US Dividends Aristocrats thread

[Mr. Wood]

Visa Inc. Reports Fiscal Fourth Quarter and Full-Year 2020 Results
October 28, 2020

Fiscal Full-Year Results:
 GAAP net income of $10.9B or $4.89 per share and non-GAAP net income of $11.2B or $5.04 per share
 Net revenues of $21.8B, a decrease of 5%

GAAP net income in the fiscal fourth quarter was $2.1 billion or $0.97 per share, decreases of 29% and 28%, respectively, over prior year’s results.

Net revenues decrease was approximately 17% on a constant-dollar basis.

Payments volume for the three months ended June 30, 2020, on which fiscal fourth quarter service revenue is recognized, decreased 10% over the prior year on a constant-dollar basis.

Payments volume for the three months ended September 30, 2020, increased 4% over the prior year on a constant-dollar basis.

 

[Mr. Wood]

ADM Reports Third Quarter Earnings of $0.40 per Share, $0.89 per Share on an Adjusted Basis
10/29/2020

• Net earnings of $225 million; adjusted net earnings of $499 million

• Outstanding results, great execution in all three businesses

• Continued focus on Readiness to drive growth, innovation, sustainability

“From our Strive 35 sustainability goals, to our partnership with Spiber to produce plant-based polymers, to the announcement of a significant expansion in probiotics with our new state-of-the art facility in Valencia, we’re advancing our work to enrich the quality of life around the globe. We’re excited about our future as we look ahead to another strong quarter, with positive momentum continuing through 2021.”

 

[Mr. Wood]

American Express (AXP) Updated October 25th, 2020
https://drive.google.com/file/d/1eY3eFypCb1xjfPhKFqKqsdiBX3tXeuWG/view

There could be volatility ahead, as it is not yet known what credit charge-offs may look like, but we believe that, based on underlying earnings power, American Express will generate attractive returns in the long run, which is why we rate the stock a buy.

 

[Mr. Wood]

Baker Hughes (BKR)
Updated October 27th, 2020

https://drive.google.com/file/d/1xJaw5_UpuX99zJZSTNUwkRuFRY8YE0ao/view

We expect the energy market to recover from the pandemic by next year and thus we expect Baker Hughes to offer a 12.0% average annual return over the next five years. We thus rate the stock as a buy, though investors should be aware of the high debt, the cyclicality of the stock and the elevated amount of risk, particularly if the ongoing downturn lasts longer than expected.

 

[Mr. Wood]

Asia Morning: U.S. Stocks Rebound on Election Eve
November 3, 2020 9:23 AM

On Monday, on the eve of the November 3 presidential election, U.S. stocks closed in positive territory. The Dow Jones Industrial Average jumped 423 points (+1.60%) to 26925, the S&P 500 gained 40 points (+1.23%) to 3310, and the Nasdaq 100 was up 31 points (+0.29%) to 11084.

Energy (+3.67%), Materials (+3.39%) and Capital Goods (+3.23%) sectors performed the best. Mohawk Industries (MHK +11.14%), National Oilwell Varco (NOV +8.45%) and United Rentals (URI +8.07%) were top gainers.

 

[Mr. Wood]

The 2020 Dividend Aristocrats List | See All 65 Now
Updated on November 2nd, 2020

The 7 Best Dividend Aristocrats Today
#7: People’s United Financial (PBCT)
5-year Expected Annual Returns: 13.2%

People’s United Financial has raised its dividend for 27 consecutive years, albeit with small increases for the past several years. Due to the dip in the earnings expected this year, the payout ratio has risen to nearly 70%. Given the economic damage caused by the coronavirus, investors should note that People’s United Financial is vulnerable to recessions. In the Great Recession, its earnings-per-share plunged -54%, from $0.52 in 2007 to $0.24 in 2010. That said, the dividend appears safe, with a high yield above 6%.

The combination of an expanding price-to-earnings multiple, future EPS growth, and dividends leads to total expected returns of 13.2% per year over the next five years.

#6: Franklin Resources (BEN)
5-year Expected Annual Returns: 13.7%

For the quarter, operating revenue totaled $1.705 billion. This figure represented 0.14% of average AUM or ~56 basis points on an annualized basis. On an adjusted basis net income equaled $291 million or $0.56 per share versus $358.4 million or $0.71 per share. For the year, Franklin Resources generated operating revenue of $5.57 billion compared to $5.67 billion in fiscal year 2019. This figure represented 0.67% of average AUM for the year. Adjusted net income totaled $1.311 billion or $2.61 per share versus $1.331 billion or $2.62 per share prior.

The combination of an expanding price-to-earnings multiple, 4% expected annual EPS growth, and the 5.5% dividend yield leads to total expected returns of 13.7% per year over the next five years.

#5: AT&T Inc. (T)
5-year Expected Annual Returns: 14.0%

Shares of AT&T trade for a 2020 price-to-earnings ratio of 8.4, below our fair value P/E of 12. The stock also has an attractive dividend yield of 7.6%. Combined with 3% expected annual earnings-per-share growth, we expect total annual returns of 14.0% per year over the next five years.

#4: Federal Realty Investment Trust (FRT)
5-year Expected Annual Returns: 15.5%

Based on expected 2020 FFO-per-share of $5.73, Federal Realty stock trades for a price-to-FFO ratio of 12.5. Our fair value estimate for Federal Realty is a price-to-FFO ratio (P/FFO) of 15. We view Federal Realty stock as undervalued. In addition, expected annual FFO-per-share growth of ~7%, plus the 6% dividend yield lead to expected total annual returns of 15.5% per year over the next five years.

#3: Walgreens Boots Alliance (WBA)
5-year Expected Annual Returns: 16.2%

Walgreens’ adjusted earnings-per-share declined by just 7% during 2009 and the company actually grew its adjusted earnings-per-share from 2007 through 2010.

Based on expected fiscal 2021 adjusted EPS of $4.98, Walgreens stock trades at a price-to-earnings ratio (P/E) of 7.2. Our fair value estimate is a P/E ratio of 10.0, which means the stock valuation has significant room for expansion. We expect this expansion to combine with 5% expected annualized EPS growth and the 5.2% dividend yield to generate 16.2% annualized total returns over the next five years.

#2: Chevron Corporation (CVX)
5-year Expected Annual Returns: 16.3%

Chevron is now trading at 16.5 times its mid-cycle earnings-per-share of $4.36. This earnings multiple is higher than its 10-year average of 15.8. If the stock reverts to its average valuation level over the next five years, it will incur a negative return for shareholders.

Offsetting this will be expected EPS growth of 13% per year and the 7.2% dividend yield, leading to total expected returns of 16.3% per year over the next five years.

#1: Exxon Mobil (XOM)
5-year Expected Annual Returns: 18.5%

In order to calculate future returns, we have used mid-cycle (5-year average) earnings-per-share of $3.26 as a base.

Using this estimate, the stock trades for a P/E ratio of 10.4 compared with our fair value estimate of 13. Expansion of the P/E multiple could boost annual returns over the next five years. Because of Exxon Mobil’s depressed earnings, we expect a snap-back with 8% annual expected earnings-per-share growth over the next five years. Including the 10.2% dividend yield, we expect total annual returns above 18% per year over the next five years.

Along with Chevron, Exxon Mobil is a riskier Dividend Aristocrat due to its volatile industry. But a recovery in oil and gas prices could mean strong returns for investors willing to buy at these depressed prices.

 

[Mr. Wood]

Nov 2020 newsletter
https://drive.google.com/file/d/1gTrL62EvnnvgHJpRj_QUMjM1pl4AZKIU/view

 

[Mr. Wood]

Sure Dividend
November 2020 Edition

Sell Recommendations
Eaton Vance (EV)
We recommend investors sell their Eaton Vance shares now to lock in gains and reinvest the proceeds elsewhere.

WestRock (WRK)

Our WestRock recommendation did not work out as we had hoped.

Exiting this position with a positive total return despite a dividend reduction is a welcomed gift from the market.

 

[Mr. Wood]

 

[Mr. Wood]

UNM Nov 2020

 

[Mr. Wood]

WBA Nov 2020

 

[Mr. Wood]

TDS Nov 2020

 

[Mr. Wood]

ABBV Nov 2020

 

[Mr. Wood]

HII Nov 2020

 

[Mr. Wood]

MO Nov 2020

 

[Mr. Wood]

PB Nov 2020

 

[Mr. Wood]

CSCO Nov 2020

 

[Mr. Wood]

AT&T Nov 2020

 

[Mr. Wood]

MTB Nov 2020

 

[Mr. Wood]

Ignoring the 2009 price-to-earnings ratio spike due to declining earnings, we are at a valuation level only approached and exceeded in the tech bubble of the late 1990’s and early 2000’s. This is a good reason to not invest in the broad market now as valuation multiple mean reversion is very likely over the coming years.

But that doesn’t mean do not own any securities. Many securities are trading at or below their fair value despite the overall market levels. Some S&P 500 securities still have single-digit price-to earnings ratios, while others are trading at more than 20x their price-to-sales ratios.

It can be difficult to remain on course during market extremes. This is why you want to have a plan in place and not be swayed by emotion, especially fear. Just this year, we’ve seen the market collapse in late March then quickly recover to new highs. This all happened with the backdrop of an upcoming election and a pandemic. With that said, we continue to recommend investing in high-quality dividend growth securities when they are trading at or below fair value, regardless of what the market is doing because we invest in individual securities, not the broad market.

TLDR: market high, buy quality stocks at below fair value