Category Archives: NLO Dividend Watch List

NLO Dividend Watch List: January 13, 2012

Posted on January 15, 2012 by | Leave a comment
We begin the year with an impressive move upward in the S&P 500 index. Two weeks have passed and the market has gained 2.5% despite the financial trouble that continues to brew in the Europe. Our 2012 dividend list has 25 companies that are within 11% of the 52-week low.

January 13, 2012

Symbol Name Price % Yr Low P/E EPS (ttm) Dividend Yield Payout Ratio
TR Tootsie Roll Industries Inc  23.63 3.55% 32.82 0.72 0.32 1.35% 44%
BCR CR Bard, Inc. 85.45 5.75% 21.97 3.89 0.76 0.89% 20%
JW-A John Wiley & Sons Inc. 44.59 6.45% 15.65 2.85 0.80 1.79% 28%
CHRW C.H. Robinson Worldwide  66.73 7.11% 25.96 2.57 1.32 1.98% 51%
WAG Walgreen Co. 32.63 7.55% 11.02 2.96 0.90 2.76% 30%
BDX Becton, Dickinson and Co. 74.91 7.64% 13.33 5.62 1.80 2.40% 32%
CWT California Water Service 17.94 7.75% 18.31 0.98 0.62 3.46% 63%
WST West Pharmaceutical 38.29 7.86% 21.15 1.81 0.72 1.88% 40%
OMI Owens & Minor, Inc. 27.96 8.08% 15.71 1.78 0.80 2.86% 45%
ANAT American National Insurance 71.06 8.14% 11.03 6.44 3.08 4.33% 48%
CLX Clorox Co. 68.03 8.38% 19.61 3.47 2.40 3.53% 69%
AVP Avon Products, Inc. 17.52 8.89% 10.31 1.70 0.92 5.25% 54%
MATW Matthews International Corp.  31.19 9.17% 12.68 2.46 0.36 1.15% 15%
KO Coca-Cola Co 66.99 9.30% 12.31 5.44 1.88 2.81% 35%
AROW Arrow Financial Corp.  23.58 9.67% 12.75 1.85 1.00 4.24% 54%
BMO Bank of Montreal 56.92 9.82% 11.07 5.14 2.73 4.80% 53%
BMS Bemis Co Inc 29.89 9.85% 15.02 1.99 0.96 3.21% 48%
CAH Cardinal Health, Inc.   41.25 9.91% 16.11 2.56 0.86 2.08% 34%
TGT Target Corp. 49.82 10.03% 11.59 4.30 1.20 2.41% 28%
PEP PepsiCo Inc. 64.4 10.09% 16.14 3.99 2.06 3.20% 52%
WTR Aqua America Inc 21.26 10.27% 21.47 0.99 0.66 3.10% 67%
T AT&T Inc 30.07 10.55% 15.26 1.97 1.76 5.85% 89%
SJW SJW Corp. 23.11 10.73% 19.42 1.19 0.69 2.99% 58%
NFG National Fuel Gas Co. 49.35 10.87% 15.97 3.09 1.42 2.88% 46%
CATO Cato Corp. 23.98 10.97% 10.90 2.20 0.92 3.84% 42%
25 Companies






Not much movement has occurred since our last watch list on December 23, 2011.

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 January 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 2010 Price 2011 Price % change
ABT Abbott Laboratories 46.89 55.43 18.21%
CL Colgate-Palmolive Co. 78.31 88.52 13.04%
CLX Clorox Co. 63.98 68.03 6.33%
LLY Eli Lilly & Co. 34.91 39.94 14.41%
KMB Kimberly-Clark Corp. 63.64 72.7 14.24%



Average 13.25%





DJI Dow Jones Industrial 11,787.38 12,422.06 5.38%
SPX S&P 500 1,293.24 1,289.09 -0.32%

Disclaimer

On our current list, we excluded companies that have no earnings. 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. We suggest that readers use the March 2009 low (or the 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. A minimum of 50% decline or the November 2008 to March 2009 low, whichever is lower, would fit 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. It is our expectation that, at the most, only 1/3 of the companies that are part of our list will outperform the market over a one-year period.


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NLO Dividend Watch List: December 30, 2011

Posted on January 4, 2012 by | Leave a comment
The S&P 500 ended the year at precisely where it started. The Dow, however, ended up nearly 6% for the year.

Our list from last year (December 31, 2010) posted an average gain of 9.5% which is considerably better than the overall market. This brings us to the end of the year watch list for 2011. As it stands, there are 22 companies this year versus 10 companies from last year. There is considerably less concentration compared to our list from last year. Below are the 22 companies ending our 2011 watch list:

December 30, 2011

Symbol Name Price % Yr Low P/E EPS (ttm) Dividend Yield Payout Ratio
TR Tootsie Roll Industries Inc  23.67 3.72% 32.88 0.72 0.32 1.35% 44%
FRS Frisch's Restaurants, Inc 19.4 5.21% 22.05 0.88 0.64 3.30% 73%
BMO Bank of Montreal 54.81 5.75% 10.66 5.14 2.74 5.00% 53%
BCR CR Bard, Inc. 85.5 5.82% 21.98 3.89 0.76 0.89% 20%
JW-A John Wiley & Sons Inc. 44.4 5.99% 15.58 2.85 0.80 1.80% 28%
LM Legg Mason, Inc.  24.05 6.37% 14.66 1.64 0.32 1.33% 20%
SCHW Charles Schwab Corp. 11.26 6.63% 16.81 0.67 0.24 2.13% 36%
WST West Pharmaceutical 37.95 6.90% 20.97 1.81 0.72 1.90% 40%
EXPD Expeditors Intl of Washington 40.96 7.08% 22.63 1.81 0.50 1.22% 28%
GS Goldman Sachs Group, Inc.   90.43 7.31% 13.76 6.57 1.40 1.55% 21%
BDX Becton, Dickinson and Co. 74.72 7.37% 13.30 5.62 1.80 2.41% 32%
OMI Owens & Minor, Inc. 27.79 7.42% 15.61 1.78 0.80 2.88% 45%
CAH Cardinal Health, Inc.   40.61 8.21% 15.86 2.56 0.86 2.12% 34%
AVP Avon Products, Inc. 17.47 8.58% 10.28 1.70 0.92 5.27% 54%
WAG Walgreen Co. 33.06 8.97% 11.17 2.96 0.90 2.72% 30%
AROW Arrow Financial Corp.  23.44 9.02% 12.67 1.85 1.00 4.27% 54%
UTX United Technologies Corp. 73.09 9.30% 13.71 5.33 1.92 2.63% 36%
BMI Badger Meter, Inc. 29.43 9.57% 18.28 1.61 0.64 2.17% 40%
CWT California Water Service 18.26 9.67% 18.63 0.98 0.62 3.40% 63%
CLX Clorox Co. 66.56 9.91% 19.18 3.47 2.40 3.61% 69%
MATW Matthews International Corp.  31.43 10.01% 12.78 2.46 0.36 1.15% 15%
BMS Bemis Co Inc 30.08 10.55% 15.12 1.99 0.96 3.19% 48%

We've reviewed many companies last week and nothing materially changed therefore we suggest readers revisit our posting from December 23, 2011 for watch list summary.

Last Year Review

We've suggested the following asset allocation for the 10 stocks. If one was to follow that conservative allocation with 51% in cash, one would end up with a gain of 4.3% excluding dividends.

Disclaimer

On our current list, we excluded companies that have no earnings. 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. We suggest that readers use the March 2009 low (or the 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. A minimum of 50% decline or the November 2008 to March 2009 low, whichever is lower, would fit 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. It is our expectation that, at the most, only 1/3 of the companies that are part of our list will outperform the market over a one-year period.

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NLO Dividend Watch List: December 23, 2011

Posted on December 23, 2011 by | Leave a comment
The S&P 500 exploded to the upside on Friday bringing the index into positive territory for the year. It has been a slightly different story for the blue chip Dow Jones Industrial Average, which is up 6% for the year.

There may be some bargains to be had in our list of 21 companies that are within 11% of the low.

December 23, 2011

Symbol Name Price % Yr Low P/E EPS (ttm) Dividend Yield Payout Ratio
TR Tootsie Roll Industries Inc  23.74 4.03% 32.97 0.72 0.32 1.35% 44%
BMO Bank of Montreal 54.4 4.96% 10.84 5.02 2.72 5.00% 54%
JW-A John Wiley & Sons Inc 43.99 5.01% 15.44 2.85 0.80 1.82% 28%
BCR CR Bard, Inc. 85.12 5.35% 21.88 3.89 0.76 0.89% 20%
FRS Frisch's Restaurants, Inc 19.5 5.75% 22.16 0.88 0.64 3.28% 73%
WST West Pharmaceutical 37.55 5.77% 20.75 1.81 0.72 1.92% 40%
BDX Becton, Dickinson and Co. 74.44 6.97% 13.25 5.62 1.80 2.42% 32%
EXPD Expeditors Intl.of Washington 41.07 7.37% 22.69 1.81 0.50 1.22% 28%
LM Legg Mason, Inc.  24.45 8.14% 14.91 1.64 0.32 1.31% 20%
AVP Avon Products, Inc. 17.48 8.64% 10.28 1.70 0.92 5.26% 54%
OMI Owens & Minor, Inc. 28.13 8.74% 15.80 1.78 0.80 2.84% 45%
MATW Matthews International Corp.  31.07 8.75% 12.63 2.46 0.36 1.16% 15%
AROW Arrow Financial Corp.  23.44 9.02% 12.67 1.85 1.00 4.27% 54%
CAH Cardinal Health, Inc.   40.96 9.14% 16.00 2.56 0.86 2.10% 34%
SCHW Charles Schwab Corp. 11.54 9.28% 17.22 0.67 0.24 2.08% 36%
T AT&T Inc 29.87 9.82% 15.16 1.97 1.76 5.89% 89%
CLX Clorox Co. 66.59 9.96% 19.19 3.47 2.40 3.60% 69%
BMS Bemis Co Inc 29.94 10.03% 15.05 1.99 0.96 3.21% 48%
CWT California Water Service 18.35 10.21% 18.72 0.98 0.62 3.38% 63%
ANAT American National Insurance 72.75 10.71% 11.30 6.44 3.08 4.23% 48%
UTX United Technologies Corp. 74.18 10.93% 13.92 5.33 1.92 2.59% 36%
21 Companies






Watch List Summary

Tootsie Roll (TR) leads our dividend list by being 4.03% above the one year low.  The chart below shows that in the last 13 years, if TR were bought around the current level, a gain of 20% is achieved in the subsequent 18 months or less.  According to Dow Theory, the minimum retracement of the current price decline from the high is to $26.40 or 11.20% above $23.74.  The downside risk is fairly limited if viewed from the perspective of the 2009 low.  At the current price, TR would need to fall -17.81% in order to accomplish the March 9, 2009 low.  This is an ideal candidate to consider for a stock that has increased its dividend for 47 years in a row, a dividend payout ratio of less than 50% and an additional 3% stock dividend that has been paid since 1966 to go along with the 1.30% cash dividend.
The Punchline: Tootsie Roll (TR) can be purchased at the current level in large quantities relative to other positions in your portfolio.  A second purchase could be done in an equal number of shares if the price declines to the 2009 low.
Bank of Montreal (BMO) has fallen –18.37% from the high      of April 2011.  The one-year low was at $51.83.  According to Dow Theory, BMO has established downside targets, from the high, of $51.06, $35.48 and $19.90.  It is interesting to note that BMO came close to the first downside target and has reversed.  In the short term, we believe that $57.66 is the minimum upside target for the stock based on the established downtrend.  However, if the price of BMO goes below the $51.06 level, we should expect a test of the $35.48 level.
The Punchline:  If BMO is considered for purchase then it should broken into thirds.  Although we favor strong Canadian banks of most U.S. banks, we recommend that any purchase of BMO be small relative to other stock holdings in your portfolio.  No additional purchases should be made of the stock rises after the initial purchase.
John Wiley and Sons (JW-A) is within striking distance of the 52-week low.  According to Dow Theory, based on the low in 2008 to the most recent high, the first downside target is $43.94.  However, with the stock currently at $43.99, there is the possibility that JW-A could fall to the second Dow Theory support level of $34.84.

The Punchline: John Wiley is a content provider/aggregator in a world seeking content.  Although the stock might be challenged in the short-term, the longer-term picture may favor JW-A.  However, we’re waiting for clarity on the $43.94 support level.

Sidenote: A company that is on our radar this week is Cardinal Health (CAH). After soaring to a high of $47 this year, the stock retreated as low as $37. The current yield of 2.1% implied that it is 31% undervalued (based on IQTrends [http://www.iqtrends.com/] range of 1.6% yield). This is the first time CAH is on our watch list since our recommendation of the stock in June 2009 (found here). The company spun off the CareFusion (CFN) division since our 2009 recommendation.

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 December 23, 2010 (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 2010 Price 2011 Price % change
CAG ConAgra Foods, Inc. 22.40 26.6 18.75%
ABT Abbott Laboratories 47.81 56.02 17.17%
SYY Sysco Corp. 29.05 29.43 1.31%
CLX Clorox Co. 63.81 66.59 4.36%
KMB Kimberly-Clark Corp. 63.22 73.73 16.62%



Average 11.64%





DJI Dow Jones Industrial 11,573.49 12,294.00 6.23%
SPX S&P 500 1,256.77 1,265.33 0.68%

Our list from last year did extremely well. The top five beat the Dow by five percentage points, excluding dividends. Four of the top five stocks, except Kimberly Clark (KMB), reached the 10% mark within 6 months.

Disclaimer:

On our current list, we excluded companies that have no earnings. 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. We suggest that readers use the March 2009 low (or the 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. A minimum of 50% decline or the November 2008 to March 2009 low, whichever is lower, would fit 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. It is our expectation that, at the most, only 1/3 of the companies that are part of our list will outperform the market over a one-year period.


Please consider donating to the New Low Observer. Thank you.

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NLO Dividend Watch List: December 9, 2011

Posted on December 11, 2011 by | 2 comments
The S&P 500 continued its volatile course peaking as high as 1,266 and falling as low as the 1,235 level, a 2% spread. At the end of the week, the S&P 500 rose 0.88%. The blue-chip Dow Jones Industrial Average rose 1.37% for the week showing that investors are moving toward higher quality names.

Our list contains 27 companies that are within 11% of the 52-week low. This is not a recommendation but a good starting point for research.

December 9, 2011

Symbol Name Price % Yr Low P/E EPS Dividend Yield Payout Ratio
AVP Avon Products, Inc. 16.58 3.05% 9.75 1.70 0.92 5.55% 54%
BDX Becton, Dickinson and Co. 72.92 4.79% 12.98 5.62 1.80 2.47% 32%
WST West Pharmaceutical 37.38 5.30% 20.65 1.81 0.72 1.93% 40%
BCR CR Bard, Inc. 85.7 6.06% 22.03 3.89 0.76 0.89% 20%
FNFG First Niagara Financial Group 8.73 6.20% 13.23 0.66 0.64 7.33% 97%
T AT&T Inc 29.03 6.73% 14.74 1.97 1.72 5.92% 87%
TR Tootsie Roll Industries Inc  24.4 6.92% 33.89 0.72 0.32 1.31% 44%
GTY Getty Realty Corp. 13.09 7.12% 9.55 1.37 1.00 7.64% 73%
BMO Bank of Montreal 55.56 7.20% 10.87 5.11 2.82 5.08% 55%
CLX Clorox Co. 65.03 7.38% 18.74 3.47 2.40 3.69% 69%
FRS Frisch's Restaurants, Inc 19.9 7.92% 22.61 0.88 0.64 3.22% 73%
CWT California Water Service 18.05 8.41% 18.42 0.98 0.62 3.43% 63%
AROW Arrow Financial Corp.  23.38 8.74% 12.64 1.85 1.00 4.28% 54%
VNO Vornado Realty Trust 74.43 8.83% 17.85 4.17 2.76 3.71% 66%
BMI Badger Meter, Inc. 29.3 8.88% 18.20 1.61 0.64 2.18% 40%
EXPD Expeditors Intl of Washington 41.73 9.10% 23.06 1.81 0.50 1.20% 28%
BMS Bemis Co Inc 29.71 9.19% 14.93 1.99 0.96 3.23% 48%
SYK Stryker Corp. 47.85 9.42% 15.19 3.15 0.72 1.50% 23%
WFSL Washington Federal, Inc.  13.31 9.55% 13.31 1.00 0.24 1.80% 24%
HCC HCC Insurance Holdings, Inc. 27.04 9.65% 11.17 2.42 0.62 2.29% 26%
ANAT American National Insurance 72.1 9.72% 11.20 6.44 3.08 4.27% 48%
CHRW C.H. Robinson Worldwide  68.44 9.86% 26.63 2.57 1.16 1.69% 45%
MTB M & T Bank Corp. 73.01 9.95% 10.57 6.91 2.80 3.84% 41%
KO Coca-Cola Co 67.57 10.25% 12.42 5.44 1.88 2.78% 35%
JW-A John Wiley & Sons Inc. CL 'A' 46.24 10.38% 15.94 2.90 0.80 1.73% 28%
OMI Owens & Minor, Inc. 28.59 10.51% 16.06 1.78 0.80 2.80% 45%
MSEX Middlesex Water Company  18.31 10.90% 20.81 0.88 0.74 4.04% 84%
27 Companies






Watch List Summary

Avon (AVP) continues to show up on our list. This time around, the stock is 3% above the low. Analysts' consensus expects Avon to grow its earnings by 8%. We expect that figure to come down in the coming weeks as we believe that many analysts are revising their estimate. Still, the earnings yield of 10% and dividend yield of 5.55% are something to consider. The payout ratio of 54% is a good margin of safety. The chart below shows Avon price and P/E going back 10 years. The current valuation is equivalent to the  2009 low. Our estimated fair value for Avon to trade up to is $32.

Avon Products Stock Chart

Next up on our list is Becton Dickinson (BDX). Analysts' consensus calls for Becton to grow earnings by 13% in 2012. The dividend yield of 2.47% is the highest yield in a 10-year period. the conservative payout ratio (32%) and earning yield of 8% makes this a quality stock to consider. IQTrends (http://www.iqtrends.com/) estimates that BDX is undervalued when the stock reaches a 2% yield. Look at the chart below for the 10-year price and dividend yield figures.

Becton Dickinson and Company Stock Chart

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 December 10, 2010 (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 2010 Price 2011 Price % change
KMB Kimberly-Clark Corp. 61.70 70.14 13.68%
CLX Clorox Co. 62.46 65.03 4.11%
CAG ConAgra Foods, Inc. 22.33 25.7 15.09%
ABT Abbott Laboratories 47.62 54.57 14.59%
CL Colgate-Palmolive Co. 78.21 90.46 15.66%



Average 12.63%





DJI Dow Jones Industrial 11,410.32 12,184.26 6.78%
SPX S&P 500 1,240.40 1,255.19 1.19%

Our top five have beaten both the Dow Jones Industrials by 2x and the S&P 500 by more than 10x! The worst performer was Clorox (CLX) which still managed to beat the S&P 500, excluding dividends. The other four stocks returned more than 10%, excluding dividends. One particular stock we'd like to highlight is ConAgra (CAG). We published an article on December 1, 2010 on SeekingAlpha (read it here) stating our reason to consider ConAgra over Hecla Mining (HL) and yet there were many who opposed our view. One commentor suggested riding the "wave" of Hecla (HL) and yet when you review the performance of the two stocks one year later, you can see that Hecla dropped -27% while ConAgra rose +18%, excluding dividends. Take a look at the chart below for the 1-year performance.

Disclaimer:

On our current list, we excluded companies that have no earnings. 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. We suggest that readers use the March 2009 low (or the 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. A minimum of 50% decline or the November 2008 to March 2009 low, whichever is lower, would fit 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. It is our expectation that, at the most, only 1/3 of the companies that are part of our list will outperform the market over a one-year period.

Please consider donating to the New Low Observer. Thank you.

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NLO Dividend Watch List: November 25, 2011

Posted on November 27, 2011 by | Leave a comment

The S&P 500 index closed down -4.7% for the week while the blue-chip Dow Jones Industrial index was down -4.6%. Our dividend list contains 29 companies this week. Those companies within 5% of the 52-week low are listed below.

November 25, 2011

Symbol Name Price % Yr Low P/E EPS (ttm) Dividend Yield Payout Ratio
AVP Avon Products, Inc. 16.09 0.00% 9.46 1.70 0.92 5.72% 54%
CCBG Capital City Bank Group  9.65 0.00% 21.93 0.44 0.40 4.15% 91%
FNFG First Niagara Financial Group 8.24 0.24% 12.48 0.66 0.64 7.77% 97%
TR Tootsie Roll Industries Inc  22.88 0.26% 31.78 0.72 0.32 1.40% 44%
WST West Pharmaceutical 35.6 0.28% 19.67 1.81 0.72 2.02% 40%
AROW Arrow Financial Corp.  21.58 0.37% 11.66 1.85 1.00 4.63% 54%
T AT&T Inc 27.41 0.77% 13.91 1.97 1.72 6.28% 87%
BMS Bemis Co Inc 27.62 1.51% 13.88 1.99 0.96 3.48% 48%
MTB M & T Bank Corp. 67.7 1.96% 9.80 6.91 2.80 4.14% 41%
CHRW C.H. Robinson Worldwide, Inc.  63.63 2.13% 24.76 2.57 1.16 1.82% 45%
BDX Becton, Dickinson and Co. 71.11 2.18% 12.65 5.62 1.64 2.31% 29%
BMO Bank of Montreal 53.22 2.68% 10.82 4.92 2.82 5.30% 57%
WFSL Washington Federal, Inc.  12.52 3.05% 12.52 1.00 0.24 1.92% 24%
LM Legg Mason, Inc.  23.31 3.10% 14.21 1.64 0.32 1.37% 20%
AVY Avery Dennison Corp. 24.25 3.10% 9.19 2.64 1.00 4.12% 38%
BCR CR Bard, Inc. 83.37 3.18% 21.43 3.89 0.76 0.91% 20%
BMI Badger Meter, Inc. 27.83 3.42% 17.29 1.61 0.64 2.30% 40%
VNO Vornado Realty Trust 70.73 3.42% 16.96 4.17 2.76 3.90% 66%
HCC HCC Insurance Holdings, Inc. 25.6 3.81% 10.58 2.42 0.62 2.42% 26%
SYK Stryker Corp. 45.52 4.09% 14.45 3.15 0.72 1.58% 23%
WFC Wells Fargo & Co. 23.51 4.12% 8.71 2.70 0.48 2.04% 18%
BXS BanCorp.South Inc. 8.57 4.13% 17.85 0.48 0.04 0.47% 8%
WEYS Weyco Group, Inc.  21.72 4.32% 16.58 1.31 0.64 2.95% 49%
BEN Franklin Resources, Inc. 91.63 4.47% 10.63 8.62 1.00 1.09% 12%
EXPD Expeditors Intl of Washington 40 4.58% 22.10 1.81 0.50 1.25% 28%
CTAS Cintas Corp.  27.63 4.70% 15.44 1.79 0.54 1.95% 30%
SIAL Sigma-Aldrich Corp.  58.89 4.82% 16.36 3.60 0.72 1.22% 20%
GE General Electric Co 14.7 4.85% 11.22 1.31 0.60 4.08% 46%
CWT California Water Service 17.47 4.92% 17.83 0.98 0.62 3.55% 63%

Watch List Summary

Topping our list this week is Avon Products (AVP). According to IQTrends (http://www.iqtrends.com/), AVP is considered undervalued once it reaches a 3.7% dividend yield. The yield rose to 5.7% this week from 5.05% two weeks prior. Any long-term investor would need to do some extensive due diligence prior to committing their hard earned capital to this company. The current payout ratio (dividend/earnings) is at 54% imply that earnings can fall by half before a dividend cut is considered. Please note that the company is being investigated by SEC.

Another company for yield seekers is AT&T (T).  The current yield of 6.28% is hard to ignore when the 10 year T-Bill pays 1.97%.  IQTrends estimates that AT&T is undervalued when the yield reaches 5.5%. A return to historical undervalued yield would equate to 14% upside move. The payout ratio of 87% is quite high but not unusual for AT&T. The recent M&A deal with T-Mobile was broken up.  This should provide an interesting backdrop for how AT&T would fight off competition from its main rival Verizon.

Disclaimer:
On our current list, we excluded companies that have no earnings. 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. We suggest that readers use the March 2009 low (or the 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. A minimum of 50% decline or the November 2008 to March 2009 low, whichever is lower, would fit 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. It is our expectation that, at the most, only 1/3 of the companies that are part of our list will outperform the market over a one-year period. 

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NLO Dividend Watch List: November 11, 2011

Posted on November 13, 2011 by | Leave a comment

The S&P closed up 0.85% for the week while the blue-chip Dow Industrial index was up 1.4%. Our dividend list contains 20 companies this week.  Those companies within 11% of the 52-week low are listed below.

November 11, 2011

Symbol Name Price % Yr Low P/E EPS (ttm) Dividend Yield Payout Ratio
AVP Avon Products, Inc. 18.23 3.87% 10.72 1.70 0.92 5.05% 54%
WAG Walgreen Co. 32.85 3.99% 11.17 2.94 0.90 2.74% 31%
BDX Becton, Dickinson and Co. 74.12 5.21% 13.19 5.62 1.64 2.21% 29%
FRS Frisch's Restaurants, Inc 19.54 5.45% 22.20 0.88 0.64 3.28% 73%
CCBG Capital City Bank Group  10.35 5.50% 23.52 0.44 0.40 3.86% 91%
TR Tootsie Roll Industries Inc  24.25 5.62% 28.20 0.86 0.32 1.32% 37%
BMS Bemis Co Inc 28.86 6.06% 14.50 1.99 0.96 3.33% 48%
PEP PepsiCo Inc. 63.28 6.80% 15.86 3.99 2.06 3.26% 52%
FNFG First Niagara Financial Group 8.94 7.84% 13.55 0.66 0.64 7.16% 97%
T AT&T Inc 29.42 8.16% 14.93 1.97 1.72 5.85% 87%
CLX Clorox Co. 65.63 8.37% 18.91 3.47 2.40 3.66% 69%
AVY Avery Dennison Corp. 26.03 8.64% 9.86 2.64 1.00 3.84% 38%
BMO Bank of Montreal 56.77 9.53% 11.29 5.03 2.82 4.97% 56%
AROW Arrow Financial Corp.  23.74 9.96% 12.83 1.85 0.97 4.09% 52%
BCR CR Bard, Inc. 88.89 10.01% 22.85 3.89 0.76 0.85% 20%
ANAT American National Insurance 72.49 10.32% 12.00 6.04 3.08 4.25% 51%
CHRW C.H. Robinson Worldwide, Inc.  68.76 10.37% 26.75 2.57 1.16 1.69% 45%
WST West Pharmaceutical 39.18 10.37% 21.53 1.82 0.72 1.84% 40%
HCC HCC Insurance Holdings, Inc. 27.23 10.42% 11.25 2.42 0.62 2.28% 26%
SYY Sysco Corp. 27.75 10.60% 14.16 1.96 1.04 3.75% 53%
20 Companies






Watch List Summary

Topping our list this week is Avon Product (AVP).  According to IQTrends (http://www.iqtrends.com/), AVP is considered undervalued once it reaches 3.7% dividend yield. At 5.05% yield, AVP is about 36% undervalued.  Any long-term investor would need to do extensive due diligence prior to committing their hard earned capital to this investment opportunity.  The current payout ratio is at 54% imply that earnings can fall by half before dividend cut is considered.  One can't ignore the fact that the company is being investigated by SEC.  Even so, analyst at Caris & Co. has target price of $21 which was lowered from $27.

The next company on our list is Walgreen (WAG) which is just 4% from the low.  IQTrends (http://www.iqtrends.com/) estimated that Walgreen is undervalued at a 1.4% yield thus making this company extremely undervalued.  Despite the dark cloud over the Express Script concern, one can't ignore the prospects of this well run company.  Our proprietary model shows that Walgreen is trading near its "bargain" price of $30.  Incorporating earnings, cash flow, book value, and dividend yield, we estimated that Walgreen should be trading a $65 fair value.  Historical dividend yield shows that Walgreen is trading at the lowest valuation ever!

Right behind Walgreen is Becton Dickinson (BDX) which we highlighted that Warren Buffett took position in 2009, 2 years ago.  Nothing in the recent filing has shown that much has changed materially since our last recommendation.  Our proprietary model shows that the high yield range is 2% which tell us that the long-term investor should put Becton on their radar.  Our fair value estimate for Becton is $88.

Watch List Performance Review

In our ongoing review of the NLO Dividend Watch List, we have taken the top five stocks on our list from November 12, 2010 (not published) and have checked their performance one year later. The top five companies on that list can be seen in the table below.

Symbol Name 2010 Price 2011 Price % change
WABC Westamerica BanCorp.  50.76 45.16 -11.03%
CAG ConAgra Foods, Inc. 22.01 24.77 12.54%
CL Colgate-Palmolive Co. 76.58 89.17 16.44%
KMB Kimberly-Clark Corp. 62.02 71.1 14.64%
BOH Bank of Hawaii Corp. 44.49 42.76 -3.89%



Average 5.74%





DJI Dow Jones Industrial 11,192.58 12,153.68 8.59%
SPX S&P 500 1,199.21 1,263.85 5.39%

Despite the lackluster performance of the top five stocks in the last year, it is noted that all of the stocks achieved a 10% gain before the month of June 2011, as indicated by the black vertical line.  We consider gains of 10% within a year to be an opportunity to consider selling the stock or selling the principal within a tax deferred account.  In this case, sales of stock at 10% gains resulted in annualized gains of at least 20%.  In the case of WestAmerica BanCorp. (WABC) the annualized gain was approximately 75%.

Disclaimer:
On our current list, we excluded companies that have no earnings. 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. We suggest that readers use the March 2009 low (or the 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. A minimum of 50% decline or the November 2008 to March 2009 low, whichever is lower, would fit 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. It is our expectation that, at the most, only 1/3 of the companies that are part of our list will outperform the market over a one-year period.

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NLO Dividend Watch List: October 14, 2011

Posted on October 14, 2011 by | Leave a comment
The market rebounded nicely this week and pushed many companies out of their 52-week low range. Despite that, there are some great bargains to be had. There are 26 companies on this week's list.

Symbol Name Price % Yr Low P/E EPS Dividend Yield Payout Ratio
WAG Walgreen Co. 32.9 2.81% 11.19 2.94 0.90 2.74% 31%
PEP PepsiCo Inc. 62.09 4.79% 15.80 3.93 2.06 3.32% 52%
BDX Becton, Dickinson 73.85 4.83% 12.41 5.95 1.64 2.22% 28%
AROW Arrow Financial Corp.  22.73 5.28% 12.09 1.88 0.97 4.27% 52%
FRS Frisch's Restaurants 19.52 5.34% 10.44 1.87 0.64 3.28% 34%
SYY Sysco Corp. 26.52 5.70% 13.53 1.96 1.04 3.92% 53%
CFR Cullen/Frost Bankers 46.94 6.58% 13.30 3.53 1.84 3.92% 52%
T AT&T Inc 29.15 7.16% 8.47 3.44 1.72 5.90% 50%
BCR CR Bard, Inc. 86.81 7.41% 22.91 3.79 0.76 0.88% 20%
BOH Bank of Hawaii Corp. 37.79 7.88% 11.21 3.37 1.80 4.76% 53%
VNO Vornado Realty Trust 76.1 7.93% 16.99 4.48 2.76 3.63% 62%
TR Tootsie Roll Industries  24.79 7.97% 28.83 0.86 0.32 1.29% 37%
WST West Pharmaceutical 38.23 8.12% 20.78 1.84 0.72 1.88% 39%
ANAT American Nat'l Insur. 71.27 8.46% 11.80 6.04 3.08 4.32% 51%
TRV Travelers 50.65 8.64% 9.57 5.29 1.64 3.24% 31%
BRO Brown & Brown, Inc. 18.38 9.02% 16.71 1.10 0.32 1.74% 29%
CWT California Water Service 18.17 9.10% 18.73 0.97 0.62 3.41% 64%
MSEX Middlesex Water  18.06 9.18% 19.63 0.92 0.73 4.04% 79%
MDT Medtronic, Inc. 33 9.34% 11.50 2.87 0.97 2.94% 34%
CBSH Commerce Bancshares  36.39 9.51% 12.90 2.82 0.92 2.53% 33%
NTRS Northern Trust Corp.  36.75 9.67% 14.58 2.52 1.12 3.05% 44%
WFSL Washington Federal  13.37 10.04% 15.55 0.86 0.24 1.80% 28%
PRK Park National Corp. 53.93 10.06% 12.15 4.44 3.76 6.97% 85%
ALL Allstate Corp.   24.58 10.37% 23.41 1.05 0.84 3.42% 80%
UTX United Technologies Corp. 74.2 10.55% 14.38 5.16 1.92 2.59% 37%
NU Northeast Utilities 33.08 11.42% 13.96 2.37 1.10 3.33% 46%

Watch List Summary

Topping our list this week is Walgreen Co. (WAG). Walgreen Co. is currently yielding 2.74% with a conservative P/E ratio of 11. Earnings is expected to grow 11% through 2012. With the stock being so close to the one year low, it appears that the risk-reward may have turned in favor of the investor. We have bought a 10% position of WAG as of Friday October 14th with the expectation to purchase the exact same dollar amount when the price falls by 20% or more. Like moths to a flame, we're drawn to the compounding consistency of Walgreen as demonstrated in the performance of the stock against Apple (AAPL) since Apple's IPO in 1980. In the chart below, only recently has AAPL been able to exceed the total return of Walgreen but by a relatively narrow margin.

Right behind Walgreen Co. is the well known consumer name, Pepsi Co. (PEP). Pepsi Co. has been on our list for some time now so we'll have to see how much longer it would stay. Analysts expect Pepsi to grow its bottom line by 7% next year. Although times may be different, but we can't help but remind investors of Jeremy Siegel's seminal piece "The Nifty Fifty Revisited" (found here). In that piece, Siegel reviews the performance of the "Nifty Fifty" at their peak price in 1972 before their crash. Pepsi Co. (PEP), from the peak in 1972, produced an annualized return of 16.03% in the period from 1972 to 1995.

Becton, Dickinson (BDX) is now on our watch list after our first recommendation of the stock on May 4, 2009.  According to Edson Gould’s altimeter (chart below), BDX is now selling below the price paid by Warren Buffett relative to the dividend and subsequent dividend increases.  BDX has a dividend payout ratio of 28% which indicates that earnings could fall by 50% without imperiling the company’s ability to make good on their dividend.

Watch List Performance Review

In our ongoing review of the NLO Dividend Watch List, we have taken the top five stocks on our list from October 8, 2010 and have checked their performance one year later. The top five companies on that list can be seen in the table below.

Symbol Name 2010 Price 2011 Price % change
CL Colgate-Palmolive Co. 74.90 91.99 22.82%
CAG ConAgra Foods, Inc. 21.87 25.47 16.46%
NTRS Northern Trust Corp.  48.35 36.63 -24.24%
WST West Pharmaceutical 35.11 38.3 9.09%
BBT BB&T Corp. 23.58 22.36 -5.17%
Average 3.79%
DJI Dow Jones Industrial 11,062.78 11,573.34 4.62%
SPX S&P 500 1,176.19 1,215.65 3.35%

The performance of the top five from last year, at 3.79%, was between the Dow's 4.62% and the S&P 500's 3.35%.

Three of the top five stocks from last year performed above the level of the S&P 500 and Dow Jones Industrial Average.  Colgate-Palmolive (CL) cranked out a return of over 22% despite sporting a subpar dividend yield of 2.83%.  ConAgra managed to generate a return of 16% with a dividend yield of 4.21% at the time the list was generated.  Northern Trust (NTRS) got hammered with a decline of -24.24%.

Disclaimer:

On our current list, we excluded companies that have no earnings. 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. We suggest that readers use the March 2009 low (or the 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. A minimum of 50% decline or the November 2008 to March 2009 low, whichever is lower, would fit 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. It is our expectation that, at the most, only 1/3 of the companies that are part of our list will outperform the market over a one-year period.

Please consider donating to the New Low Observer. Thank you.

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NLO Dividend Watch List: September 30, 2011

Posted on October 1, 2011 by | Leave a comment
The problems in Europe continue to plague the markets globally.  The S&P 500 rallied mid-week when it seemed that the bailout of Greece is coming.  Seemingly good news couldn't hold the market up and thus the selling continued from Wednesday through Friday.  The S&P closed down 0.44% for the week while the blue-chip, the Dow Industrial index, was actually up 1.3%.  Upon initial review, it could have been a flight to "quality" within the realm of stocks.  However, as a result of the sell off, our list swelled and we included only those companies within 5% of the 52-week low below. 
Symbol
Name
Price
% Yr Low
P/E
EPS
Dividend
Yield
Payout
FNFG
First Niagara Financial Group Inc. 
9.15
0.00%
13.66
0.67
0.64
6.99%
96%
EMR
Emerson Electric Co.
41.31
0.00%
12.75
3.24
1.38
3.34%
43%
GTY
Getty Realty Corp.
14.42
0.00%
8.69
1.66
1.00
6.93%
60%
NFG
National Fuel Gas Co.
48.68
0.02%
15.65
3.11
1.42
2.92%
46%
MMM
3M Co
71.79
0.11%
12.19
5.89
2.20
3.06%
37%
AOS
AO Smith Corp.
32.03
0.28%
9.56
3.35
0.64
2.00%
19%
UMBF
UMB Financial Corp. 
32.08
0.38%
13.04
2.46
0.78
2.43%
32%
WFSL
Washington Federal, Inc. 
12.74
0.39%
14.81
0.86
0.24
1.88%
28%
AVP
Avon Products, Inc.
19.6
0.51%
11.46
1.71
0.92
4.69%
54%
ATR
AptarGroup Inc.
44.67
0.61%
16.98
2.63
0.88
1.97%
33%
XRAY
DENTSPLY International Inc. 
30.69
0.92%
16.07
1.91
0.20
0.65%
10%
BMI
Badger Meter, Inc.
28.93
0.94%
16.44
1.76
0.64
2.21%
36%
AVY
Avery Dennison Corp.
25.08
0.97%
9.02
2.78
1.00
3.99%
36%
DNB
Dun & Bradstreet Corp.
61.26
1.36%
11.92
5.14
1.44
2.35%
28%
ADM
Archer Daniels Midland Co.
24.81
1.60%
7.93
3.13
0.64
2.58%
20%
ALB
Albemarle Corp.
40.4
1.60%
9.35
4.32
0.66
1.63%
15%
SYY
Sysco Corp.
25.9
1.65%
13.21
1.96
1.04
4.02%
53%
CYN
City National Corp.
37.76
1.70%
12.50
3.02
0.80
2.12%
26%
CAT
Caterpillar Inc.
73.84
1.71%
12.20
6.05
1.84
2.49%
30%
JCI
Johnson Controls Inc  
26.37
1.78%
11.77
2.24
0.64
2.43%
29%
UGI
UGI Corp.
26.27
1.78%
11.52
2.28
1.04
3.96%
46%
ITW
Illinois Tool Works, Inc.
41.6
1.91%
10.98
3.79
1.44
3.46%
38%
BXS
BanCorp.South Inc.
8.78
1.97%
18.68
0.47
0.04
0.46%
9%
EOG
EOG Resources, Inc.
71.01
2.10%
44.66
1.59
0.64
0.90%
40%
BEN
Franklin Resources, Inc.
95.64
2.20%
11.41
8.38
1.00
1.05%
12%
SON
Sonoco Products Co.
28.23
2.21%
14.19
1.99
1.16
4.11%
58%
BDX
Becton, Dickinson and Co.
73.32
2.25%
12.32
5.95
1.64
2.24%
28%
CATO
Cato Corp.
22.56
2.36%
10.30
2.19
0.92
4.08%
42%
HP
Helmerich & Payne, Inc.
40.6
2.39%
11.12
3.65
0.28
0.69%
8%
UVV
Universal Corp.
35.86
2.40%
6.87
5.22
1.92
5.35%
37%
APD
Air Products & Chemicals, Inc.
76.37
2.40%
14.22
5.37
2.32
3.04%
43%
VNO
Vornado Realty Trust
74.62
2.43%
16.66
4.48
2.76
3.70%
62%
DOV
Dover Corp.
46.6
2.60%
10.20
4.57
1.26
2.70%
28%
MUR
Murphy Oil Corporation
44.16
2.62%
8.96
4.93
1.10
2.49%
22%
WAG
Walgreen Co.
32.89
2.78%
11.19
2.94
0.90
2.74%
31%
FULT
Fulton Financial Corp. 
7.65
2.82%
11.42
0.67
0.20
2.61%
30%
CTBI
Community Trust BanCorp., Inc. 
23.29
2.87%
9.95
2.34
1.24
5.32%
53%
NUE
Nucor Corp.
31.64
2.99%
21.38
1.48
1.45
4.58%
98%
SBSI
Southside Bancshares, Inc. 
18.01
3.00%
8.00
2.25
0.72
4.00%
32%
AROW
Arrow Financial Corp. 
22.25
3.00%
11.84
1.88
0.97
4.36%
52%
TRMK
Trustmark Corp. 
18.15
3.01%
10.93
1.66
0.92
5.07%
55%
BOH
Bank of Hawaii Corp.
36.4
3.12%
10.80
3.37
1.80
4.95%
53%
BMS
Bemis Co Inc
29.31
3.17%
14.58
2.01
0.96
3.28%
48%
MSEX
Middlesex Water Company 
17.07
3.20%
18.55
0.92
0.73
4.28%
79%
EXPD
Expeditors International of Washington
40.55
3.23%
23.17
1.75
0.50
1.23%
29%
GE
General Electric Co
15.22
3.40%
11.98
1.27
0.60
3.94%
47%
GS
Goldman Sachs Group, Inc.  
94.55
3.45%
9.27
10.20
1.40
1.48%
14%
ARE
Alexandria Real Estate Equities, Inc.
61.39
3.47%
21.47
2.86
1.88
3.06%
66%
PPG
PPG Industries, Inc.
70.66
3.50%
11.15
6.34
2.28
3.23%
36%
WBS
Webster Financial Corp.
15.3
3.52%
12.24
1.25
0.20
1.31%
16%
BRO
Brown & Brown, Inc.
17.8
3.55%
16.18
1.10
0.32
1.80%
29%
GBCI
Glacier BanCorp., Inc. 
9.37
3.65%
16.44
0.57
0.52
5.55%
91%
SWK
Stanley Black & Decker, Inc.
49.1
3.87%
13.68
3.59
1.64
3.34%
46%
MLM
Martin Marietta Materials, Inc.
63.22
3.98%
34.36
1.84
1.60
2.53%
87%
SUSQ
Susquehanna Bancshares, Inc. 
5.46
4.00%
21.00
0.26
0.08
1.47%
31%
BMO
Bank of Montreal
55.85
4.09%
11.24
4.97
2.71
4.85%
55%
CFR
Cullen/Frost Bankers, Inc.
45.86
4.13%
12.99
3.53
1.84
4.01%
52%
LNC
Lincoln National Corp.
15.63
4.20%
4.56
3.43
0.20
1.28%
6%
HIG
Hartford Financial Services Group Inc.  
16.14
4.26%
4.62
3.49
0.40
2.48%
11%
SJW
SJW Corp.
21.77
4.31%
16.37
1.33
0.69
3.17%
52%
NTRS
Northern Trust Corp. 
34.98
4.39%
13.88
2.52
1.12
3.20%
44%
TROW
T. Rowe Price Group, Inc. 
47.77
4.42%
16.76
2.85
1.24
2.60%
44%
WSFS
WSFS Financial Corp. 
31.57
4.43%
15.55
2.03
0.48
1.52%
24%
PBI
Pitney Bowes Inc  
18.8
4.44%
11.33
1.66
1.48
7.87%
89%
PEP
PepsiCo Inc.
61.9
4.47%
15.75
3.93
2.06
3.33%
52%
TRV
The Travelers Companies, Inc.
48.73
4.53%
9.21
5.29
1.64
3.37%
31%
CBSH
Commerce Bancshares, Inc. 
34.75
4.57%
12.32
2.82
0.92
2.65%
33%
PH
Parker Hannifin Corp.
63.13
4.59%
9.91
6.37
1.48
2.34%
23%
TDS
Telephone and Data Systems, Inc
21.25
4.68%
11.87
1.79
0.47
2.21%
26%
FRS
Frisch's Restaurants, Inc
19.4
4.70%
10.37
1.87
0.64
3.30%
34%
CBU
Community Bank System, Inc.
22.69
4.71%
11.64
1.95
1.04
4.58%
53%
UTX
United Technologies Corp.
70.36
4.83%
13.64
5.16
1.92
2.73%
37%
T
AT&T Inc
28.52
4.85%
8.29
3.44
1.72
6.03%
50%
PAYX
Paychex, Inc. 
26.37
4.98%
17.94
1.47
1.24
4.70%
84%
Watch List Summary
Topping our list this week is First Niagara Financial Group (FNFG).  According to Value Line, this New York regional bank typically trades at 15 times earnings.  The recent merger with NewAlliance Bancshares should fuel First Niagara's expansion and growth.  It appears that growth is being priced into the company as seen in the forward P/E ratio of 7.5.  If the company can grow 18% as predicted by the analysts, the dividend payout ratio should contract slightly.

Moving down the list, we have a well known bluechip company, 3M (MMM). IQTrends estimates that anytime 3M trades around a 3% dividend yield, it is undervalue. Currently, the yield sits slightly above its undervalued range at 3.06%.  Another gauge we can look to is Value Line Investment Survey, which shows a fair value at 12x cash flow. Using the 2012 estimate of $9 cash flow and 3M is fairly valued at $108.  At the  current price of $71, with a 3% yield, there appears to be a reasonable  margin of safety for long-term investors.

Another company to highlight this week is Avon Products (AVP). This cosmetics producer is extremely undervalued according to historical cash flow and dividend yield. At almost 5% dividend yield and a healthy payout ratio, we believe Avon is a stock one to pay attention to. The stock is undervalued at or around 3.7% dividend yield so the current 4.69% yield suggests that AVP has at least 25% upside. If based on AVP's cash flow we get a more bullish picture. Valueline shows Avon trades around 14x cash flow and with 2012 consensus at $2.80 per share, Avon's fair value appears to be at $39, a figure that is twice the current price.

After last appearing on our Dividend Watch List of September 16, 2011, Harleysville Group (HGIC) has increase by 119%.  On Friday September 23rd, it was reported by Bloomberg (article here) that Harleysville Group was rumored to be acquired by Nationwide Insurance.  On Thursday September 29th, it was officially announced that Nationwide Insurance would pay $60 a share for Harleysville Group.  Nationwide Insurance is paying 2 times book value in the transaction.  Harleysville Group was ranked 3rd on our list of top dividend stocks to consider on September 16th.
From the same list, three insurance related companies are worth considering.  First on the list is American National Insurance Company (ANAT) which “…operates in five segments: Life, Annuity, Health, Property and Casualty, and Corporate…” ANAT is selling at a book value of $139 a share while trading at $69.25 and sporting a P/E ratio of 11.5.  From 1992 to 2002, ANAT increased it’s dividend for each year.  However, since late 2002, ANAT has intermittently increased the annual dividend from $2.96 to the current level of $3.08.  The dividend yield is a healthy 4.40% with a reasonable payout ratio of 51%.
The next company was ranked 5th on our September 16th list and currently ranked 51st is Brown & Brown (BRO).  Brown & Brown is “…a diversified insurance agency, markets and sells insurance products and services primarily in the United States.”  BRO has a price/book ratio of 1.65 and an enterprise value of $2.51 billion.  Trading within 4% of the 52-week low, Brown & Brown has fallen by 34% from the high and is within 13% of the 2009 low.  BRO has increased the dividend every year since 1996.

Finally, Allstate (ALL) was ranked 9th on the list and has managed to fall off of our current list.  Prior to 2008, Allstate had increased the dividend for 14 years in a row.  However, the financial crisis took its toll on the company requiring a dividend cut of 51%.  Allstate recently increased the dividend in March of this year.  

Watch List Performance Review

In our ongoing review of the NLO Dividend Watch List, we have taken the top five stocks on our list from September 10, 2010 and have checked their performance one year later. The top five companies on that list can be seen in the table below.

Symbol Name 9/10/2010 9/9/2011
% change
INTC Intel Corp. 17.97 19.7 9.63%
WST West Pharmaceutical Services 33.65 37.78 12.27%
TR Tootsie Roll Industries Inc 23.87 23.67 -0.84%
OMI Owens & Minor, Inc. 26.44 27.72 4.84%
BEC Beckman Coulter, Inc. 45.71 83.47 82.61%
Avg.
 21.70%
Dow Industrials 10,462.77 10,992.13 5.06%
Excluding Beckman Coulter (BEC), the remaining four stocks, on average, managed to exceed the Dow Jones Industrials throughout the year with a gain +6.48%. The average performance of all five stocks was 21.70% compared to the Industrials 5.06% in the same one year period of time.

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NLO Dividend Watch List: September 16, 2011

Posted on September 16, 2011 by | Leave a comment
The market rallied everyday this week taking the Dow Jones Industrial Average above the 11,500 mark.  The S&P 500 is back above 1,200 level. In regards to Dow Theory, we believe that the bear market is still intact (see Dow Theory Bear Market stands).  Until both the Industrials and Dow Jones Transports can break above their intermediate high, we believe the market remains very vulnerable.

September 16, 2011 

Symbol Name Price % Yr Low P/E EPS (ttm) Dividend Yield Payout Ratio
ANAT American National Insurance 70.88 1.10% 11.74 6.04 3.08 4.35% 51%
TMP Tompkins Financial Corp. 36.51 2.41% 11.59 3.15 1.44 3.94% 46%
HGIC Harleysville Group Inc.  26.76 3.60% 15.12 1.77 1.52 5.68% 86%
SYY Sysco Corp. 27.4 3.71% 13.98 1.96 1.04 3.80% 53%
BRO Brown & Brown, Inc. 19.01 4.51% 17.28 1.10 0.32 1.68% 29%
PEP PepsiCo Inc. 62.05 4.73% 15.79 3.93 2.06 3.32% 52%
SFNC Simmons First National Corp.  21.8 5.47% 10.48 2.08 0.76 3.49% 37%
GBCI Glacier BanCorp., Inc.  10.64 5.56% 18.67 0.57 0.52 4.89% 91%
ALL Allstate Corp.   24.94 5.59% 23.75 1.05 0.84 3.37% 80%
GD General Dynamics Corp. 60.6 5.59% 8.64 7.01 1.88 3.10% 27%
SYBT S.Y. BanCorp., Inc.  19.4 5.66% 11.21 1.73 0.72 3.71% 42%
VLY Valley National BanCorp.  11.11 5.71% 13.23 0.84 0.69 6.21% 82%
CBSH Commerce Bancshares, Inc.  37.36 5.78% 13.25 2.82 0.92 2.46% 32%
CATO Cato Corp. 24.03 5.86% 10.97 2.19 0.92 3.83% 42%
MMM 3M Co 80.53 5.96% 13.67 5.89 2.20 2.73% 37%
CTBI Community Trust BanCorp., Inc.  24.65 6.02% 10.53 2.34 1.24 5.03% 53%
FRS Frisch's Restaurants, Inc 19.66 6.10% 10.51 1.87 0.64 3.26% 34%
BDX Becton, Dickinson and Co. 77.25 6.19% 12.98 5.95 1.64 2.12% 28%
BXS BanCorp.South Inc. 10.31 6.29% 21.94 0.47 0.04 0.39% 9%
T AT&T Inc 28.94 6.40% 8.41 3.44 1.72 5.94% 50%
CFR Cullen/Frost Bankers, Inc. 48.98 6.43% 13.88 3.53 1.84 3.76% 52%
NTRS Northern Trust Corp.  37 6.69% 14.68 2.52 1.12 3.03% 44%
DOV Dover Corp. 52.34 6.71% 11.45 4.57 1.26 2.41% 28%
SJW SJW Corp. 22.31 6.80% 16.77 1.33 0.69 3.09% 52%
BRK-A Berkshire Hathaway Inc. CL 'A' 107100 6.82% 14.36 7457.95 N/A N/A N/A
TR Tootsie Roll Industries Inc  24.89 7.01% 28.94 0.86 0.32 1.29% 37%
MDP Meredith Corp. 24.28 7.05% 8.73 2.78 1.02 4.20% 36%
MTB M & T Bank Corp. 74.15 7.11% 10.44 7.10 2.80 3.78% 39%
FNFG First Niagara Financial Group Inc.  10.46 7.28% 15.61 0.67 0.64 6.12% 96%
MATW Matthews International Corp.  31.25 7.35% 12.86 2.43 0.32 1.02% 13%
EOG EOG Resources, Inc. 90.16 7.44% 56.70 1.59 0.64 0.71% 40%
SWK Stanley Black & Decker, Inc. 56.73 7.59% 15.80 3.59 1.64 2.89% 46%
BOH Bank of Hawaii Corp. 40.13 7.62% 11.91 3.37 1.80 4.49% 53%
GS Goldman Sachs Group, Inc.   107.49 7.73% 10.54 10.20 1.40 1.30% 14%
ALB Albemarle Corp. 46.3 7.77% 10.72 4.32 0.66 1.43% 15%
PAYX Paychex, Inc.  27.08 7.80% 19.07 1.42 1.24 4.58% 87%
CYN City National Corp. 42.13 7.89% 13.95 3.02 0.80 1.90% 26%
PRK Park National Corp. 53.56 7.92% 12.06 4.44 3.76 7.02% 85%
ATNI Atlantic Tele-Network, Inc. 32.6 7.95% 31.65 1.03 0.88 2.70% 85%
FFIN First Financial Bankshares, Inc.  28.23 8.00% 13.70 2.06 0.96 3.40% 47%
CWT California Water Service 18.05 8.41% 18.61 0.97 0.62 3.43% 64%
WEYS Weyco Group, Inc.  22.81 8.41% 18.85 1.21 0.64 2.81% 53%
JCI Johnson Controls Inc   30.19 8.48% 13.48 2.24 0.64 2.12% 29%
THFF First Financial Corp. 28.75 8.49% 11.88 2.42 0.94 3.27% 39%
SHW Sherwin-Williams Co. 75.37 8.49% 16.53 4.56 1.46 1.94% 32%
TRV The Travelers Companies, Inc. 50.61 8.56% 9.57 5.29 1.64 3.24% 31%
BANF BancFirst Corp.  34.61 8.60% 12.49 2.77 1.08 3.12% 39%
EGN Energen Corp. 47.11 8.75% 12.30 3.83 0.54 1.15% 14%
TRMK Trustmark Corp.  20.24 8.88% 12.19 1.66 0.92 4.55% 55%
WMT Wal-Mart Stores, Inc. 52.65 8.98% 11.20 4.70 1.46 2.77% 31%
CB Chubb Corp.   60.39 9.03% 8.69 6.95 1.56 2.58% 22%
BMO Bank of Montreal 60.07 9.08% 11.55 5.20 2.82 4.69% 54%
AVP Avon Products, Inc. 22.1 9.14% 12.92 1.71 0.92 4.16% 54%
UMBF UMB Financial Corp.  36.79 9.17% 14.96 2.46 0.78 2.12% 32%
DNB Dun & Bradstreet Corp. 66.59 9.25% 12.96 5.14 1.44 2.16% 28%
FFIC Flushing Financial Corp.  11.20 9.27% 8.55 1.31 0.52 4.64% 40%
ASBC Associated Banc-Corp.  10.32 9.32% 32.25 0.32 0.04 0.39% 13%
ARE Alexandria Real Estate Equities, Inc. 68.56 9.57% 23.97 2.86 1.80 2.63% 63%
HNZ HJ Heinz Co. 51.52 9.66% 17.12 3.01 1.92 3.73% 64%
FUL HB Fuller Company 20.89 9.95% 12.90 1.62 0.30 1.44% 19%
SEIC SEI Investments Company  16.88 9.97% 13.84 1.22 0.24 1.42% 20%
BMS Bemis Co Inc 31.25 10.00% 15.55 2.01 0.96 3.07% 48%
GCI Gannett Co Inc 10 10.05% 4.73 2.13 0.32 3.18% 15%
ADM Archer Daniels Midland Co. 28.62 10.08% 9.14 3.13 0.64 2.24% 20%
AFL AFLAC Inc. 36.33 10.09% 9.56 3.80 1.20 3.30% 32%
CBU Community Bank System, Inc. 23.99 10.30% 12.30 1.95 1.04 4.34% 53%
AOS AO Smith Corp. 37.51 10.32% 11.20 3.35 0.64 1.71% 19%
CHFC Chemical Financial Corp.  16.74 10.42% 12.49 1.34 0.80 4.78% 60%
APD Air Products & Chemicals, Inc. 82.36 10.43% 15.34 5.37 2.32 2.82% 43%
EXPD Expeditors International of Washington, Inc.  44.33 10.44% 25.33 1.75 0.50 1.13% 29%
WFC Wells Fargo & Co. 24.95 10.50% 9.67 2.58 0.48 1.92% 19%
MUR Murphy Oil Corporation 52.21 10.52% 10.59 4.93 1.10 2.11% 22%
EMR Emerson Electric Co. 45.74 10.56% 14.12 3.24 1.38 3.02% 43%
UBSI United Bankshares, Inc.  21.52 10.70% 13.04 1.65 1.20 5.58% 73%
FII Federated Investors Inc 17.75 10.87% 11.02 1.61 0.96 5.41% 60%
GE General Electric Co 16.33 10.94% 12.86 1.27 0.60 3.67% 47%
STT State Street Corp. 34.43 10.96% 10.90 3.16 0.72 2.09% 23%
77 Companies

Watch List Summary
Topping our list this week is a life insurance company, American National (ANAT), which is selling at half of its book value.  With a 4.35% dividend yield and a conservative dividend payout ratio, ANAT should entice most patience investors to look into this company.  We've initiated a 5% position of this company in our portfolio.
Another company we like and have mentioned many times is Sysco (SYY).  We again bring back the concept of using dividend yield to gauge valuation.  Sysco historically is undervalued at 2% thus making it very attractive at current levels.  If the yield returns to the historical undervalued range, the potential upside would be 90%.  With a payout ratio sitting at 53%, the earnings could take a hit and the dividend is would still be safe. We've initiated a 5% position of this company in our portfolio.
Pepsi Co. (PEP) is another name we'd like to highlight.  The earnings predictability of Pepsi Co. is high and investors could possibly extract additional information on key metrics such as cash flow or dividend outlook.  According to its historical trend, anytime Pepsi trades above 2.2% dividend yield, the stock is considered undervalued.  The current yield of 3.32% could reward long-term investor with 50% upside in a fairly short period of time.

Top Five Performance Review

In our ongoing review of the NLO Dividend Watch List, we have taken the top five stocks in our database from September 17, 2010 (not published) and have checked their performance one year later. The top five companies on that list can be seen in the table below.



Symbol Name 2010 Price 2011 Price % change
WST West Pharmaceutical 33.43 40.07 19.86%
OMI Owens & Minor, Inc. 26.63 29.89 12.24%
WFSL Washington Federal, Inc.  14.59 14.99 2.74%
FUL HB Fuller Company 19.32 20.89 8.13%
CSL Carlisle Companies Inc. 29.31 37.15 26.75%
Average 13.94%
DJI Dow Jones Industrial 10,607.85 11,509.09 8.50%
SPX S&P 500 1,125.59 1,216.01 8.03%

Last year's top five outperformed the market by more than 5%.  The best performer was Carlisle (CSL) whose share have risen as high as 73% and that occurred within 7 months.  West Pharma (WST) rose as high as 40% in just 6 months.

Disclaimer:

On our current list, we excluded companies that have no earnings. 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. We suggest that readers use the March 2009 low (or the 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. A minimum of 50% decline or the November 2008 to March 2009 low, whichever is lower, would fit 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. It is our expectation that, at the most, only 1/3 of the companies that are part of our list will outperform the market over a one-year period.



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NLO Dividend Watch List: August 19, 2011

Posted on August 19, 2011 by | Leave a comment
The market continued to lose its footing.  The S&P 500 closed down almost 5% for the week while the Dow slipped below 10,900. The Dow Theory Bear Market stands at the end of the week with no sign of alleviating.  As a result of weakness in the market, there are many opportunities to be had if and when the market turn.  Our list exploded to include more than 100 companies.  This after we've incorporated more filters to make sure that only quality names appear on the list.  We've chosen to display only the companies that are within 5% of the low this week.  If you'd like to see the full list, please consider donating to the New Low Observer.

August 19, 2011 Watch List

Symbol Name Price % Yr Low P/E EPS (ttm) Dividend Yield Payout Ratio
BOH Bank of Hawaii Corp. 37.44 -3.41% 11.11 3.37 1.80 4.81% 53%
LNC Lincoln National Corp. 19.46 -3.28% 5.67 3.43 0.20 1.03% 6%
SEIC SEI Investments Company  15.71 -2.06% 12.88 1.22 0.24 1.53% 20%
STT State Street Corp. 31.91 -1.75% 10.10 3.16 0.72 2.26% 23%
BBT BB&T Corp. 19.27 -1.73% 14.27 1.35 0.64 3.32% 47%
AFL AFLAC Inc. 34.61 -1.23% 9.11 3.80 1.20 3.47% 32%
NTRS Northern Trust Corp.  34.78 -0.91% 13.80 2.52 1.12 3.22% 44%
WFSL Washington Federal, Inc.  13.85 -0.86% 16.10 0.86 0.24 1.73% 28%
MDP Meredith Corp. 23.63 -0.59% 8.50 2.78 1.02 4.32% 37%
EV Eaton Vance Corp. 21.16 -0.47% 13.74 1.54 0.72 3.40% 47%
SYY Sysco Corp. 27 -0.44% 13.78 1.96 1.04 3.85% 53%
HHS Harte-Hanks, Inc. 7.37 -0.27% 10.10 0.73 0.32 4.34% 44%
FII Federated Investors Inc 16.39 -0.18% 10.18 1.61 0.96 5.86% 60%
DNB Dun & Bradstreet Corp. 62.32 -0.08% 12.12 5.14 1.44 2.31% 28%
MMM 3M Co 76.87 -0.17% 13.05 5.89 2.20 2.86% 37%
BRC Brady Corp. 24.94 0.24% 13.13 1.90 0.72 2.89% 38%
USB U.S. BanCorp. 20.56 0.59% 9.98 2.06 0.50 2.43% 24%
AVY Avery Dennison Corp. 26.05 0.77% 9.37 2.78 1.00 3.84% 36%
MUR Murphy Oil Corporation 48.69 0.83% 9.88 4.93 1.10 2.26% 22%
ANAT American National Insurance 72.5 0.95% 12.00 6.04 3.08 4.25% 51%
SON Sonoco Products Co. 28.04 1.23% 14.09 1.99 1.16 4.14% 58%
AVP Avon Products, Inc. 20.53 1.38% 12.01 1.71 0.92 4.48% 54%
WEYS Weyco Group, Inc.  22.02 1.43% 18.20 1.21 0.64 2.91% 53%
GS Goldman Sachs Group, Inc.   111.76 1.56% 10.96 10.20 1.40 1.25% 14%
ECL Ecolab, Inc. 44.53 1.64% 20.06 2.22 0.70 1.57% 32%
NC NACCO Industries Inc. 69.16 1.71% 4.33 15.99 2.13 3.08% 13%
BMS Bemis Co Inc 28.6 1.92% 14.23 2.01 0.96 3.36% 48%
TRV The Travelers Companies, Inc. 49.46 2.06% 9.35 5.29 1.64 3.32% 31%
FFIC Flushing Financial Corp.  10.73 2.09% 8.19 1.31 0.52 4.85% 40%
BMI Badger Meter, Inc. 32.03 18.20 1.76 0.64 2.00% 36%
CHRW C.H. Robinson Worldwide 63.67 2.20% 25.47 2.50 1.16 1.82% 46%
BRK-A Berkshire Hathaway Inc. 102591 2.32% 13.76 7457.95 N/A N/A N/A
HIG Hartford Financial Services  17.72 2.43% 5.08 3.49 0.40 2.26% 11%
SYK Stryker Corp. 43.8 2.48% 13.86 3.16 0.72 1.64% 23%
EOG EOG Resources, Inc. 87.57 2.52% 55.08 1.59 0.64 0.73% 40%
ITW Illinois Tool Works, Inc. 41.36 2.55% 10.91 3.79 1.44 3.48% 38%
EMR Emerson Electric Co. 42.46 2.63% 13.10 3.24 1.38 3.25% 43%
EXPD Expeditors International 40.33 2.86% 23.05 1.75 0.50 1.24% 29%
PNR Pentair, Inc. 30.26 2.89% 13.82 2.19 0.80 2.64% 37%
TMP Tompkins Financial Corp. 37 2.98% 11.75 3.15 1.44 3.89% 46%
SJW SJW Corp. 21.52 3.02% 16.18 1.33 0.69 3.21% 52%
MATW Matthews International Corp.  30.05 3.23% 12.37 2.43 0.32 1.06% 13%
PEP PepsiCo Inc. 62.07 3.28% 15.79 3.93 2.06 3.32% 52%
APD Air Products & Chemicals 75.24 3.34% 14.01 5.37 2.32 3.08% 43%
WFC Wells Fargo & Co. 23.36 3.45% 9.05 2.58 0.48 2.05% 19%
LLTC Linear Technology Corp.  26.31 3.54% 10.52 2.50 0.96 3.65% 38%
GD General Dynamics Corp. 57.47 3.62% 8.20 7.01 1.88 3.27% 27%
MDT Medtronic, Inc. 31.29 3.68% 10.94 2.86 0.97 3.10% 34%
TFX Teleflex InCorp.orated 49.87 4.07% 9.39 5.31 1.36 2.73% 26%
UTX United Technologies Corp. 67.45 4.46% 13.07 5.16 1.92 2.85% 37%
LLY Eli Lilly & Co. 35.01 4.63% 8.24 4.25 1.96 5.60% 46%
AOS AO Smith Corp. 34.43 4.86% 10.28 3.35 0.64 1.86% 19%

52 companies

Watch List Summary

Much of the weakness in the market can be attribute to the banking sector.  Thus it's no surprise that Bank of Hawaii (BOH) top our list.  Our long time readers may remember our buy and sell recommendation of BOH back in 2009.  The stock appears to have come full circle.  Back in January of 2009, 6 months before the Dow Theory buy signal in July, we advised our readers to research BOH when it was trading at $37.76 with 4.8% yield.  The 10-year note was trading at 2.34% which mean BOH offered a 2.46% premium over the treasury.  While BOH hasn't raised their dividend, they also haven't cut it.  At the same time, earnings have risen from $3 to $3.37 which bring down the payout ratio.  Acquiring this stock today would give you a 2.74% premium over the 10-year note.

Top Five Performance Review

In our ongoing review of the NLO Dividend Watch List, we have taken the top five stocks in our database from August 20, 2010 (not published) and have checked their performance one year later. The top five companies on that list can be seen in the table below.

Symbol Name 2010 Price 2011 Price % change
SVU SUPERVALU Inc. 10.08 6.8 -32.54%
HRB H&R Block, Inc. 13.47 13.26 -1.56%
BBT BB&T Corp. 23.11 19.27 -16.62%
MDT Medtronic, Inc. 34.77 31.29 -10.01%
WFC Wells Fargo & Co. 24.60 23.36 -5.04%



Average -13.15%





DJI Dow Jones Industrial 10,213.62 10,817.65 5.91%
SPX S&P 500 1,071.69 1,123.53 4.84

Last year's performance was far below the market  Even the "best" performer (H&R Block) lagged the market by a wide margin.  The biggest hit to the list was the collapse of Supervalu (SVU).  SVU's failure to pass on costs was a major factor in their profit decline.  Although holding on to these names for one year yielded a negative return, each name offered at least 10% profit within seven months of purchase.

Disclaimer:

On our current list, we excluded companies that have no earnings. 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. We suggest that readers use the March 2009 low (or the 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. A minimum of 50% decline or the November 2008 to March 2009 low, whichever is lower, would fit 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. It is our expectation that, at the most, only 1/3 of the companies that are part of our list will outperform the market over a one-year period.

Please consider donating to the New Low Observer. Thank you.

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NLO Dividend Watch List: July 22, 2011

Posted on July 22, 2011 by | Leave a comment
It was a great week for the market as the S&P 500 continued to move up toward the 1,350 mark and closed the week up 2.2%.  The Dow didn't fair so well but nevertheless closed the week up 1.6% and is looking to test the 12,800 high.  Our watch list contains 39 companies within 11% of their respective 52-week low.

July 22, 2011 Watch List
Symbol Name Price % Yr Low P/E EPS (ttm) Dividend Yield Payout Ratio
MDP Meredith Corp. 29.36 -0.05% 10.30 2.85 1.02 3.47% 36%
ANAT American National Insurance 76.58 0.37% 12.96 5.91 3.08 4.02% 52%
WABC Westamerica BanCorp.  48.57 0.39% 15.52 3.13 1.44 2.96% 46%
MCY Mercury General Corp. 38.7 1.45% 14.23 2.72 2.40 6.20% 88%
GBCI Glacier BanCorp., Inc.  13.12 2.22% 22.24 0.59 0.52 3.96% 88%
TCB TCF Financial Corp. 13.05 2.55% 13.18 0.99 0.20 1.53% 20%
HGIC Harleysville Group Inc.  30.72 2.71% 11.01 2.79 1.44 4.69% 52%
SFNC Simmons First National Corp.  25.15 2.72% 11.70 2.15 0.76 3.02% 35%
TDS Telephone and Data Systems 30.18 2.84% 23.22 1.30 0.47 1.56% 36%
AFL AFLAC Inc. 46.21 3.08% 10.41 4.44 1.20 2.60% 27%
UVV Universal Corp. 37.14 3.16% 6.85 5.42 1.92 5.17% 35%
BRK-A Berkshire Hathaway Inc. CL 'A' 115,750 3.37% 17.59 6580.82 N/A N/A N/A
SYBT S.Y. BanCorp., Inc.  23.35 3.62% 13.65 1.71 0.72 3.08% 42%
STBA S&T BanCorp., Inc.  17.61 5.04% 15.18 1.16 0.60 3.41% 52%
CMA Comerica, Inc. 33.78 5.31% 18.56 1.82 0.40 1.18% 22%
PEP PepsiCo Inc. 65.76 5.50% 17.58 3.74 2.06 3.13% 55%
AVY Avery Dennison Corp. 33.69 5.66% 11.70 2.88 1.00 2.97% 35%
ALL Allstate Corp.   28.69 5.73% 11.71 2.45 0.84 2.93% 34%
NTRS Northern Trust Corp.  45.92 5.81% 16.94 2.71 1.12 2.44% 41%
NWN Northwest Natural Gas Co. 46.62 5.96% 17.79 2.62 1.74 3.73% 66%
CHFC Chemical Financial Corp.  19.1 6.30% 17.36 1.10 0.80 4.19% 73%
SUSQ Susquehanna Bancshares, Inc.  7.9 6.95% 46.47 0.17 0.08 1.01% 47%
SCG SCANA Corporation 40.54 7.06% 13.65 2.97 1.94 4.79% 65%
CINF Cincinnati Financial Corp.  28.4 7.14% 12.51 2.27 1.60 5.63% 70%
BOH Bank of Hawaii Corp. 46.35 7.33% 12.91 3.59 1.80 3.88% 50%
BXS BanCorp.South Inc. 12.49 7.62% 78.06 0.16 0.04 0.32% 25%
GS Goldman Sachs Group, Inc.   135.49 7.66% 14.84 9.13 1.40 1.03% 15%
PRK Park National Corp. 63.95 7.76% 14.18 4.51 3.76 5.88% 83%
SON Sonoco Products Co. 32.94 8.36% 16.15 2.04 1.16 3.52% 57%
PG Procter & Gamble Co.   64.25 8.62% 16.91 3.80 2.10 3.27% 55%
WMT Wal-Mart Stores, Inc. 54.52 8.74% 11.90 4.58 1.46 2.68% 32%
BKH Black Hills Corp. 30.84 8.90% 18.80 1.64 1.46 4.73% 89%
AVP Avon Products, Inc. 28.69 9.16% 17.71 1.62 0.92 3.21% 57%
LLTC Linear Technology Corp.  31.27 9.25% 13.25 2.36 0.96 3.07% 41%
CTL CenturyTel, Inc.   38.66 9.57% 12.97 2.98 2.90 7.50% 97%
CFR Cullen/Frost Bankers, Inc. 55.77 9.72% 15.93 3.50 1.84 3.30% 53%
MLM Martin Marietta Materials, Inc. 79.16 9.77% 35.18 2.25 1.60 2.02% 71%
FII Federated Investors Inc 22.18 9.89% 13.28 1.67 0.96 4.33% 57%
C Citigroup Inc  40.26 10.42% 13.16 3.06 0.04 0.10% 1%
39 Companies              

Watch List Summary
There is a noticeably large number of insurance and financial companies on our list.  This may be because of the foreign debt situation in Greece or the possibility of a debt ceiling impass.  Further analysis would have to be done but it appears that this sector is out of favor and worth investigating.

On the top of our list is Meredith (MDP), a major player in the media sector.  While the Murdoch scandal seems to casts a pall over the sector, Meredith has emerged to be in good shape financially.  The company earned $2.85 in the last 12 months and is paying $1.02 in dividends.  Next year earnings are expected to come in at $2.68 which would not jeopardize the dividend payment in our view.  Historically, MDP is considered undervalued with a dividend yield of  1.3% thus the current yield of 3.47% suggests that the stock could double in due time.  The company will report its quarterly earning on July 28th.

American National Insurance (ANAT) is no stranger to the NLO team.  This life insurer trades at a 55% discount to its book value and offers a hefty 4% dividend yield.  With the payout ratio at 50%, earnings will need to drop substantially for the company to consider cutting, halting or borrowing to pay the dividend.  Anyone interested in this stock should be aware that it is a highly illiquid stock.  The average volume based on the last three months is merely 21,000.  Friday's volume for ANAT was 12,150.  American National Insurance has been trading in a line formation or consolidation for a year and any move, up or down, could set the trend for the stock.

Another stock hitting our radar is Pepsico (PEP).  Pepsi reported higher profits but scaled back on their guidance which took down the stock.  Pepsi's yield is slightly above 3% making the stock worth looking into.  Historically, Pepsi trades between 2.2% and 1.2% so a 3% yield would imply that this company is undervalued by as much as 40%.

Stock Highlight: Greenhill & Co. (GHL)

Greenhill & Co. (GHL) is trading close to its 52-week low but because the dividend payment exceeds earnings, it doesn't pass our criteria to appear on our list this time around.  Greenhill & Co. is an investment bank that has managed to emerge from the wreckage of the financial crisis relatively intact. While the investment bank is experiencing internal turmoil as indicated in this Bloomberg article, we believe we have a solution for some of the problems related to the company’s financial situation. We recommend that Greenhill & Co. consider cutting the dividend in half.
Cutting the dividend would put Greenhill & Co. (GHL) in a better financial position to retain the staff necessary to get the mergers and acquisitions done. We recognize that the dividend, with a payout that exceeds current earnings, would further undermine the current stock price and pay less cash to the largest shareholders. However, maintaining such a high dividend leaves less cash available to pass on to their most valuable asset, the employees.
In the chart below we present Edson Gould’s Altimeter which reflects the relative value of a company based on the dividend and the stock price. In the case of Greenhill, the red line reflects the actual movement of the price in relation to the dividend while the blue line reflects what we believe would be the ideal dividend policy of a cut.
Under either scenario, Greenhill & Co. is undervalued. However, if Greenhill maintains the aggressive dividend policy, which exceeds current earnings, then the company does not have a viable business model for the inevitable slowdown in the economy and stock market. On the other hand, were GHL to cut their dividend and then re-embark on a more gradual dividend increasing policy, there would be assured growth of the company going forward. We’d rather take the dividend cut instead of being acquired at a discount by a less efficient but “well established” federally chartered investment bank.

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 23, 2010 and have checked their performance one year later. The top five companies on that list can be seen in the table below.
Symbol Name 2010 Price 2011 Price % change
BEC Beckman Coulter, Inc. 47.26 83.5 76.68%
JNJ Johnson & Johnson   57.63 66.72 15.77%
FRS Frisch's Restaurants, Inc 19.99 22.4 12.06%
XRAY DENTSPLY International 29.26 39.54 35.13%
WST West Pharmaceutical 35.41 46.45 31.18%
      Average 34.16%
         
DJI Dow Jones Industrial 10,424.62 12,681.16 21.65%
SPX S&P 500 1,102.66 1,345.02 21.98%
Last year's list performed well because of the acquisition of Beckman from Danaher.  Some of our reader may recalled our article on Beckman.  In any case, a study of this list alone could yield great ideas.  If you look at the composition of the top five, there are three companies that we could classify as healthcare related companies, Beckman (BEC), Johnson & Johnson (JNJ), and West Pharmaceutical (WST).   Because Beckman is no longer publicly traded, we could not display the stock in the chart above.


Disclaimer:

On our current list, we excluded companies that have no earnings. 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. We suggest that readers use the March 2009 low (or the 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. A minimum of 50% decline or the November 2008 to March 2009 low, whichever is lower, would fit 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. It is our expectation that, at the most, only 1/3 of the companies that are part of our list will outperform the market over a one-year period.

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NLO Dividend Watch List: July 8, 2011

Posted on July 9, 2011 by | Leave a comment
It was a good week for the market as the S&P 500 roared back 1.75%.  The Dow did even better and closed at 12,657, up 1.95% for the week.  Our watch list contains 30 companies within 11% of their respective 52-week low.

July 8, 2011 Watch List

Symbol Name Price % Yr Low P/E EPS (ttm) Dividend Yield Payout Ratio
CMA Comerica, Inc. 33.79 2.15% 18.57 1.82 0.40 1.18% 22%
NTRS Northern Trust Corp.  45.87 2.89% 16.93 2.71 1.12 2.44% 41%
BXS BanCorp.South Inc. 12.01 3.80% 75.06 0.16 0.04 0.33% 25%
GS Goldman Sachs Group, Inc.   134.08 4.51% 14.69 9.13 1.40 1.04% 15%
BRK-A Berkshire Hathaway Inc. CL 'A' 115,050 4.66% 17.48 6580.82 N/A N/A N/A
GBCI Glacier BanCorp., Inc.  13.44 4.67% 22.78 0.59 0.52 3.87% 88%
AFL AFLAC Inc. 46.51 5.35% 10.48 4.44 1.20 2.58% 27%
NWN Northwest Natural Gas Co. 45.93 5.42% 17.53 2.62 1.74 3.79% 66%
WABC Westamerica BanCorp.  49.7 5.95% 15.63 3.18 1.44 2.90% 45%
ANAT American National Insurance 78.74 6.20% 13.32 5.91 3.08 3.91% 52%
MCY Mercury General Corp. 39.61 6.22% 14.56 2.72 2.40 6.06% 88%
SYBT S.Y. BanCorp., Inc.  23.59 6.41% 13.80 1.71 0.72 3.05% 42%
SCG SCANA Corporation 39.55 6.63% 13.32 2.97 1.94 4.91% 65%
CHFC Chemical Financial Corp.  19.07 6.83% 17.34 1.10 0.80 4.20% 73%
TCB TCF Financial Corp. 13.85 7.36% 13.99 0.99 0.20 1.44% 20%
BKH Black Hills Corp. 30.25 7.57% 18.45 1.64 1.46 4.83% 89%
BOH Bank of Hawaii Corp. 46.24 7.69% 12.88 3.59 1.80 3.89% 50%
UVV Universal Corp. 38.11 7.78% 7.03 5.42 1.92 5.04% 35%
SFNC Simmons First National Corp.  26.13 8.24% 12.15 2.15 0.76 2.91% 35%
HGIC Harleysville Group Inc.  32.01 8.51% 11.47 2.79 1.44 4.50% 52%
MDP Meredith Corp. 31.41 8.61% 11.02 2.85 1.02 3.25% 36%
KMB Kimberly-Clark Corp. 66.62 9.11% 15.14 4.40 2.80 4.20% 64%
AVP Avon Products, Inc. 28.53 9.23% 17.61 1.62 0.92 3.22% 57%
SUSQ Susquehanna Bancshares, Inc.  8.08 9.49% 47.53 0.17 0.08 0.99% 47%
PG Procter & Gamble Co.   64.93 9.73% 17.09 3.80 2.10 3.23% 55%
PRK Park National Corp. 64.98 9.95% 14.41 4.51 3.76 5.79% 83%
TDS Telephone and Data Systems 31.85 10.44% 24.50 1.30 0.47 1.48% 36%
HHS Harte-Hanks, Inc. 8.39 10.54% 10.62 0.79 0.32 3.81% 41%
WMT Wal-Mart Stores, Inc. 54.08 10.84% 11.81 4.58 1.46 2.70% 32%
CINF Cincinnati Financial Corp.  29.02 10.89% 12.78 2.27 1.60 5.51% 70%
30 Companies






Watch List Summary

Northern Trust (NTRS) came in second on our list this week. The shares are trading just 2.89% above the 52-week low. We had written an investment observation about this company back on September 2010 and feel that none of redeeming qualities have changed except the price and improved fundamentals.  Since our last write up, the stock rose as high as 56.55, a gain of nearly 20%, but has retraced that level.  We gave a sell recommendation on December 3, 2010 (Sell recommendation here) with a gain of 10.96% which was exactly half of the upside move, in accordance with Dow's theory. 

Northern Trust (NTRS) is now trading below $47 but the fundamentals have gotten stronger.  Net tangible assets rose from $6,369M in September 2010 quarter to $6,522M in March 2011 quarter.  Credit Suisse shares our view with a recent report of five banks with strong capital level.

Fundamentals aside, the chart below shows that $45 has been a strong support level for nearly 3 years.  In addition, the price-to-book ratio (P/B) is close to its historical low range.  Northern Trust's P/B is even lower than it was at the December 2008 low.


Aflac (AFL) is an insurance company we'd like to highlight this week.  Currently trading at just 5% above its 52-week low, we believe prudent investors could gain good upside if shares return to their historical fundamental averages.  The five year average P/E for AFL is 15.6.  As one of the largest life insurance companies in Japan, the headline risk has pressured investors to only pay 10.5x earnings.  Additionally, the 5-year average dividend yield  is 1.8%.  The current yield of 2.58% is a sign of great value.  With a dividend payout ratio at 27%, we believe the safety of the dividend is very much intact.

C.H. Robinson (CHRW), a third-party logistics company, was last on our Dividend Watch List on June 11, 2010. At the time, the company had some pretty unassuming numbers such as a P/E ratio of 27, dividend yield of 1.72% and a dividend payout ratio of 47%. Apparently, those unassuming numbers have translated into a stock price that has achieved a 38% gain over the last 13 months. However, the chart below shows that the last seven months have been a challenge for new investors.

Something is compelling existing investors to sell whenever the stock price approaches $82 a share. This is despite the fact that the current trailing P/E ratio of 33 is only marginally higher than the 27 p/e ratio back in June 2010. C.H. Robinson also has impressive return on assets and return on equity of 20% and 34%, respectively.

Being in the transportation sector, the company’s fate is tied with the performance of the Dow Jones Transportation Average. Since the first Dow Theory signal that was provided in July 2009, the Transportation Index has led the way higher with each successive bull market confirmation. The most recent ability of the Transportation Average to attain an all time high bodes well for the remaining transportation stocks. The primary risk to the scenario of the Transportation Average going higher is that the Dow Jones Industrial Average do not confirm by making an all time high.

Our bias is towards securing the gains that have been accomplished for C.H. Robinson. While the upside seems unlimited, the gains achieved so far require seeking out clear value propositions from our most recent Dividend and Nasdaq 100 watch lists.

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 9, 2010 and have checked their performance one year later. The top five companies on that list can be seen in the table below.

Symbol Name 2010 Price 2011 Price % change
FRS Frisch's Restaurants, Inc 19.95 22.47 12.63%
DNB Dun & Bradstreet Corp. 67.46 76.04 12.72%
WMT Wal-Mart Stores, Inc. 49.43 54.08 9.41%
FII Federated Investors Inc 21.24 24 12.99%
XOM Exxon Mobil Corp.   58.78 82.42 40.22%



Average 17.59%





DJI Dow Jones Industrial 10,198.03 12,657.20 24.11%
SPX S&P 500 1,077.96 1,343.80 24.66%

In our view, it is important to learn from the past and thus we shall revisit what the news of Exxon (XOM) was a year ago.  The most compelling case we found was from an article featured in Barron's titled Buy Into the ExxonMobil Slide.  Collins Stewart's analyst, Katherine Lucas Minyard, called for a 40% upside and amazingly hit that mark (and more) in less than a year.  Her research was very prescient and well timed.  In her report, Minyard stated that based on historical P/E multiples, Exxon should be trading at $82 per share.  Moreover, just as we subscribe to the dividend yield theory, Minyard noted that "ExxonMobil's dividend yield is currently 3.1%, with a return to the 10-year average 2.2% implying a share price of $82".  The stock closed at $82.42 on Friday July 8, virtually one year after Minyard's report was published.



Disclaimer:

On our current list, we excluded companies that have no earnings. 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. We suggest that readers use the March 2009 low (or the 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. A minimum of 50% decline or the November 2008 to March 2009 low, whichever is lower, would fit 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. It is our expectation that, at the most, only 1/3 of the companies that are part of our list will outperform the market over a one-year period.

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iShares Silver Trust (SLV): Tipping its hand or major bluff

Posted on July 5, 2011 by | Leave a comment
On May 5, 2011, we concluded an article about the iShares Silver Trust (SLV) with the following:

“…in general, we should see SLV tread water for a brief period of time before falling back to the prior low which began with the current run back in November 2008. Dow Theory suggests that a reasonable buying opportunity would exist at below line B (blue line B). However, we wouldn’t jump in at the slightest move below line B. Instead, we’d like to see the price decline to the dashed blue line at $15.41 or below.”

Our claim that SLV would tread water or trade in a range was based on the prior move from the peak in March 2008 to July 2008. We felt that, until proven otherwise, the 2006 to 2008 run was the best precedent to go by. In the charts below, we have found some striking similarities that are worth observing.

In both instances, after the peak in the price, the silver ETF traded in a relatively narrow range. After the peak of 2008 and before the subsequent collapse of SLV, the ETF traded in a range for about 5.5 months. This year, the late April peak has traded in a feeble range for less than 2.5 months. So hobbled is the price action of SLV that it appears as if it will break the price support of the crash level that was previously established in May 2011.
Closing below a panic support level at this time leads to two contrasting thoughts.
First, all things considered, SLV is going to $15.41 as indicated in our May 5th posting. If this is a correct view then, as we’ve asserted on many occasions, the stock market has to follow along with gold and silver. The magnitude of the decline would be considered phenomenal if SLV actually does go back to $15.41, a loss of 55%. Keep in mind that in the period from July 14, 2008 to November 20, 2008, SLV fell 53%. We don’t know of any single factors or specific events that would contribute to such a decline on the scale of what occurred in 2008. However, it is apparently such declines are not out of the question.
Our second thought is that the price action we’re seeing is simply one of the largest and most beautifully orchestrated fake outs in history. Not since the Nipper Panic on May 9, 1901, when Northern Pacific Railroad went from as low a $160 up to $1,000 and closed at $325 all in a single day, have we seen what is possibly at hand for the iShares Silver Trust (SLV). We could be absolutely wrong, but the price action of SLV is following along the same lines. As a sidebar, the massive movements in Northern Pacific Railroad happened on the same day that most active stocks crashed 20% to 60% before recovering most, if not all, of the losses in the same day.
To be on the safe side, we’re opting for the view that SLV will replicate much of the same pattern as was demonstrated in the previous period from 2006 to late 2008. If we’re wrong then we’ll miss out on the bigger party in silver since the Hunt brothers corner of the market in the late 1970’s. If we’re partially correct, then we should see SLV very close to a great buying opportunity at $15.41. We’d translate the actions of SLV into the purchase of severely discounted silver stocks and junk silver.*
*We avoid buying ETFs whenever possible

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NLO Dividend Watch List: June 24, 2011

Posted on June 25, 2011 by | Comments Off on NLO Dividend Watch List: June 24, 2011
The market continues to correct.  The S&P 500 is now down 7.5% from its recent peak while the Dow dipped below the 12,000 mark, a -7.3% pull back from the recent peak.  Our investment filter showed 50 companies within 11% of the low so we decided to reduce our list to those that are within 5% of the low. The list produced 24 quality companies. The following are stocks on our list that are within 6% of their 52-week low.
June 24, 2011 Watch List
Symbol Name Price % Yr Low P/E EPS (ttm) Dividend Yield Payout Ratio
NTRS Northern Trust Corp.  44.98 -0.49% 16.60 2.71 1.12 2.49% 41%
SYBT S.Y. BanCorp., Inc.  22.5 0.04% 13.16 1.71 0.72 3.20% 42%
TGT Target Corp. 46.33 0.39% 11.33 4.09 1.20 2.59% 29%
WEYS Weyco Group, Inc.  22.37 0.54% 19.45 1.15 0.64 2.86% 56%
GBCI Glacier BanCorp., Inc.  12.97 1.01% 21.98 0.59 0.52 4.01% 88%
SFNC Simmons First National Corp.  24.4 1.08% 11.35 2.15 0.76 3.11% 35%
GS Goldman Sachs Group, Inc.   130.91 1.09% 14.34 9.13 1.40 1.07% 15%
HGIC Harleysville Group Inc.  29.89 1.32% 10.71 2.79 1.44 4.82% 52%
ANAT American National Insurance 75.4 1.70% 12.76 5.91 3.08 4.08% 52%
CMA Comerica, Inc. 33.74 2.00% 18.54 1.82 0.40 1.19% 22%
CHFC Chemical Financial Corp.  18.27 2.35% 16.61 1.10 0.80 4.38% 73%
WABC Westamerica BanCorp.  48.12 2.58% 15.13 3.18 1.44 2.99% 45%
BRK-A Berkshire Hathaway Inc. CL 'A' 113,100 2.89% 17.19 6580.82 N/A N/A N/A
SUSQ Susquehanna Bancshares, Inc.  7.65 3.66% 45.00 0.17 0.08 1.05% 47%
MCY Mercury General Corp. 38.85 4.18% 14.28 2.72 2.40 6.18% 88%
HHS Harte-Hanks, Inc. 7.91 4.22% 10.01 0.79 0.32 4.05% 41%
NWN Northwest Natural Gas Co. 44.6 4.62% 17.02 2.62 1.74 3.90% 66%
TCB TCF Financial Corp. 13.56 5.12% 13.70 0.99 0.20 1.47% 20%
MDP Meredith Corp. 30.4 5.12% 10.67 2.85 1.02 3.36% 36%
AVP Avon Products, Inc. 27.53 5.40% 16.99 1.62 0.92 3.34% 57%
BXS BanCorp.South Inc. 12.21 5.53% 76.31 0.16 0.04 0.33% 25%
BOH Bank of Hawaii Corp. 45.34 5.59% 12.63 3.59 1.80 3.97% 50%
UVV Universal Corp. 37.37 5.68% 6.89 5.42 1.92 5.14% 35%
SJW SJW Corp. 23.18 5.94% 18.11 1.28 0.69 2.98% 54%
24 Companies
Watch List Summary
Northern Trust (NTRS) top our list this week. The shares of NTRS traded down and hit a fresh 52-week low at the close of Friday on big volume.  Readers may recalled that we recommended buying Norther Trust back on 9/1/10 and selling it on 12/3/10.  While the current price is about 5% lower, we believe Northern Trust may prove to be a good investment.  Investors should note that the company has not raise its dividend since 2007 but hasn't cut the dividend during the recent banking crisis either.  We view such action as a good indication by NTRS management.  The current payout ratio of 41% gives room for earning to fall by half and still meet the current dividend.  Credit Suisse cut its estimates on NTRS in this article.  Also, the company purchased a fund-administration unit from Citadel last month.

 

Target (TGT) landed in the third spot after Fitch cut its debt rating.  They've taken the rating down from A to A- on claims that Target is aggressively buying back its own shares and remodeling stores in Canada.  We've said it before that shares of Target look attractive at a 2% yield but it's even more attractive at a 2.59% yield.  This yield boost was because the company raised its dividend by 20%, from $0.25 to $0.30 per share.  Once again, IQTrend has estimated that Target is a good buy when it reaches a 1% yield.

 

Another company on our radar is American National Insurance (ANAT). Shares are trading 0.54x book value and we can't help but think that this company is about to go on the acquisition block after seeing Transatlantic (TRH) get a buyout offer at almost 0.8x book value.  In any case, investors will receive a 4% dividend as a token to wait for the price to skyrocket or get acquired.  The payout ratio for ANAT is manageable at 52%.  With $570 million in cash and only $60 million in debt, we'll be taking a closer look at this name in the coming weeks (probably will get snatched up before we can pull the trigger.)

 

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 25, 2010 and have checked their performance one year later. The top five companies on that list can be seen in the table below.

 

Symbol Name 2010 Price 2011 Price % change
WAG Walgreen Co. 26.93 41.39 53.69%
MON Monsanto Co. 48.27 65.96 36.65%
SVU SUPERVALU Inc. 12.00 8.57 -28.58%
XOM Exxon Mobil Corp.   59.10 76.78 29.92%
HSC Harsco Corp. 25.05 30.88 23.27%



Average 22.99%





DJI Dow Jones Industrial 10,143.81 11,934.58 17.65%
SPX S&P 500 1,076.76 1,268.45 17.80%

 

It's interesting to note that a "boring" company like Walgreen (WAG) would outshine all those companies on the list.  It even outperformed the high flying Apple (AAPL) since that list was published.  Walgreen returned over 50% while Apple did 21.3%.  In our on-going comparison of WAG and AAPL, what we're trying to emphasis is the consistency of one stock over the other.  As AAPL's popularity waxes and wanes, WAG continues to methodically provided above average returns along with an outstanding dividend.
Disclaimer:
On our current list, we excluded companies that have no earnings. 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. We suggest that readers use the March 2009 low (or the 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. A minimum of 50% decline or the November 2008 to March 2009 low, whichever is lower, would fit 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. It is our expectation that, at the most, only 1/3 of the companies that are part of our list will outperform the market over a one-year period.
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NLO Dividend Watch List: June 10, 2011

Posted on June 12, 2011 by | Leave a comment

The recent market correction has expanded our list.  Since our list grew to more than 50 companies within 11% of the low, we decided to reduce our list to 5% of the low.  Our list still produced 33 quality companies.  The following are stocks on our list that are within 6% of their 52-week low.

June 10, 2011 Watch List

Symbol Name Price % Yr Low P/E EPS (ttm) Dividend Yield Payout Ratio
WEYS Weyco Group, Inc.  22.32 -0.36% 19.41 1.15 0.64 2.87% 56%
TRH Transatlantic Holdings, Inc. 44.01 0.25% 14.38 3.06 0.88 2.00% 29%
CHFC Chemical Financial Corp.  18.13 0.33% 16.48 1.10 0.80 4.41% 73%
TGT Target Corp. 46.7 0.39% 11.42 4.09 1.20 2.57% 29%
SFNC Simmons First National Corp.  24.38 0.83% 11.34 2.15 0.76 3.12% 35%
WABC Westamerica BanCorp.  47.66 1.60% 14.99 3.18 1.44 3.02% 45%
TMP Tompkins Financial Corp. 36.58 1.81% 11.69 3.13 1.36 3.72% 43%
SJW SJW Corp. 22.32 2.01% 17.44 1.28 0.69 3.09% 54%
CMA Comerica, Inc. 33.78 2.02% 18.56 1.82 0.40 1.18% 22%
STBA S&T BanCorp., Inc.  16.98 2.04% 14.64 1.16 0.60 3.53% 52%
BRK-A Berkshire Hathaway Inc. CL 'A' 111,045 2.08% 16.87 6580.82 N/A N/A N/A
UBSI United Bankshares, Inc.  22.57 2.17% 13.60 1.66 1.20 5.32% 72%
HTLF Heartland Financial USA, Inc.  13.41 2.29% 12.53 1.07 0.40 2.98% 37%
ANAT American National Insurance 76 2.51% 12.86 5.91 3.08 4.05% 52%
HGIC Harleysville Group Inc.  31.11 2.64% 11.15 2.79 1.44 4.63% 52%
MDP Meredith Corp. 29.72 2.77% 10.43 2.85 1.02 3.43% 36%
NWN Northwest Natural Gas Co. 43.9 2.98% 16.76 2.62 1.74 3.96% 66%
NTRS Northern Trust Corp.  46.76 3.23% 17.25 2.71 1.12 2.40% 41%
GBCI Glacier BanCorp., Inc.  13.29 3.47% 22.53 0.59 0.52 3.91% 88%
SYBT S.Y. BanCorp., Inc.  23.33 3.73% 13.64 1.71 0.72 3.09% 42%
BXS BanCorp.South Inc. 12.14 4.30% 75.88 0.16 0.04 0.33% 25%
UVV Universal Corp. 37 4.64% 6.83 5.42 1.92 5.19% 35%
AVP Avon Products, Inc. 27.36 4.75% 16.89 1.62 0.92 3.36% 57%
C Citigroup Inc  37.92 4.75% 12.39 3.06 0.04 0.11% 1%
BMI Badger Meter, Inc. 35.61 4.80% 20.12 1.77 0.56 1.57% 32%
TDS Telephone and Data Systems 30.23 4.82% 23.25 1.30 0.47 1.55% 36%
BKH Black Hills Corp. 29.16 4.93% 17.78 1.64 1.46 5.01% 89%
GS Goldman Sachs Group, Inc.   135.92 4.96% 14.89 9.13 1.40 1.03% 15%
CWT California Water Service 35.59 5.14% 19.34 1.84 0.62 1.74% 34%
MCY Mercury General Corp. 39.26 5.28% 14.43 2.72 2.40 6.11% 88%
HHS Harte-Hanks, Inc. 8 5.40% 10.13 0.79 0.32 4.00% 41%
TCB TCF Financial Corp. 13.62 5.58% 13.76 0.99 0.2 1.47% 20%
PRK Park National Corp. 62.57 5.87% 13.87 4.51 3.76 6.01% 83%
33 Companies






Watch List Summary

Weyco (WEYS) topped out list again. The company is typically undervalue at 2.2% dividend yield.  The current yield implies that this company is undervalued by 30%. Current cost pressures may be coming from the commodity side, leather cost.  But once the company passes that cost down to the consumer, that variable cost could be key to future margin expansion.

Transatlantic Holdings (TRH) is a re-insurer and may be under pressure because of the recent catastrophic headlines.  Currently trading 30% below book value, TRH may provide sufficient margin of safety for patient investors.

You may note that Berkshire Hathaway (BRK) is on this list but doesn't pay any dividend.  We view BRK as a no-load fund that all investors should consider holding.  There's no better time to buy this company than at or near the low.

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 11, 2010 and have checked their performance one year later. The top five companies on that list can be seen in the table below.

Symbol Name 2010 Price 2011 Price % change
SVU SUPERVALU Inc. 12.24 8.49 -30.64%
FRS Frisch's Restaurants, Inc 20.55 21.34 3.84%
CWT California Water Service 34.91 35.59 1.95%
GS Goldman Sachs Group, Inc.   135.64 135.92 0.21%
UMBF UMB Financial Corp.  37.58 40.46 7.66%



Average -3.40%





DJI Dow Jones Industrial 10,211.07 11,951.91 17.05%
SPX S&P 500 1,091.60 1,270.98 16.43%

Disclaimer:
On our current list, we excluded companies that have no earnings. 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. We suggest that readers use the March 2009 low (or the 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. A minimum of 50% decline or the November 2008 to March 2009 low, whichever is lower, would fit 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. It is our expectation that, at the most, only 1/3 of the companies that are part of our list will outperform the market over a one-year period.

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