Category Archives: NLO Dividend Watch List

NLO Dividend Watch List

Posted on November 19, 2010 by | Leave a comment

Watch List Summary

This week's list contains 21 companies that are among some of the biggest blue-chip institutions out there. Topping this list is the giant food supplier, ConAgra (CAG). A quick glance at the one year performance review of the top five companies (see below) and you may want to consider ConAgra (CAG) as a potential investment.

In addition, there are great household names such as Kimberly-Clark (KMB), Colgate-Palmolive (CL), Pepsi (PEP), and Clorox (CLX) that we are all familiar with. Inflation themed investors can look to another major food supplier to restaurants, Sysco (SYY).  In the following article we wrote on December 17, 2008, we compared Sysco to Newmont Mining (NEM) and Couer D'Alene (CDE) from 1970 to 1983.  On a total return basis, according to Morningstar.com, Sysco gave far superior returns (4 times greater) than the leading gold and silver stocks did during a commodity boom.

The New Low team is very interested in re-purchasing Bank of Hawaii (BOH) as the banking sector is seen as out of favor. If interested, investors can refer to our original writing on Bank of Hawaii from initiation to sell recommendation with a detailed follow-up titled "The Anatomy of a Bear Market Trade."

November 19, 2010 Watch List

Symbol Name Price % Yr Low P/E EPS (ttm) Div/Shr Yield Payout Ratio
CAG ConAgra Foods, Inc. 21.48 2.19% 13.68 1.57 0.92 4.28% 59%
WABC Westamerica BanCorp.  50.50 2.98% 15.83 3.19 1.44 2.85% 45%
IBKC IBERIABANK Corp.  50.52 4.57% 8.43 5.99 1.36 2.69% 23%
GBCI Glacier BanCorp., Inc.  13.32 5.05% 21.14 0.63 0.52 3.90% 83%
VLY Valley National BanCorp.  13.01 6.14% 17.12 0.76 0.72 5.53% 95%
KMB Kimberly-Clark Corp. 61.84 6.16% 13.99 4.42 2.64 4.27% 60%
ABT Abbott Laboratories 47.40 6.30% 15.64 3.03 1.76 3.71% 58%
CLX Clorox Co. 62.93 6.73% 13.50 4.66 2.20 3.50% 47%
CBSH Commerce Bancshares, Inc.  37.59 7.09% 14.98 2.51 0.94 2.50% 37%
CL Colgate-Palmolive Co. 78.21 6.96% 18.27 4.28 2.12 2.71% 50%
LLY Eli Lilly & Co. 34.50 7.75% 7.91 4.36 1.96 5.68% 45%
BOH Bank of Hawaii Corp. 44.95 8.05% 11.83 3.80 1.80 4.00% 47%
CWT California Water Service 36.44 7.78% 19.28 1.89 1.19 3.27% 63%
WFSL Washington Federal, Inc.  15.17 8.59% 14.45 1.05 0.20 1.32% 19%
SYY Sysco Corp. 28.84 8.83% 14.87 1.94 1.04 3.61% 54%
FULT Fulton Financial Corp.  8.87 9.51% 16.43 0.54 0.12 1.35% 22%
FNFG First Niagara Financial Group 12.31 9.62% 19.54 0.63 0.60 4.87% 95%
TFX Teleflex Inc. 52.62 9.81% 12.99 4.05 1.36 2.58% 34%
PEP Pepsi Co Inc. 64.71 10.14% 16.30 3.97 1.92 2.97% 48%
EGN Energen Corp. 44.41 10.34% 11.87 3.74 0.52 1.17% 14%
PNR Pentair, Inc. 32.53 10.61% 17.87 1.82 0.76 2.34% 42%
21 Companies






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 November 20, 2009 and have check their performance one year later. The top five companies on that list were Aqua America (WTR), First Financial (THFF), California Water(CWT), WGL Holding (WGL), and UGI (UGI).

Name Symbol 2009 Price 2010 Price % change
AQUA AMERICA INC WTR 15.88 21.05 32.56%
First Financial Corporation Ind THFF 27.96 31.1 11.23%
CALIFORNIA WATER SVC CWT 35.78 36.44 1.84%
WGL HOLDINGS INC WGL 31.33 37.12 18.48%
U G I CP UGI 23.36 30.16 29.11%



Average 18.64%





Dow Jones Industrial DJI 10,318.16 11,203.55 8.58%
S&P 500 SPX 1,091.38 1,199.73 9.93%

As a group, the top five companies on our Dividend List averaged a gain of 18.64% in the last year. This compares with the Dow Jones Industrial Average gain of 8.58% and the S&P500 gain of 9.93% in the same one year time frame. Again, the graph below demonstrates that all stocks achieved 10% gains within six months of being on the watch list from November of 2009.

Disclaimer

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

Please revisit New Low Observer for edits and revisions to this post. Email us.

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A Comparison Between Dividend Strategies

Posted on November 17, 2010 by | Leave a comment
In an effort to contrast our work with our peers, we recommend that readers review the article titled “11 High Yield Stocks to Buy Now” published October 10, 2010 on Seeking Alpha. This list of companies is compiled by Scott’s Investments blog and was intended to provide top choices for income investors with an interest in trading dividend stocks. Although we have always indicated that our list of stocks is useful for both long and short-term investors, we couldn’t help but attempt to contrast our October 8, 2010 NLO Dividend Watch List [NLO] with the performance of Scott’s Investments [SI].
Because both articles were generated and posted onto the internet after the market closed on Friday October 8, 2010 and before the market open on Monday October 11, 2010, we thought it would be possible to make a few observations about the performance of the stocks on each list.
In order to make our observations we have attempted to ensure data integrity by making a few assumptions. First of all, we decided to make our list from October 8th only the top eleven companies to match the number of companies on the SI list. Next, to determine the performance of each stock, we used the October 8th to November 15th closing prices as our benchmark. Finally, we calculated the adjusted closing price for all of the stocks that paid a dividend between October 8, 2010 and November 15, 2010.

Our first observation on the performance between the NLO Dividend Watch List [NLO] and Scott’s Investments [SI] is that the NLO list accomplished a gain of 6.25% compared to SI’s gain of 2.17%. There is little to explain why there is such a disparity in the two lists. Especially since the [SI] list is tailor-made for individuals interested in dividend income at a time when investors of all stripes are more aware of the need for an income component to their portfolio. This is contrasted with the NLO list which only has the requirement that the stocks have, or have had, a history of dividend increases of more than 10 years in a row and within 20% of the 52-week low. From our perspective, we normally chose the stocks nearest the new low and then work our way up from a qualitative standpoint based on fundamental and technical attributes.

Scott's Investments 11 High Yield Stocks to Buy Now October 10,2010
Ticker Company 10/8/10* 11/15/10* Change** Yield on 10/8
Q Qwest Inc. 6.34 6.85 8.04% 5.05%
MO Altria Group Inc. 24.51 24.69 0.73% 5.79%
FTR Frontier Communications 8.39 9.1 8.46% 11.20%
PGN Progress Energy Inc. 44.57 44.38 -0.43% 5.56%
POM Pepco Holdings, Inc. 19.11 18.85 -1.36% 5.65%
WIN Windstream Corporation 12.14 13.05 7.50% 8.24%
CTL CenturyLink, Inc. 39.76 42.33 6.46% 7.24%
SO Southern Company 37.26 38.33 2.87% 4.83%
TEG Integrys Energy Group, Inc. 53.07 51.48 -3.00% 5.13%
CNP CenterPoint Energy, Inc. 15.9 16.22 2.01% 4.91%
HCP HCP, Inc. 35.83 33.18 -7.40% 5.19%
    Avg Return: 2.17%    
Source:  Scott's Investments October 10, 2010
  11 High Yield Stocks to Buy Now

Our next observation is that, although the NLO list rose at a much more torrid pace than the SI list, the best and worst performers for the NLO list outpaced the SI comparables. Of the best performing stocks, the NLO’s Beckman Coulter (BEC) rose 16.26% while the SI best performer, Frontier Communications (FTR), rose 8.46%. The Beckman Coulter (BEC) rise outpaced Frontier Communications (FTR) by 92%. This suggests that the positions taken in the NLO list are likely to be higher risk.

NLO Dividend Watch List October 8, 2010
Ticker Company 10/8/2010* 11/15/2010* Change** 10/08 Yield
CL Colgate-Palmolive Co. 74.39 78.37 5.35% 2.73%
CAG ConAgra Foods, Inc. 21.65 21.61 -0.18% 3.83%
NTRS Northern Trust Corp.  48.35 51.30 6.10% 2.32%
WST West Pharmaceutical 34.94 38.33 9.70% 1.95%
BBT BB&T Corp. 23.43 25.05 6.91% 2.56%
MDT Medtronic 33.45 34.66 3.62% 2.57%
BEC Beckman Coulter 47.78 55.55 16.26% 1.53%
SBSI Southside Bancshares 18.98 19.92 4.95% 4.37%
USB U.S. BanCorp. 22.31 24.94 11.79% 0.90%
WFSL Washington Federal 15.27 15.24 -0.20% 1.31%
FUL HB Fuller Company 20.24 21.15 4.50% 1.38%
Average Return: 6.25%
Source: New Low Observer October 8, 2010
NLO Dividend Watch List
http://www.newlowobserver.com/2010/10/dividend-watch-list.html
When comparing the worst performing stocks from each list, we get a picture that may suggest that the overall risk, at least in the short run, in the NLO list might be worthwhile. Of the worst performing stocks, the NLO’s ConAgra (CAG) fell by -0.20% while the SI worst performer, HCP Inc. (HCP), fell by -7.40%. The loss incurred in HCP Inc. was 37 times the loss of CAG. However, we cannot be certain, based on the results, whether or not the high performance of the NLO list is clear evidence of the high-risk nature of the stocks or that the NLO selection process is calibrated for better performance. We would rather err on the side of caution and assume that the NLO list is biased towards higher risk.
Though not significant, another potential factor that contributed to the gains for the NLO list was the fact that more dividend payments were made within the last month than were the case for the SI list. However, this dispels the claim that because a dividend payment is made the stock price is adjusted lower. To the shareholder of a dividend paying stock, the cost basis is adjusted lower, not the stock price prior to, at the time of or after a dividend payment.
The author of the “11 High Yield Stocks to Buy Now” does indicate that the stocks were ideally suited for the purpose of trading. However, the full benefit of such stocks is likely to be recognized over a period of at least a year. After all, if the high yield is never recognized due to trading then it seems as though better alternatives that don’t pay a dividend may be overlooked in the process.

Since we suspect that the SI portfolio will perform quite well over an extended period of time. We will review these same portfolios after a year to determine if there are any new lessons to be learned from selecting stocks based on high dividend yields.

Notes:
*based on closing price of October 8, 2010 and November 15, 2010
**all prices for Oct 8th and Nov 15th are adjusted for dividends

Please revisit New Low Observer for edits and revisions to this post. Email us.

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NLO Dividend Watch List

Posted on November 5, 2010 by | Leave a comment

Watch List Summary

This week's watch list shrank drastically after an amazing run in the market. According to Dow Theory, this bull market still has legs after the Dow Jones Industrial Average confirmed the move of the Dow Jones Transportation Average at the closing on Wednesday, November 3, 2010. We elaborate further in the article, Dow Theory: Continuation of Bull Market Confirmed. We suggest anyone who missed that article to revisit it.
Although companies on our watch list may not appear to be "exciting," they contain some of the best run companies in the world. For example, we all know Colgate, Clorox, Kimberly-Clark (maker of Kleenex) and Pepsi. This may be a good time to start your research on these companies. Once you have determined the potential stock(s), you may want to refer to our post on the November ex-dividend dates which may help boost the gain or offset the costs.

November 5, 2010 Watch List

Symbol Name Price % Yr Low P/E EPS (ttm) Div/Shr Yield Payout Ratio
CAG ConAgra Foods, Inc. 22.15 4.14% 14.11 1.57 0.92 4.15% 59%
CL Colgate-Palmolive Co. 77.45 4.84% 18.48 4.19 2.12 2.74% 51%
CLX Clorox Co. 62.61 5.09% 14.77 4.24 2.20 3.51% 52%
WABC Westamerica BanCorp.  51.50 5.54% 16.14 3.19 1.44 2.80% 45%
KMB Kimberly-Clark Corp. 63.01 5.80% 14.26 4.42 2.64 4.19% 60%
BOH Bank of Hawaii Corp. 45.37 6.42% 11.94 3.80 1.80 3.97% 47%
CBSH Commerce Bancshares, Inc.  38.75 8.04% 15.44 2.51 0.94 2.43% 37%
PEP PepsiCo Inc. 65.08 9.85% 16.39 3.97 1.92 2.95% 48%
8 Companies






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 November 6, 2009 and have check their performance one year later. The top five companies on that list were Aqua America (WTR), California Water (CWT), Monsanto (MON), Wal-Mart (WMT), and Piedmont Natural Gas (PNY).

Name Symbol 2009 Price 2010 Price % change
Aqua America WTR 15.63 21.93 40.31%
California Water CWT 35.16 37.72 7.28%
Monsanto MON 67.87 62.27 -8.25%
Wal-Mart WMT 50.12 55.2 10.14%
Piedmont Nat Gas PNY 22.02 29.59 34.38%
Average 16.77%
Dow Jones Industrial DJI 10,023.42 11,444.08 14.17%
S&P 500 SPX 1,069.30 1,225.85 14.64%

As a group, the top five companies on our Dividend List averaged a gain of 16.77% in the last year. This compares with the Dow Jones Industrial Average gain of 14.17% and the S&P500 gain of 14.64% in the same one year time frame. The top performing stock of the group was Aqua America (WTR) which closes out the year with a gain of 40.31%. The worst performing stock was Monsanto with a loss of 8.25% in the one year time period. The graph below demonstrates that all stocks, except Wal-Mart, achieved 10% gains within six months of being on the watch list from November of last year.

Disclaimer

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

Please revisit New Low Observer for edits and revisions to this post. Email us.

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NLO Dividend Watch List

Posted on October 24, 2010 by | Leave a comment
Top Five Performance Review
The following is a total return (appreciation plus dividends) performance review of our top five Dividend Watch List from October 22, 2009 to October 22, 2010:

Name symbol
with div.
without div.
Shenandoah Tel.
shen
12.79%
10.67%
Wal-Mart
wmt
9.50%
7.09%
C.R. Bard
bcr
8.89%
7.97%
Weyco
weys
16.34%
13.26%
Aqua America
wtr
35.95%
31.47%
Group Average:
16.69%
14.09%
Dow Industrials ^dji
13.46%
10.43%
As a group, the average gain for the stocks mentioned was 16.69%. This is contrasted by the Dow Jones Industrial Average gain of 13.46% in the same period of time. Excluding the dividend, the top five watch list stocks gained 14.09% and the Dow Jones Industrial Average gained 10.43%.  According to the graph below, all stocks accomplished 10% within 6 months of being on the list.
 It is our expectation that only 1/3 of the companies that are part of our list will outperform the market over a one year period. However, when the market of 5,000 investment opportunities is winnowed down to what we believe are the best 50, we think that selecting one out of four companies become so much easier.

October 22, 2010 Watch List

Symbol Name Price % Yr Low P/E EPS (ttm) Div/Shr Yield Payout Ratio
BBT BB&T Corp. 22.62 4.14% 21.34 1.06 0.60 2.65% 57%
CBSH Commerce Bancshares, Inc.  36.80 4.84% 14.66 2.51 0.94 2.55% 37%
CL Colgate-Palmolive Co. 76.84 5.09% 18.34 4.19 2.12 2.76% 51%
NTRS Northern Trust Corp.  47.81 5.54% 15.68 3.05 1.12 2.34% 37%
WFSL Washington Federal, Inc.  14.78 5.80% 14.08 1.05 0.20 1.35% 19%
HRB H&R Block, Inc. 10.78 6.42% 7.38 1.46 0.60 5.57% 41%
VLY Valley National BanCorp.  13.13 8.04% 17.99 0.73 0.72 5.48% 99%
FFIN First Financial Bankshares, Inc.  47.84 9.85% 18.33 2.61 1.36 2.84% 52%
WABC Westamerica BanCorp.  51.87 10.17% 16.26 3.19 1.44 2.78% 45%
WST West Pharmaceutical Services, Inc. 36.10 10.26% 15.76 2.29 0.68 1.88% 30%
MLM Martin Marietta Materials, Inc. 78.91 10.36% 43.84 1.80 1.60 2.03% 89%
LLY Eli Lilly & Co. 35.40 10.56% 8.76 4.04 1.96 5.54% 49%
SBSI Southside Bancshares, Inc.  19.24 10.64% 7.29 2.64 0.68 3.53% 26%
PEP PepsiCo Inc. 65.01 10.66% 16.38 3.97 1.92 2.95% 48%
FUL HB Fuller Company 20.45 10.72% 13.82 1.48 0.28 1.37% 19%
BCR CR Bard, Inc. 83.01 10.87% 16.91 4.91 0.72 0.87% 15%
16 Companies






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

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