holdings in the exchange traded funds, XLF and KBE, and for various financials-oriented ETFs.  Kris Rosemann: Hello and welcome to the Valuentum Securities podcast. My name is Kris Rosemann Associate Investment Analyst at Valuentum. With me is Chris Araos and Brian Nelson President of Equity Research and ETF Analysis at Valuentum. Today, we are going to have a quick discussion over … Read more