Category Archives: Dividend Watch List

End of March Dividend Watch List Performance

Posted on March 29, 2013 by | Comments Off on End of March Dividend Watch List Performance

Below is the one year performance of our March Dividend Watch Lists for 2010, 2011 and 2012.  While the Wall Street adage says “Sell in May and Go Away,” we’d like to know what the market would look like if bought one month before May and held for the following year.

First up is the March 26, 2010 watch list (found here).  The chart is organized based on the stocks nearest the new low are on the left.  For the year, our top five stocks (XOM, FPL, MON, TMP, BRO) gained an average of +20.86% as compared to the Dow Jones Industrial Average gains of +12.63%.  In this example, the top five stocks provided above average gains.  Within the context of the gains that were made one year later, the Dow Jones Industrial Average experienced a decline of –14.60% from the April 2010 high to the July 2010 low.  As a note, FPL bought PGN and trades under a new symbol NEE.

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Next up is the 2011 watch list (found here). The chart is organized based on the stocks nearest the new low on the left.  For the year, our top five stocks (SJW, SYY, WABC, PPL, TGT) gained an average of +8% as compared to the Dow Jones Industrial Average gains of +7.04%. In this example, the top five stocks provided moderate gains. Within the context of the gains that were made one year later, the Dow Jones Industrial Average experienced a decline of –19.19% from the May 2011 high to the October 2011 low. As a note, HGIC and TRH were both acquired.

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The last Dividend Watch list is from March 23, 2012 (found here). The chart is organized based on the stocks nearest the new low on the left. For the year, our top five stocks (TR, CHRW, CLX, ATO, CWT) gained an average of +18.32% as compared to the Dow Jones Industrial Average gains of +10.94%. In this example, the top five stocks provided exceptional gains. Within the context of the gains that were made one year later, the Dow Jones Industrial Average experienced a decline of –10.70% from the May 2012 high to the June 2012 low.  Additionally, the Dow Jones Industrial Average declined –8.71% from October 2012 to mid-November 2012.

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Even with the view of “Sell in May and Go Away,” the top five stocks on our U.S. Dividend Watch List have performed quite well.  The average gain over the three periods reviewed was +15.72% compared to average gain of the Dow Industrials at +10.20%.

All good things must come to an end.  We do not expect that the stock market will be as forgiving in the next three years as it has in the last three years.  However, we recommend considering the top five stocks from our latest dividend watch list for potential investment, even if the mantra is “Sell in May.”

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Analyst Estimate: Dividend Watch List

Posted on November 9, 2012 by | Leave a comment

Below is a ranking from our October 26, 2012 watch list based on the analyst’s low earnings estimate for 2013.  This list ranks the potential price gain at 10% and above assuming that the analyst’s lowest estimate for earnings materialize and the P/E ratio remains the same as when our original watch list was created.

We chose to utilize the analyst’s low estimates because the mean and high estimates for stocks tend to be too optimistic.  By going with the lowest or most pessimistic estimate, we have the ability to “play it safe” for the company prospects going forward.

Symbol
 Name Price % Yr Low P/E EPS (ttm) 2013 low EPS est. # of analysts est. price est. % change
ABM ABM Industries, Inc. 18.87 5.71% 19.45 0.97 $1.32 6 $25.67 36.06%
SON Sonoco Products Co. 31.06 8.56% 17.45 1.78 $2.30 14 $40.14 29.22%
FDS FactSet Research Systems 90.85 6.41% 22.05 4.12 $5.07 8 $111.79 23.05%
WGL WGL Holdings, Inc. $39.50 4.91% 20.05 $1.97 $2.40 7 $48.12 21.82%
RAVN Raven Industries, Inc.  27.27 8.69% 18.68 1.46 $1.69 1 $31.57 15.77%
EMR Emerson Electric Co. 47.84 9.75% 14.5 3.3 $3.81 18 $55.25 15.48%
NJR New Jersey Resources 44.6 8.49% 19.73 2.26 $2.61 6 $51.50 15.46%
CWT California Water Service 18.43 7.53% 20.94 0.88 $1.01 7 $21.15 14.76%
IBM IBM 193.27 9.16% 13.89 13.91 $15.88 23 $220.57 14.13%
CAH Cardinal Health, Inc.  40.43 9.54% 13.21 3.06 $3.49 15 $46.10 14.03%
APD Air Products & Chemicals $77.92 2.38% 14.32 $5.44 $6.20 17 $88.78 13.94%
TNC Tennant Co. 37.35 7.36% 18.31 2.04 $2.30 4 $42.11 12.75%
ERIE Erie Indemnity Company  $62.59 2.39% 22.27 $2.81 $3.15 2 $70.15 12.08%
MDU MDU Resources Group 21.48 9.31% 19.01 1.13 $1.26 7 $23.95 11.51%
OMI
 Owens & Minor, Inc. 28.76 5.08% 15.63 1.84 $2.05 7 $32.04 11.41%
JW-A John Wiley & Sons Inc. $43.20 1.74% 13.29 $3.25 $3.60 2 $47.84 10.75%

The refinement of our October 26, 2012 watch list should improve the usefulness of that list as a way of determining which companies to concentrate your investment dollars.  The very last column is where we believe additional adjustments could be made.  As an example, the very first stock on our list is ABM with an expected gain of +36.06% in the coming year (assuming the P/E ratio remains the same with the estimated 2013 earnings).  We like to assume that we’d only achieve half of what the potential might be.  In the case of ABM, our adjusted expectation is that the stock could gain as much as +18.08% (all thing being equal).

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Posted in ABM, Analyst Estimate, Dividend Watch List, FDS, RAVN, SON, WGL

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U.S. Dividend Watch List: October 12, 2012

Posted on October 14, 2012 by | Leave a comment

Below are the 50 companies on our U.S. Dividend Watch List that are within 11% of their respective 52-week lows. 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 rigorous due diligence.

Symbol Name Price % Yr Low P/E EPS (ttm) Dividend Yield Payout Ratio
INTC Intel Corp. 21.48 0.38% 9.10 2.36 0.90 4.19% 38%
ABM ABM Industries, Inc. 18.12 1.51% 18.68 0.97 0.58 3.20% 60%
EXPD Expeditors International 34.78 1.70% 20.70 1.68 0.56 1.61% 33%
IBKC IBERIABANK Corp. 45.25 1.78% 20.38 2.22 1.36 3.01% 61%
CLC Clarcor Inc. 44.69 2.92% 18.39 2.43 0.54 1.21% 22%
ERIE Erie Indemnity Company 63.20 3.39% 22.49 2.81 2.21 3.50% 79%
WGL WGL Holdings, Inc. 39.09 3.82% 19.84 1.97 1.60 4.09% 81%
JW-A John Wiley & Sons Inc. CL 'A' 45.06 4.21% 13.86 3.25 0.80 1.78% 25%
MATW Matthews International Corp. 29.13 4.48% 13.12 2.22 0.36 1.24% 16%
ETP Energy Transfer Partners L P 42.61 3.85% 9.05 4.71 3.58 8.40% 76%
CRR Carbo Ceramics, Inc. 64.49 5.14% 11.29 5.71 1.08 1.67% 19%
HRL Hormel Foods Corp. 28.83 5.68% 16.02 1.80 0.60 2.08% 33%
PBI Pitney Bowes Inc 13.36 5.70% 3.91 3.42 1.50 11.23% 44%
CAT Caterpillar Inc. 82.82 5.84% 9.26 8.94 2.08 2.51% 23%
OMI Owens & Minor, Inc. 29.06 6.17% 15.79 1.84 0.88 3.03% 48%
VVC Vectren Corp. 28.78 6.55% 14.84 1.94 1.40 4.86% 72%
ED Consolidated Edison, Inc. 59.83 6.71% 16.53 3.62 2.42 4.04% 67%
SON Sonoco Products Co. 30.59 6.92% 15.53 1.97 1.20 3.92% 61%
STBA S&T BanCorp., Inc. 16.85 7.46% 14.28 1.18 0.60 3.56% 51%
SRCE 1st Source Corp. 22.06 7.56% 11.55 1.91 0.68 3.08% 36%
MCD McDonald's Corp. 92.51 7.67% 17.39 5.32 3.08 3.33% 58%
BUSE First Busey Corp. 4.76 7.69% 19.04 0.25 0.16 3.36% 64%
APD Air Products & Chemicals, Inc. 82.00 7.74% 13.00 6.31 2.56 3.12% 41%
UTX United Technologies Corp. 75.96 7.88% 15.92 4.77 2.14 2.82% 45%
UNM Unum Group 19.75 8.04% 26.69 0.74 0.52 2.63% 70%
ANAT American National Insurance 72.01 8.16% 10.65 6.76 3.08 4.28% 46%
PNY Piedmont Natural Gas Co., Inc. 31.28 8.24% 20.05 1.56 1.20 3.84% 77%
VLY Valley National BanCorp. 9.85 8.24% 14.49 0.68 0.65 6.60% 96%
CWT California Water Service 18.58 8.40% 21.11 0.88 0.63 3.39% 72%
SJW SJW Corp. 24.59 8.90% 21.76 1.13 0.71 2.89% 63%
LM Legg Mason, Inc. 24.39 9.08% 22.58 1.08 0.44 1.80% 41%
FDS FactSet Research Systems Inc. 93.28 9.25% 22.64 4.12 1.24 1.33% 30%
MDU MDU Resources Group Inc. 21.48 9.31% 19.01 1.13 0.67 3.12% 59%
AMAT Applied Materials Inc. 10.90 9.33% 13.13 0.83 0.36 3.30% 43%
BDX Becton, Dickinson and Co. 76.62 9.38% 13.88 5.52 1.80 2.35% 33%
GD General Dynamics Corp. 66.10 9.53% 9.69 6.82 2.04 3.09% 30%
RBCAA Republic BanCorp., Inc. 20.49 9.87% 4.06 5.05 0.66 3.22% 13%
RLI RLI Corp. 68.06 10.02% 13.24 5.14 1.28 1.88% 25%
SFNC Simmons First National Corp. 24.83 10.11% 16.12 1.54 0.80 3.22% 52%
NJR New Jersey Resources Corp. 45.27 10.12% 20.03 2.26 1.60 3.53% 71%
RAVN Raven Industries, Inc. 27.68 10.32% 18.96 1.46 0.42 1.52% 29%
PPL PP&L Corporation 29.44 10.34% 10.01 2.94 1.44 4.89% 49%
DOV Dover Corp. 55.33 10.35% 12.03 4.60 1.40 2.53% 30%
SJI South Jersey Industries, Inc. 51.49 10.68% 16.19 3.18 1.61 3.13% 51%
JCI Johnson Controls Inc 25.87 10.70% 10.31 2.51 0.72 2.78% 29%
MSEX Middlesex Water Company 19.23 10.71% 24.04 0.80 0.74 3.85% 93%
CAH Cardinal Health, Inc. 40.89 10.78% 13.11 3.12 0.95 2.32% 30%
STR Questar Corp. 20.20 10.81% 17.12 1.18 0.68 3.37% 58%
EMR Emerson Electric Co. 48.35 10.92% 14.65 3.30 1.60 3.31% 48%
COP ConocoPhillips 56.17 10.96% 6.56 8.56 2.64 4.70% 31%
50 Companies

Watch List Review

Topping out list this week is Intel (INTC). The stock continues to be under pressure especially after Advance Micro Devices (AMD) issued a profit warning. Speculation about job cuts, as much as 2,340 jobs (20% of the work force), is also circulating. AMD shares were down -14% on Friday. Despite that, Intel share were down just less than -1%.  At the current price, INTC is yielding 4.19% with a conservative payout ratio of 38%. While the short-term picture seems grim, with the PC market slowing to a halt, we still believe the that there is significant value built into INTC and it shouldn’t be ignored. Again, we took a position in Intel about a week ago and would be very excited to see it trade down to $16.

ABM Industries (ABM) has been trading in a "line" formation (between $18-$20) for nearly three months. The stock appears to be retesting the $18 level we saw in mid-July. The company announced a definitive agreement to purchase Air Serv which provides facility management services to airlines and airports. ABM expects to add $650 million to their top line through this acquisition. Based on that, we assume a Price-to-Sales ratio of 0.24 which is a decent figure. Our valuation model shows a possible downside to $15 and upside to $24, a –19%/+34% risk/reward.

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 14, 2011 and have check their performance one year later. The top five companies on that list can be seen in the table below.

Symbol Name 2011 Price 2012 Price % change
WAG Walgreen Co. 32.90 35.94 9.24%
PEP PepsiCo Inc. 62.09 70.05 12.82%
BDX Becton, Dickinson and Co. 73.85 76.62 3.75%
AROW Arrow Financial Corp. 22.73 24.74 8.84%
FRS Frisch's Restaurants, Inc 19.52 17.13 -12.24%
Average 4.48%
DJI Dow Jones Industrial 11,644.49 13,328.85 14.46%
SPX S&P 500 1,224.58 1,428.59 16.66%

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Our top five underperformed the market by nearly 10% partly due to the loss from Frisch (FRS).  All of the stocks on our watch list achieved a +10% gain within a year.  In fact, 4 of 5 stocks achieved 15% gains within the year. 

Despite the year end losses in FRS, it should be noted that in the process to FRS having a losing year, it also had the largest increase in the year.  FRS gained as much as +67% before collapsing within the last two months.  The performance of FRS is among the primary reasons why we choose to consider selling if the gain exceeds the historical average.

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NLO Dividend Watch List: March 9, 2012

Posted on March 10, 2012 by | Leave a comment

It was a volatile week but the market finished unchanged.  There are some bargains to be had in our Dividend Watch List this week which contains 11 companies that are within 11% of the 52-week low. A reminder to our readers, these are companies with long historical track records of dividend payments and increases.

Symbol Name Price % Yr Low P/E EPS (ttm) Dividend Yield Payout Ratio
TR Tootsie Roll Industries 22.63 2.31% 30.58 0.74 0.32 1.41% 43%
CHRW C.H. Robinson Worldwide 66.35 6.50% 25.32 2.62 1.32 1.99% 50%
CLX Clorox Co. 67.91 7.69% 16.56 4.1 2.40 3.53% 59%
PEP PepsiCo Inc. 63.15 7.95% 15.67 4.03 2.06 3.26% 51%
ANAT American National Insurance 71.49 8.80% 11.10 6.44 3.08 4.31% 48%
ATO Atmos Energy Corp. 31.09 9.05% 14.07 2.21 1.38 4.44% 62%
HNZ HJ Heinz Co. 53.06 10.27% 17.69 3 1.92 3.62% 64%
WAG Walgreen Co. 33.48 10.35% 11.31 2.96 0.90 2.69% 30%
BDX Becton, Dickinson 76.82 10.39% 14.02 5.48 1.80 2.34% 33%
CWT California Water Service 18.43 10.69% 20.48 0.9 0.63 3.42% 70%
MATW Matthews International  31.65 10.78% 13.08 2.42 0.36 1.14% 15%
11 Companies

Watch List Summary

Topping our list this week is Tootsie Roll (TR) which took a hit in the last month, down 2.6%. Our suspicion is that the recent rise in input costs (commodities such as sugar and cocoa) has hampered the growth of TR.  In the short-term, companies are not able to adjust their prices faster than their input costs, thus pressuring their margins in the short term. Value Line's estimated fair value for TR is around 19x cash flow which places the 2012 stock price at $20.90. After reviewing the historical range for TR, we see the worst case scenario at 15x cash flow. Therefore, our downside target is $16.50.

There are several companies on this list that have hit what IQTrends (www.iqtrends.com) considers “undervalued”. These are Clorox (CLX), Pepsi (PEP), Walgreen (WAG), and Becton (BDX). Based on their dividend yield thesis, the estimated upside are 26%, 48%, 92%, and 17% for these respective companies.

We are convinced that Walgreen (WAG) can emerge out of the Express Script deal better than expected. There’s no doubt that Walgreen's earnings will be hurt but we believed that many of these factors are priced into the stock. As such, our model places Walgreen fair value at $51. Value Line estimated that Walgreen trades at or around 11.5x cash flow which would put the intrinsic value at $50. We believed that the downside risk for the stock is around $30 level.  The technicals also support our claim as the shares have a 1-year low of $30.74.  In addition, we are anticipating a crossing over of the moving averages which should act as a buying case for the bulls. In any event, the dividend yield is at its highest point in history with a very low payout ratio. We feel comfortable holding a large amount of WAG in our portfolio.

WAG

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 March 11, 2011 and have check their performance one year later. The top five companies on that list can be seen in the table below.

Symbol Name 2011 Price 2012 Price % change
HCBK Hudson City Bancorp, Inc. 9.92 6.79 -31.55%
SYY Sysco Corp. 27.83 29.93 7.55%
SHEN Shenandoah Telecom. 16.01 10.35 -35.35%
BMI Badger Meter, Inc. 37.68 32.01 -15.05%
WABC Westamerica BanCorp.  50.25 47.32 -5.83%
Average -16.05%
DJI Dow Jones Industrial 12,044.40 12,922.02 7.29%
SPX S&P 500 1,304.28 1,370.87 5.11%

Companies on our watch list got hammered. Especially Hudson City (HCBK) and Shenandoah (SHEN). We said the following about Hudson City:

"On the top of our list this week is Hudson City Bancorp (HCBK). The stock has been under pressure this week. Current yield of 6% is attractive but with nearly $30B of debt and only $650M of cash on hand, it many not be worth risk/reward..."

We're glad that our intuition was right about the company and didn’t take any positions in the stock. Shenandoah paid an annual dividend which we were not fond of. As such, the name never attracted us. We highlighted Sysco (SYY) and Target (TGT) which rose 7.5% and 12.7% respectively.

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NLO Dividend Watch List: March 16, 2012

Posted on February 18, 2012 by | Leave a comment

The $3 Billion Greek deal may have pushed some bulls back into the market. It was a volatile week but the market finished unchanged. The S&P was virtually flat but the blue chip lost 55 points for the week. There are some bargains to be had in our watch list this week which contains 11 companies that are within 11% of the 52-week low. A reminder to our readers, these are companies with a long track records of dividend payments.

Symbol Name Price % Yr Low P/E EPS (ttm) Dividend Yield Payout Ratio
TR Tootsie Roll Industries Inc  22.9 2.31% 30.95 0.74 0.32 1.40% 43%
CHRW C.H. Robinson Worldwide, Inc.  65.67 6.50% 25.06 2.62 1.32 2.01% 50%
ATO Atmos Energy Corp. 30.71 7.69% 13.90 2.21 1.38 4.49% 62%
CLX Clorox Co. 68.21 7.95% 16.64 4.1 2.40 3.52% 59%
CWT California Water Service 18.22 8.80% 20.24 0.9 0.63 3.46% 70%
UNS UniSource Energy Corporation 36.32 9.05% 13.21 2.75 1.72 4.74% 63%
PEP PepsiCo Inc. 64.47 10.27% 16.00 4.03 2.06 3.20% 51%
CAH Cardinal Health, Inc.  41.59 10.35% 15.40 2.7 0.86 2.07% 32%
8 Companies

Watch List Summary

Topping our list this week is Tootsie Roll (TR). Based on the work we’ve done on this stock, we are becoming less convinced of the upside based on historical valuation. Using dividend yield theory, we see very limited upside. Our estimate is that TR's fair value is at $24. There are several factors that we are increasingly concern about regarding. One is the declining profit margin which has been shrinking since 2001 as our chart shown below. Second is the stagnant trend in dividend payments since 2009 (please note that they reward shareholders with 3% special dividend in the form of stock.) As for a cash payout, they have been returning 35% of their earning to investors. Alternatively, the board opts for a share buyback and which reduced the shares outstanding from 66 million shares to 55 million shares. This strategy helped offset the dilution from the 3% stock issuance. We have never a fan of share repurchase, though a recent letter from Warren Buffett stated the benefits of share repurchases.

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Readers may have noticed that the largest part of our portfolio is in Tootsie Roll (TR). The rational for such action is that we are utilizing this stock as a cash holding. Our observation is that stocks that appear and continue to show up on our watch list have a good probability of being near the bottom rather than the top of their respective price range. As such, we believe the downside is limited but the upside may be equally as limited for the reasons stated above. Our action may reverse if conditions in the stock price change signficantly. For now we continue to view Tootsie Roll (TR) as a cash holding.

C.H. Robinson (CHRW), one of the largest 3rd party logistic companies, is second on our list this week. The stock has been hammered because of the recent rise in the oil prices and we believe this could be a great opportunity to start your research if you have always wanted to own a cyclical stock. Valueline estimates that CHRW trades at a fair value of 22x cash flow which suggests that the stock should be trading for $75. If you’ve read our recent review of the stock market, you will know that we are cautious because the Dow Jones Transportation Index has failed to test and exceed its July 2011 high.

If cyclical stock aren’t your cup of tea, there are three that fit the undervalued mark based on a dividend yield thesis. These companies are Clorox (CLX), PepsiCo (PEP), and Cardinal Health (CAH). The first two are great household names that are considered defensive according to Wall Street. Cardinal Health (CAH) manufactures and distributes generic drugs. On average, if these shares revert to their historical dividend yield, CAH should return somewhere between 10% to 15% in the coming year.

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 March 18, 2011 (not published) and have check their performance one year later. The top five companies on that list can be seen in the table below.

Symbol Name 2011 Price 2012 Price % change
HGIC Harleysville Group Inc.  30.56 57.54 88.29%
SJW SJW Corp. 22.48 24.22 7.74%
MCY Mercury General Corp. 37.84 43.95 16.15%
SYY Sysco Corp. 27.7 29.63 6.97%
JNJ Johnson & Johnson  58.57 65.12 11.18%
Average 26.06%
DJI Dow Jones Industrial 11,858.52 13,232.62 11.59%
SPX S&P 500 1,279.21 1,404.17 9.77%

Companies on our watch list outperformed the market by a wide margin. The biggest driver was Harleysville (HGIC) which received a buyout bid from Nationwide Mutual Insurance.  However, when you exclude the gains of HGIC, our top five retained a respectable +10.51% gain.

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