Category Archives: NLO Dividend Watch List

Below are the 15 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.

New additions to our master database and appearing on our dividend list this week is Applied Materials (AMAT). SEMICON West was held in San Francisco this last week which set the stage for earnings release by companies in the semiconductor industry. Many semiconductor companies are going into the second half of the year more cautious than last year. Chip companies typically start ramping up for the Holiday season at about this time, however, the macro view is uncertain. This leads many companies to push back on their orders. Such push back causes the earnings to be very cyclical for equipment makers such as Applied Materials. Strong balance sheets as well as high dividend yields provide a good opportunity to do research on these firms. Readers may remember that we owned AMAT last year and have taken profits. Another entry point is near and we are getting bullish on AMAT.

A New York based bank, First Niagara Financial (FNFG), topped our list this week after falling -2% during the week.  While the yield of 4.18% and payout ratio of 53% appears to be a sure thing, a quick glance at the balance sheet tells a different story.  The company has $430M in cash and $11B in total debt.  If the economy continued to falter and the market falls further, the bank would likely have to raise capital.  The valuation appears attractive but anyone attempting to purchase the stock should view this as a speculation.

Walgreen (WAG) closed above $30 for the first time in weeks.  We have written commentary on Walgreen on June 21st and nothing material has changed s0 we urge readers to visit that post for our bullish view on the stock.

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 July 8,  2011 and have check their performance one year later. The top five companies on that list can be seen in the table below.

Our top five stocks underperformed the market by roughly 2-3%.  Only Glacier BanCorp (GBCI) reached our goal of +10% gains within one year.

Below are the 15 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.

A New York based bank, First Niagara Financial (FNFG), topped our list this week after falling -2% during the week.  While the yield of 4.18% and payout ratio of 53% appears to be a sure thing, a quick glance at the balance sheet tells a different story.  The company has $430M in cash and $11B in total debt.  If the economy continued to falter and the market falls further, the bank would likely have to raise capital.  The valuation appears attractive but anyone attempting to purchase the stock should view this as a speculation.

Walgreen (WAG) continued to struggle below the $30 mark.  We have written commentary on Walgreen on June 21 and nothing material has changed thus we urge reader to visit that post for our bullish view on the stock.

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 July 8,  2011 and have check their performance one year later. The top five companies on that list can be seen in the table below.

Our top five stocks underperformed the market by roughly 1%.  Only BanCorp (BXS) reached our goal of +10% gains within one year.

Below are the 34 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.

Topping our list is Unum Group (UNM) which provides disability, life, and financial protection benefits.  The stock is trading at a 33% discount to its book value.  Our Altimeter study of UNM shows that the stock, while not at its low, UNM is approaching an ideal buy point.  The model shows that $15.54 or below is the best purchase price.

Walgreen (WAG) reported earning along with news that it will be acquiring 45% stake in the U.K.’s largest drugstore-chain, Alliance Boots.  While the weakness in the Euro zone had all the analysts in panic mode, we believe this an amazing deal for Walgreen.  Boots broad exposure in different countries will help diversify the revenue stream for Walgreen.  The company raised its 2013 earnings outlook as a result of the integration.  For all the critic of Walgreen buying a European company at the time that there is upheaval, this is precisely the moment blood is running in the streets. Remember that in January 2012, the greatest investor, Warren Buffett, raised his stake in another UK retail firm, Tesco.  The biggest news for Walgreen, however, is the announcement of a dividend hike.  The company now will pay out $1.10 per share annually, which is a 22% increase from $0.90.  Take the current stock price of $29 and you get a 3.8% yield with wide margin for safety.  We believe Walgreen is a steal at any price below $30.

The C.H. Robinson (CHRW) Altimeter suggests that the stock valuation is close to a bottom.  The five-year dividend yield averages 1.5% but the current yield of 2.2% points to undervalution.  Looking at all other factors, the company is trading at a deep discount (source Morningstar).  Our only concern is the current Dow Theory bear market sentiment which could push the transportation stocks down even further.  If the 2.2% yield provides good compensation, one might want to start dipping their toe into this stock.

Procter & Gamble (PG) also reported earnings that failed to meet analysts’ expectations partly because of the slowdown in Europe.  Currency risk also plays a part in the decline of earnings.  With cosumers trading down to generic brand, it would hurt Procter & Gamble.  However, this may create a great entry point for anyone looking to get into this blue-chip name at bargain price.  IQTrend estimated that Procter is undervalued at 2.5%yield.  The current yield of 3.7%, then, is a good starting point to consider.

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 June 24, 2011 and have check their performance one year later. The top five companies on that list can be seen in the table below.

Our top five outperformed the market 2-3%.  Two of the five company fail to reach the 10% mark within a year.

Below are the 21 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.

Watch List Summary

Unum Group (UNM) provides disability, life, and financial protection benefits.  The stock is trading at a 33% discount to its book value.  Our Altimeter study  of UNM displays a noticeable trading range and suggest that we are currently at the middle of that range.

The C.H. Robinson (CHRW) Altimeter suggests that the stock valuation is close to a bottom.  The five-year dividend yield averages 1.5% but the current yield of 2.2% points to undervalution.  Looking at all other factors, the company is trading at a deep discount (source Morningstar).  Our only concern is the current Dow Theory bear market sentiment which could push the transport stock down even further.  If the 2.2% yield provides good compensation, one might want to start dipping their toe into this stock.

Of all these companies, Matthews International (MATW) provide the largest margin of safety with a 15% dividend payout ratio.  Typically, the stock trades at 13x cash flow.  Cash flow estimates are $3.75 and $4.05 for 2012 and 2013, respectively.  Matthews International's fair value calculation is $48.75 for 2012 and $52.65 for 2013.

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 June 15, 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.

Our top five outperformed the market by a wide margin thanks to the acquisition of Harleysville (HGIC).  Berkshire (BRK-A) is on our dividend watch list even though it doesn’t pay dividend.  Because Berkshire is a large beneficiary of dividend paying companies we believe it is wise to track it the stock.  As such, you can see that it outperformed the market by 2-3%.

Below are the 23 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.

Watch List Summary

Carbo Ceramics (CRR) tops our list and continues to trade lower.  With the current technical picture, the $60 level would be an important support level.  Analysts have taken the CRR earning estimate down since April when they projected Carbo Ceramics will grow by +31%, or $8.28.  The stock has fallen -18% since our April list.  Growth estimates of 25% is a bit rich for us but we will wait and see how the stock holds up at these levels.

Bank of Montreal (BMO) continues to struggle and remains at the 52-week low. We’ve made our “bullish” case for BMO on our June 7th post.  We think that $51.80 and below would be the right price to start accumulating shares.

McDonald’s (MCD) has appeared our list this week.  IQTrends (www.iqtrends.com) estimates that MCD is undervalued when it has a dividend yield of3.6%.  Our model places fair value at $104 but it is considered undervalued at $58.

Given the bearishness of the market, we believe that there a significant chance of MCD moving towards $58 before getting to the $104 fair value level.  The slowdown in China and greater Asia in general should hit the bottom line as consumers seek alternatives.

Walgreen's trading at its historically cheapest level.  That fact hasn’t convinced Morningstar.com to rate this stock favorably.  Morningstar.com suggests that investors buy the shares at the $21 range even though the stock has a fair value at $35.  The analyst at Morningstar.com is concerned about the competitive edge Walgreen has to face with consolidation in the industry.  As such, they see margin contraction coming soon.  Value Line Investment Survey also cites some of the same issues but they placed a more favorable view on Walgreen based on market size and its ability to generate cash flow.  Value Line expects Walgreen to trade around 11.5x cash flow.  With 2013 estimated cash flow per share of $4.30, Value Line has a fair value at $49.45.  That figure is in line with our valuation model.

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 June 10, 2011 and have check their performance one year later. The top five companies on that list can be seen in the table below.

Transatlantic Holdings (TRH) was acquired by Alleghany (Y) after a feeble and failed attempt to acquire by Warren Buffett.  Our top five returned an average of +15% over the last year.  Additionally, the top five easily achieved our minimum target return of +10% within the one year time frame.

Below are 42 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.

Watch List Summary

CH Robinson (CHRW) tops our list again this week. We will continue to stress the weakness in the Transportation index because of the bear market signal as noted from our call on May 19th.  As such, anyone interested in purchasing this stock needs to allocate at least three stage purchases at each 10% decline.

Bank of Montreal (BMO) has broken its 52-week low based on the closing price.  The company is of particular interest to us and will be updating our reader on its altimeter this week.  Based on IQ Trend, anytime the stock breach the 4.7% yield mark, it is deem undervalued.  Current yield of 5.23% suggest that the company is undervalue by 11%.  More on Bank of Montreal in last week’s list.

There’s no need to introduce Walgreen (WAG).  The company is at its historically cheapest level.  That fact alone hasn’t convinced Morningstar.com to rate this stock favorably.  The research firm suggests that investor to buy the shares at the $21 range but has a fair value at $35.  The analyst at Morningstar.com is concerned about the competitive edge Walgreen has to face with consolidation in the industry.  As such, they see margin contraction coming.  Value Line Investment Survey also cited some of the same issues but they placed a more favorable view on Walgreen based on market size and its ability to generate cash flow.  Value Line expects Walgreen to trade around 11.5x cash flow.  With 2013 estimated cash flow per share of $4.30, we have a fair value at $49.45.  That figure is in line with our valuation model.

Carbo Ceramics (CRR) continue to struggle and we expect it to keep trading down.  Our Altimeter study shows that stock could hit $62.40 which would make a great buying opportunity.

We’ve added Applied Materials (AMAT) because we view this company as a dividend contender.  The company started paying dividends in 2005 and has been raising that at 21% annually.  While that rate of increase isn’t sustainable, we believe that the 3.6% yield provides a good cushion for such a cyclical stock.  We do expect more weakness in the name and could easily see the price fall to the $7-8 range.  Semiconductor equipment is in a cyclical downturn and we are closer to the bottom in sales growth.  The dividend payout ratio of 35% suggests a good margin of safety.

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 June 3, 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.

As has been typical of our U.S. Dividend Watch List, the performance in the last year was stellar.  Our top 5 stocks gained more than +12% on both the Dow Jones Industrial Average and S&P 500.  All but one company reached our goal of gaining +10% within one year.

Below are 26 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.

Watch List Summary

CH Robinson (CHRW) tops our list this week. But we caution against this name as well as the sector because of the Dow Theory trend (indicated here). We briefly stated our case for the Transportation Index in our May 18 Nasdaq Watch List.

ConocoPhillips (COP) rose 4% over the week after the split off their chemical division.  We’d expect the dividend to be relatively safe but we questioned the growth potential of the exploration and production business.  As the resource pool shrinks (oil), more pressure will be placed on the company to build up its reserves.  Morningstar.com placed a fair value at $58 which is 11% above its current price.  More on ConocoPhillips and Phillips 66 in this article.

Carbo Ceramics (CRR) remain under pressure. Its earning estimate for 2012 has been revised downward by Valueline.  They are now expect to earn $6.10 per share versus previously estimated of $7.55.  Fair value however is estimated to be at 20x cash flow per share (CF).  Valueline estimate 2012 Price/Cash Flow to come in around $7.70 which places the fair value at $154.  The Morningstar.com figures show that Carbo Ceramics is currently trading at 17x CF which is about a 10% discount to fair value.

Canadian & American investors should be made aware of Bank of Montreal (BMO), currently #3 on our list, which is featured in the latest edition of Bloomberg Markets article titled "World's Strongest Banks", which says following the say:

"Bank of Montreal (BMO), Canada’s fourth-largest lender, also ramped up its presence in the U.S. by buying Marshall & Ilsley Corp., a Milwaukee-based bank, last year for $4.19 billion. Prior to that, its main U.S. asset had been the small Chicago-based Harris Bank franchise it bought in 1984."

Bank of Montreal's acquisition of Marshall & Ilsley (MI) is significant because MI had a 36-year history of dividend increases before being taken over.  This suggest that BMO has aquired a significant asset at a severely undervalued price.  Even before the financial crisis, we never had much interest in a banking stock.  However, high quality banks like Bank of Hawaii (BOH) and Bank of Montreal (BMO) must be considered at the right price.  Our transaction alerts will tip you off to when we begin our campaign of buying BMO.

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 May 27, 2011 and have check their performance one year later. The top five companies on that list can be seen in the table below.

We highlighted Heartland Financial (HTLF), Target (TGT), and American National Insurance (ANAT).  Our strong conviction in American National didn’t pan out as we expected and the stock fell -10%.  Including the dividend of 4%, the net loss for American National Insurance would be -6%.  Heartland Financial was trading at a 7% discount to its book value but traded up to 1.1x book value.  Target never traded up to 1% yield mark that we anticipated.  However, the gain of +16.7% was greatly appreciated. Ironically, Pershing Square's exit from Target marked the bottom of the stock's price.

Three out of the five companies, Heartland Financial, Target, and Chemical Finance, achieved our goal of +10% within one year.

Watch List Summary

The stock market seems to be in a full bear mode now that the Dow and the Transport have breached its recent low. Despite better than expected housing starts and industrial production, the market fell for a 3rd week. The biggest internet IPO, Facebook (FB), couldn’t spur more buying on Friday. As such, our watch list expanded to include 35 companies that are within 11% of the low.

With current market re-entering bear mode, there is still investment values to be had. We keep going back to Walgreen (WAG) for the same reasons, its risk/reward profile is at historic low levels. The stock is trading just 3.2% above the low and $3o appears to be a good support level. The dividend payout ratio of 31% provides margin of safety of 69% against a decline in earnings. Our most conservative analysis puts fair value at the  $29.90.

A company that we haven’t seen in a while is Air Product & Chemicals (APD). We recommended the stock on September 29, 2008 (found here) after the stock sustained a decline of -42% from the 2008 high.  The specialty chemical company is estimated to be undervalue at 3.30%. We are willing to say that APD is undervalue at the current yield of 3.29%.  The payout ratio of 46% and estimated growth rate of 14% give us a hint that APD could be a great buy when the market makes a turn.

United Technologies (UTX) fell 16% since mid March. The stock has a strong support at $68 level but this cyclical name may have more downside to go if we at the beginning of the bear market. Based on IQ Trend, the current yield of 2.65% suggest that the company is undervalue.

Fore more detail on companies such as ConocoPhillips (COP), Carbo Ceramics (CRR), and Johnson & Johnson (JNJ), please refer to our May 4 post.

Below are the 35 companies that meet our criteria and are within 11% of the 52-week low: