Dividend Growth Stocks
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  • T. Rowe Price Group Inc. (TROW) Dividend Stock Analysis
    Linked here is a detailed quantitative analysis of T. Rowe Price Group Inc. (TROW). Below are some highlights from the above linked analysis:

    Company Description: T. Rowe Price Group Inc. (formerly T. Rowe Price Associates) operates one of the largest no-load mutual fund and life cycle fund complexes in the United States.

    Fair Value: In calculating fair value, I consider the NPV MMA Differential Fair Value along with these four calculations of fair value, see page 2 of the linked PDF for a detailed description:

    1. Avg. High Yield Price
    2. 20-Year DCF Price
    3. Avg. P/E Price
    4. Graham Number

    TROW is trading at a discount to only 3.) above. The stock is trading at a 6.0% discount to its calculated fair value of $84.28. TROW earned a Star in this section since it is trading at a fair value.

    Dividend Analytical Data: In this section there are three possible Stars and three key metrics, see page 2 of the linked PDF for a detailed description:

    1. Free Cash Flow Payout
    2. Debt To Total Capital
    3. Key Metrics
    4. Dividend Growth Rate
    5. Years of Div. Growth
    6. Rolling 4-yr Div. > 15%

    TROW earned three Stars in this section for 1.), 2.) and 3.) above. A Star was earned since the Free Cash Flow payout ratio was less than 60% and there were no negative Free Cash Flows over the last 10 years. The stock earned a Star as a result of its most recent Debt to Total Capital being less than 45%. TROW earned a Star for having an acceptable score in at least two of the four Key Metrics measured. The company has paid a cash dividend to shareholders every year since 1986 and has increased its dividend payments for 27 consecutive years.

    Dividend Income vs. MMA: Why would you assume the equity risk and invest in a dividend stock if you could earn a better return in a much less risky money market account (MMA) or Treasury bond? This section compares the earning ability of this stock with a high yield MMA. Two items are considered in this section, see page 2 of the linked PDF for a detailed description:

    1. NPV MMA Diff.
    2. Years to > MMA

    TROW earned a Star in this section for its NPV MMA Diff. of the $1,192. This amount is in excess of the $800 target I look for in a stock that has increased dividends as long as TROW has. If TROW grows its dividend at 10.9% per year, it will take 4 years to equal a MMA yielding an estimated 20-year average rate of 3.08%. TROW earned a check for the Key Metric 'Years to >MMA' since its 4 years is less than the 5 year target.

    Memberships and Peers: TROW is a member of the S&P 500, a Dividend Aristocrat, a member of the Broad Dividend Achievers™ Index and a Dividend Champion. The company's peer group includes: The Federated Investors (FII) with a 3.5% yield, Eaton Vance (EV) with a 2.5% yield and BlackRock Inc. (BLK) with a 2.5% yield.

    Conclusion: TROW earned one Star in the Fair Value section, earned three Stars in the Dividend Analytical Data section and earned one Star in the Dividend Income vs. MMA section for a total of five Stars. This quantitatively ranks TROW as a 5-Star Very Strong stock.

    Using my D4L-PreScreen.xls model, I determined the share price would need to increase to $92.11 before TROW's NPV MMA Differential decreased to the $800 minimum that I look for in a stock with 27 years of consecutive dividend increases. At that price the stock would yield 1.9%.

    Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the target $800 NPV MMA Differential, the calculated rate is 9.5%. This dividend growth rate is below the 10.9% used in this analysis, thus providing a small margin of safety. TROW has a risk rating of 1.00 which classifies it as a Low risk stock.

    With a well-respected brand and a strong market share, TROW is well-positioned as an asset manager. It consistently produces net client inflows based on the relative performance of its funds. TROW's target-date retirement funds should continue to be an attractive option with baby boomers now that they have reached retirement age.

    TROW is focused on revenue growth with net revenues increasing 16.1% year over year in first-half 2014. This trend should continue going forward. TROW is an attractive investment for yield-conscience investors. In Feb 2014, the company’s increased its quarterly divided 16.0%. This marks the 28th consecutive annual dividend increase. In addition, in first-half 2014, the company repurchased $57 million of its common stock.

    The company has been able to generate more stable results than its peers with significant invested assets in retirement accounts and variable-annuities. This focus provides a much more stable investment base with lower turnover. With no debt, higher return on earnings and improving investor sentiment, the company is strong contender within its industry. The stock is currently trading near its calculated fair value of $84.28. I am watching this stock closely for an opportune time to buy.

    Disclaimer: Material presented here is for informational purposes only. The above quantitative stock analysis, including the Star rating, is mechanically calculated and is based on historical information. The analysis assumes the stock will perform in the future as it has in the past. This is generally never true. Before buying or selling any stock you should do your own research and reach your own conclusion. See my Disclaimer for more information.

    Full Disclosure: At the time of this writing, I held no position in TROW (0.0% of my Dividend Growth Portfolio). See a list of all my dividend growth holdings here.

    Related Articles:
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    - CVS Health Corporation: Trading Below Fair Value And Strong Dividend Growth
    - Lockheed Martin Corp. Priced To Buy
    - Dividend Stock Analysis: McDonald's Corporation, One To Watch Closely
    - Dividend Stock Analysis: Is It Time To Buy ConocoPhillips?
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    Tags: [TROW] [FII] [EV] [BLK]


  • Are Defense Stocks Good Defensive Stocks?
    When the economy and the market starts heading south, many investors start buying dividend growth stocks. They have long been considered a defensive position in turbulent times. Given these investors defensive stance, one might ask how about some real defense stocks, as in the Aerospace and Defense industry.

    With a steady flow of government money, defense stocks have long been considered a safe haven when the economy slows down and the market begins to sputter. However, with so many countries around the world, including the U.S., facing huge budget deficits, defense spending is where many politicians are looking for significant spending cuts.

    As a result of the 2011 Budget Control Act, which took effect in January 2013, the U.S. Department of Defense must reduce spending by a total of $1.1 trillion over the eight-year period from 2013 to 2021. To this point, the industry has emerged relatively unscathed. In the near-term things might actually improve with the defense sector experiencing a rebound as a result of the U.S. military involvement in Iraq. Such actions could well affect the fiscal 2015 defense budget

    Below are several defense stocks to consider and how they might be affected in the future:

    Lockheed Martin Corp. (LMT)
    This company, the world's largest military weapons manufacturer, is also a significant supplier to NASA and other non-defense government agencies. With about 93% of its revenues from global defense sales, LMT will be hard-pressed to escape unblemished when the budgetary ax falls. Anticipating upcoming cuts, the company has systematically reduced its workforce head count to 113,000 from 146,000 in 2008.

    The stock boasts a yield of 3.3% after its recent dividend increase of 13% - its 12th consecutive double-digit dividend increase. I currently rate LMT as a 4-Star Strong stock and it is trading at a discount to my calculated fair value. You can read the full analysis of LMT here.

    Northrop Grumman Corp. (NOC)
    This company is the world's third largest producer of military arms and equipment, with about 90% of its revenue from defense, and also has a large government IT services business. To the company's credit it has streamlined its business to focus on more profitable contracts such as command, control, communications, computers, intelligence, surveillance, and reconnaissance, or C4ISR; cybersecurity; unmanned aerial systems; manned aircraft; and services and logistics.

    NOC's lower yield of 2.3% reflects its strong balance sheet, low free cash flow payout (35%) and low debt to capital (36%). The company has aggressively bought back its stock over the last decade, while its dividend increases have averaged 11.7% from 2004 to 2013.

    Raytheon Co. (RTN)
    Raytheon, the world's sixth largest military contractor, specializes in making high-tech missiles, advanced radar systems and sensors, defense electronics, and missile-defense systems. As a result of its non-platform-centric focus, RTN is one of the best-positioned companies among the large-cap defense players. Its diversified military products and GaN technology have helped the company gain a mixture a small and big defense contracts. Approximately 80 countries purchase the company's products.

    Yielding about 2.6%, RTN has an excellent balance sheet, low free cash flow payout (30%) and good debt to capital (29%). However, the stock is currently trading above my calculated fair value of $67.68.

    General Dynamics Corp (GD)
    General Dynamics is the world's fourth largest military contractor and also one of the world's biggest makers of corporate jets. GD, with its diversified offerings, is also in a good position to survive defense spending cuts. The company's Aerospace business continues to enjoy a significant backlog for large-cabin aircraft, and should remain strong over the next several years. There is an opportunity to see margins expand as production becomes increasingly efficient.

    GD's strong balance sheet, low free cash flow payout (29%) and low debt to capital (23%) make it an appealing stock. However, its low yield of 2.1% and premium price to my calculated fair value will keep me from adding to my position in the near-term.

    Aerospace and defense companies that do a lot of government work usually enjoy long contracts and are in a good position to weather economic downturns. However, to varying degrees, each of the above companies also is engaged in non-government commercial business that could be adversely affected by the next economic downturn. There is certainly a spot for defense stocks in my dividend growth portfolio, but I will patiently wait for the right time and entry point.

    Full Disclosure: Long LMT, RTN, GD in my Dividend Growth Portfolio. See a list of all my dividend growth holdings here.

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    (Photo Credit)


    Tags: [LMT] [NOC] [RTN] [GD]


  • 7 Stocks Building A Higher Yield With Increased Dividends
    Every investor wants to earn more. It is how we define "more" and how we go about earning it that determines the type of investor we are. Income investors want more income. Yield is a significant determinant of income. Instead of buying a current high-yield stock, investors in dividend growth stocks prefer to build their own. Granted, the current yield may never be classified as high-yield, but over time the yield-on-cost can reach epic heights.

    Below are several companies that chose to build a higher yield for their shareholders with increased cash dividends...

    Continue Reading »




  • Weekly Links: September 28, 2014
    Each Sunday I highlight any notable articles that I came across over the past week, along with any Carnivals I participated in. For those readers not familiar with carnivals, it's where personal finance bloggers submit their best articles of the week with one blog serving as the host. The entries are separated into various categories such as Investing, Credit, Debt, Budgeting, Frugality, Wealth Building, Money Management, Financial Planning, Insurance, Taxes, The Economy, Real Estate, et. al.

    Articles you might find interesting:

    - 7 Stocks Building A Higher Yield With Increased Dividends
    - High Yield Companies for Current Income
    - IBM: Trading At A Discount And Double-Digit Dividend Growth
    - Monday Question: What happened to Helmerich & Payne (HP)?
    - September And Beyond
    - Two Insurance Stocks On My Radar
    - Stock Valuation: It’s all a matter of perspective

    The DIV-Net Featured Articles:

    - 5 Dividend Stocks That Gave Me A 20%+ Annualized Return
    - The Buyback Annoyance
    - These 6 Dividend Stocks Start To Take-Off
    - Price And Value
    - Walgreen Dividend Stock Analysis

    Articles from D4L-News:

    5 Undervalued Dividend Stocks Trading Below Their Graham Number
    To look for value stocks, we then narrowed the screen using the Graham number. Invented by the granddaddy of value investing, Benjamin Graham, the number tries to assign a "fair value" to a stock based on earnings per share and book value. When a stock trades below its Graham number, it might be said to be undervalued. The above screen left us with only five stocks on our list...

    Buy This High-Dividend Stock For Strong Revenue Growth And 2 Near-7% Yields
    Looking for dividend stocks that are riding an ongoing trend? Thanks to the US economic recovery, an updated lodging forecast released last week by PricewaterhouseCoopers US anticipates stronger occupancy gains in 2014. The report suggested that this may give U.S. hotels their highest occupancy levels in 20 years for 2015. This week's focus stock...

    3 Hot Chinese Dividend Stocks Offering Big Yields
    Fortunately, there are far better Chinese dividend stocks out there for you to choose from, ones that are spanking the S&P 500, and also offer up enticing yields sure to make any dividend hound smile. Here are three hot Chinese dividend stocks that also pay big dividends...

    3 Dividend Stocks For Retirement
    Here, we will look at three companies (two large-caps, one small-cap) with a strong cash flow history and the ability to maintain stable stock values even during bear-market downturns. One common theme that should be seen in this list is the fact that these companies are well-managed and produce essential products. These stocks offer investors the opportunity to generate long-term gains, reduce risk and avoid external market shocks in structuring a portfolio that can support you into retirement...

    A Healthcare High Dividend Stock With 25%+ FFO Growth; Yielding Over 7%
    Let's face it, the US populace, which is 26% baby boomers, is getting a bit gray around the temples. How gray? AARP has this to say, "In 2011, the first of the baby boom generation reached what used to be known as retirement age. And for the next 18 years, boomers will be turning 65 at a rate of about 8,000 a day. As this unique cohort grows older, it will likely transform the institutions of aging." A 7% Preferred Dividend...

    Pay Yourself First With This Clever Income Strategy
    If you’re like me, your main goal is to keep the income rolling in with a solid set of yield plays — but that doesn’t mean getting complacent once you’ve got your dividend portfolio in place. Rather than ignoring the short-term swings in the broad market, a smart investor pays attention and looks for opportunities to boost his income stream, which sometimes means thinking outside the box. In addition to your typical buy-and-hold positions, I recommend you always stay on the lookout for new strategies that can complement the dividend payers you may already own. Today I’d like to show you how you can manufacture an instant “dividend” for yourself by trading an up-and-coming Internet stock. Let’s get started...

    Click Here For More Dividend News

    There are some really good articles here, please take time and read a few of them.

    D4L-Premium Services Updated:
    The D4L-Dashboard, Analytical Reports, D4L-Data, and The D4L-Newsletter (September edition) have been updated and are available at the D4L-Premium Services web site at: [Click Here] Not a subscriber? [Click Here] for for more information on the benefits of these services, sample reports, pricing and subscription information.

    (Photo: Sachin Ghodke)
     



  • Emerson Electric Co. (EMR) Dividend Stock Analysis
    Linked here is a detailed quantitative analysis of Emerson Electric Co. (EMR). Below are some highlights from the above linked analysis:

    Company Description: Emerson Electric Co. designs and supplies product technology, and delivers engineering services and solutions to a wide range of industrial, commercial and consumer markets around the world.

    Fair Value: In calculating fair value, I consider the NPV MMA Differential Fair Value along with these four calculations of fair value, see page 2 of the linked PDF for a detailed description:

    1. Avg. High Yield Price
    2. 20-Year DCF Price
    3. Avg. P/E Price
    4. Graham Number

    EMR is trading at a premium to all four valuations above. The stock is trading at a 42.0% premium to its calculated fair value of $45.78. EMR did not earn any Stars in this section.

    Dividend Analytical Data: In this section there are three possible Stars and three key metrics, see page 2 of the linked PDF for a detailed description:

    1. Free Cash Flow Payout
    2. Debt To Total Capital
    3. Key Metrics
    4. Dividend Growth Rate
    5. Years of Div. Growth
    6. Rolling 4-yr Div. > 15%

    EMR earned two Stars in this section for 1.) and 2.) above. A Star was earned since the Free Cash Flow payout ratio was less than 60% and there were no negative Free Cash Flows over the last 10 years. The stock earned a Star as a result of its most recent Debt to Total Capital being less than 45%. The company has paid a cash dividend to shareholders every year since 1947 and has increased its dividend payments for 58 consecutive years.

    Dividend Income vs. MMA: Why would you assume the equity risk and invest in a dividend stock if you could earn a better return in a much less risky money market account (MMA) or Treasury bond? This section compares the earning ability of this stock with a high yield MMA. Two items are considered in this section, see page 2 of the linked PDF for a detailed description:

    1. NPV MMA Diff.
    2. Years to > MMA

    The NPV MMA Diff. of the $166 is below the $500 target I look for in a stock that has increased dividends as long as EMR has. If EMR grows its dividend at 3.7% per year, it will take 5 years to equal a MMA yielding an estimated 20-year average rate of 3.08%.

    Memberships and Peers: EMR is a member of the S&P 500, a Dividend Aristocrat, a member of the Broad Dividend Achievers™ Index and a Dividend Champion. The company's peer group includes: Espey Manufacturing & Electronics Corp. (ESP) with a 4.0% yield, ABB Ltd. (ABB) with a 3.4% yield and Regal Beloit Corporation (RBC) with a 1.3% yield.

    Conclusion: EMR did not earn any Stars in the Fair Value section, earned two Stars in the Dividend Analytical Data section and did not earn any Stars in the Dividend Income vs. MMA section for a total of two Stars. This quantitatively ranks EMR as a 2-Star Weak stock.

    Using my D4L-PreScreen.xls model, I determined the share price would need to decrease to $50.28 before EMR's NPV MMA Differential increased to the $500 minimum that I look for in a stock with 58 years of consecutive dividend increases. At that price the stock would yield 3.4%.

    Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the target $500 NPV MMA Differential, the calculated rate is 6.3%. This dividend growth rate is higher than the 3.7% used in this analysis, thus providing no margin of safety. EMR has a risk rating of 1.50 which classifies it as a Low risk stock.

    EMR holds a broad portfolio of industrial businesses with a strong competitive positions. The company has a reputation for providing consistent returns to its investors. Management projects 2014 E.P.S. to grow by 4% to 7% driven by slightly higher operating margins. Order rates, including those in Europe and Asia, should have bottomed out with increased construction spending in North America, along with global energy investments.

    In its most recent earnings announcement, the company reported slower than expected growth, with financial performance trending to the low end of the previously communicated guidance ranges. Backlogs are at a record level, up more than 20% driven by underlying orders growth of 5%. Margin expansion was strong as portfolio changes and operational efficiencies more than offset growth investment. Earnings per share of $1.03 increased 6%, cash generations remained strong.

    The company's advantages include globally branded platforms, new products in the pipeline and it enjoys a strong balance sheet with a low free cash flow payout and low debt to total capital. The stock is currently trading well above my calculated fair value price of $45.78, so for now I will not be adding to my position.

    Disclaimer: Material presented here is for informational purposes only. The above quantitative stock analysis, including the Star rating, is mechanically calculated and is based on historical information. The analysis assumes the stock will perform in the future as it has in the past. This is generally never true. Before buying or selling any stock you should do your own research and reach your own conclusion. See my Disclaimer for more information.

    Full Disclosure: At the time of this writing, I was long in EMR (2.5% of my Dividend Growth Portfolio). See a list of all my dividend growth holdings here.

    Related Articles:
    - CVS Health Corporation: Trading Below Fair Value And Strong Dividend Growth
    - Lockheed Martin Corp. Priced To Buy
    - Dividend Stock Analysis: McDonald's Corporation, One To Watch Closely
    - Dividend Stock Analysis: Is It Time To Buy ConocoPhillips?
    - Dividend Stock Analysis: Leggett & Platt, A Solid Steady Performer
    - More Stock Analysis



    Tags: [EMR] [ESP] [ABB] [RBC]






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