NLO Dividend Watch List

Watch List Summary
Revisiting the previous list has provided great insight into those stocks that have either underperformed or overperformed.  The best performing stock from our September 24th list was Flushing Financial (FFIC).  After being listed as the top 10 bank stocks on TheStreet, the shares of FFIC are finally getting some recognition.

 

Although we don’t have much insight into FFIC, we suggest readers look into our recent commentary on Northern Trust (NTRS).  Northern Trust was listed #3 on TheStreet’s 10 Banks That Defy The Great Recession.  The #1 bank on that list was Bank of Hawaii (BOH). We wrote about this name back on January 12, 2009 and more recently in our article titled “The Anatomy of a Bear Market Trade.” Another bank that made TheStreet.com’s list and our list as well is US Bank (USB).  Although we’re typically averse to investing in banking institutions, we find the current environment favorable to regional and multinational banks.

 

The worst performing stock from our September 24th list was Colgate (CL).  After falling 4% in two weeks, this name is becoming interesting at the current dividend yield.  Colgate is in the undervalued range, according to Investment Quality Trends (http://www.iqtrends.com/).

Top Five Performance Review

In our ongoing review of the NLO Dividend Watch List, we have taken the top five stocks on our list from October 9, 2009 and have check their performance one year later.  The top five companies on that list were Wal-Mart (WMT), Cardinal Health (CAH), Weyco Group (WEYS), Bard Corp. (BCR), and Piedmont Natural Gas (PNY).

As a group, the top five companies on our Dividend List averaged a gain of 14.47% in the last year.  This compares with the Dow Jones Industrial Average gain of 11.57% in the same one year time frame.  The top performing stock of the group was Piedmont Natural Gas (PNY) which closes out the year with a gain of 23.81%.  The worst performing stock was Bard Corp. (BCR) with a paltry gain of 6.47% in the one year time period.  The graph below demonstrates that all stocks achieved 10% gains within six months of reaching a new low.

Chart courtesy of Yahoo!Finance and Commodity Systems Inc (CSI)

 

October 8, 2010 Watch List
Symbol Name Price % Yr Low P/E EPS (ttm) Div/Shr Yield Payout Ratio
CL Colgate-Palmolive Co. 74.90 2.43% 17.88 4.19 2.12 2.83% 51%
CAG ConAgra Foods, Inc. 21.87 6.42% 13.84 1.58 0.92 4.21% 58%
NTRS Northern Trust Corp.  48.35 6.73% 15.85 3.05 1.12 2.32% 37%
WST West Pharmaceutical 35.11 7.24% 15.33 2.29 0.64 1.82% 28%
BBT BB&T Corp. 23.58 8.56% 22.25 1.06 0.60 2.54% 57%
MDT Medtronic 33.45 8.60% 10.59 3.16 0.90 2.69% 28%
BEC Beckman Coulter 47.95 9.10% 22.83 2.10 0.72 1.50% 34%
SBSI Southside Bancshares 18.98 9.14% 7.19 2.64 0.68 3.58% 26%
USB U.S. BanCorp. 22.31 9.15% 16.05 1.39 0.20 0.90% 14%
WFSL Washington Federal 15.27 9.31% 14.54 1.05 0.20 1.31% 19%
FUL HB Fuller Company 20.31 9.96% 13.72 1.48 0.28 1.38% 19%
HCC HCC Insurance Holdings 26.24 10.02% 9.02 2.91 0.58 2.21% 20%
TR Tootsie Roll Industries 25.53 10.04% 28.05 0.91 0.32 1.25% 35%
HGIC Harleysville Group Inc.  33.08 10.08% 12.48 2.65 1.44 4.35% 54%
FFIN First Financial Bankshares 47.99 10.20% 18.39 2.61 1.36 2.83% 52%
MLM Martin Marietta Materials 78.96 10.43% 43.87 1.80 1.60 2.03% 89%
OMI Owens & Minor 28.21 10.54% 14.32 1.97 0.71 2.52% 36%
CBSH Commerce Bancshares 38.13 10.63% 15.50 2.46 0.94 2.47% 38%
BOH Bank of Hawaii Corp. 45.30 10.87% 12.41 3.65 1.80 3.97% 49%
INTC Intel 19.52 10.91% 11.69 1.67 0.63 3.23% 38%
20 Companies






On our current list, we excluded companies that have no earnings and payout ratios in excess of 100%. Stocks that appear on our watch lists are not recommendations to buy. Instead, they are the starting point for doing your research and determining the best company to buy. Ideally, a stock that is purchased from this list is done after a considerable decline in the price and extensive due diligence.
Because our list has many great companies, we urged investors to filter for companies with less than 50% payout ratio. This should minimized the risk of dividend reductions if earnings are to fall by half. If you understand the companies’ history and their ability to pay the dividend, then payout ratios in excess of 50% may be considered. We suggest readers use the March 2009 low (or companies’ most distressed level in the last 2 years) as the downside projection for investing. Our view is to embrace the worse case scenario prior to investing. The November 2008 to March 2009 time frame fits that description. It is important to place these companies on your own watch list so that when the opportunity arises, you can purchase them with a greater margin of safety.
Email our team here.

Leave a Reply

Your email address will not be published.

* Copy This Password *

* Type Or Paste Password Here *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>