NEW LOW OBSERVER

The market rebounded this week with a gain of +1.2%. The S&P 500 appears to be consolidating as it trades sideways for nearly 6 months now. The volatility in the market is having a material effect on our watch list. We continue to see a large number of companies trading at or near their yearly low. There are many large blue-chip names to review on our list below. Continue reading →

Top Five 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 July 25, 2014 and have checked the performance one year later. The top five companies on that list can be seen in the table below.

Our top five gained an average of 14.1%. This far exceeded the market performance. The only company that failed to meet or exceed the market performance was Stepan (SCL) which fell -5.8%. The other four companies had gains ranging from +10.7% to +31.2%. Our commentary about Stepan and Tootsie Roll is worth reviewing. Regarding Stepan, we said the following:

When we look at the price level compared to various fundamental figures (cash flow, earning, and book value), you will see that price has risen far beyond the fundamental. From 2003 to 2013, the stock has risen around 17% on an annual basis. Compared that to 5.6% for cash flow, 13% for earning, 10% for bookvalue, and 5.5% for dividend. While stock purchased at the low will mark a better entrance than stock at the high, we think that this stock will have some catching up to do on the fundamental front.

As for Tootsie Roll (TR), we all know there isn't anything exciting to write about the company other than it managed to gain nearly +16% while the S&P 500 had risen only +4.5%. The stock of Tootsie Roll has always appears to be 'expensive' on P/E basis but time after time, the company manages to maintain a consistent level of appreciation. That may be due to the predictability of their revenue and profit. We stated that the stock was worth a look at the current price while making note that it wasn't a screaming buy.

U.S. Dividend Watch List: July 24,2015

It was a train wreck for the market this week as the S&P 500 fell -2.2% while Industrial average lost nearly -3%. For those with cash on the sidelines, this is music to their ears. A pullback in the market will allow long-term investors to accumulate assets and utilize our dividend watch list to position themselves for income investing. Continue reading →

Top Five 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 July 11, 2014 and have checked the performance one year later. The top five companies on that list can be seen in the table below.

The top five companies combined for an average gain of +22.6%, far exceed the performance of the market. The biggest gainer was Ross Stores (ROST) which gained +54.6%, split adjusted. The worse performer was Stepan (SCL) which lost -4.4% over the year.

U.S. Dividend Watch List: July 10, 2015

This week, we highlight 27 companies that are on our dividend watch list. Continue reading →

Top Five 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 June 27, 2014 and have checked the performance one year later. The top five companies on that list can be seen in the table below.

Out top five companies surpassed the market performance by a wide margin. The overall gain was +23.60% compared with +7.20% for the S&P 500.

Ross Stores (ROST) was the largest contributor with a +52.8% gain. ROST also did a 2-to-1 split on June 12th of this year. Our assessment of Ross was inaccurate when we said that the stock doesn't have enough margin of safety at the current level. However, we may have identified a key attribute for stocks that may outperform the market. One of the biggest takeaway is the fact that ROST raised its dividend by +17% while maintaining a low payout ratio of 19%. The fact that the dividend yield was only 1.12% confirms our theory that the dividend growth and sustainability is more important than absolute yield.

Of the top five, Stepan (SCL) was the worst performer. The street had an optimistic view of the stock and expected it to grow net income by +36%. This made Stepan's forward P/E of 9 very attractive. However, that all depended on one important fact, that the net income must rise by more than a third. Because the stock was trading at its 5-year high on P/E, any earnings miss would not be good. When Stepan reported earnings in October 2014, the street expected EPS to come in at $0.89 but the actual result was $0.68. The stock fell from $52 to $38. Next, the inevitable event occurred, analysts revised their estimate downward.  Stepan's EPS came in at $0.38 in the February quarter, above the street's estimate of $0.35. Three months later, EPS came in at $0.90 when the street's estimate was $0.68. Shares rose back from $38 to $55.

U.S. Dividend Watch List: June 26, 2015

There are 33 companies on our watch list. Continue reading →