Recent Sell - Macy's

I bought a few shares of Macy's at $19.02 seven months ago. At that time, the panic about the impact of the Amazon on the offline retailers was really high. Almost every financial newspapers write about it, and it was a good opportunity to buy an undervalued good company. I saw, that the company worth more, and it can easily pay out the dividends from it's FCF. I thought that I can collect my dividend payments until the market realize, that the company worth much more. So I had a great, 7.94% dividend yield, while I am waiting.

Yesterday I sold all of my shares at $39.79. It was a really good business for me, because I can double my initial investment. If I would not sell it, now I can collect 3.77% dividend yield. This yield is not so good for me for a fairly valued company. I think, that there are much better investment possibilities at todays market. I hope, that I can find some undervalued dividend growth stock in a few days.

Recent Sell & Buy – January – TEVA, Ventas, Gilead Sciences

I bought a few shares of TEVA in August 2017. I thought that the market overreacted the announced goodwill impairment, and it has a good valuation. As I saw the revenue and EPS decline, and the large restructuring, I felt that I can not predict the profit of the company for the next few years and I closed my long position at $21.41. It brings me a small profit for this few months.

(Source: www.finviz.com)

I bought Ventas (VTR) shares at $56.19 which means 5.52% dividend yield for me. I think that VTR is a great company, which increased it's dividend in the last 7 years and has not decreased it in 2008-2009.

(Source: www.finviz.com)

As I have more money after selling my TEVA shares, I bought a few shares of Gilead Sciences (GILD) at $80.74 which gives me 2.86% dividend yield (after the recently announced dividend increase).

  (Source: www.finviz.com)

Full disclosure: Long VTR, GILD

Related Posts:

• Recent Buy – TEVA
• Recent Buy – TEVA - 2

Recent Sell – V. F. Corporation

I bought a few shares of V. F. Corporation (VFC) in February 2017. I thought that it has a good valuation at $50.30. 

When I bought the shares, the P/BV was 4.21 and the P/S was 1.71, but now I calculate P/BV 7.62 and P/S 2.50. The P/E was 19.80 at the time of my purchase, and I felt, that it is a good opportunity to buy a dividend aristocrat. 

Now, (as I calculate) the P/E is 28.52, which is a really high value for a company which has only single digit long term revenue and EPS growth rate. So these ratios show me, that it is better to realize my profit. I sold my shares at $74.14, which gives me a really good capital gain. I think that I will find much better investment opportunities for my money in the next few months.

Related Posts:

• Dividend Increase - V. F. Corportation (VFC)
• Recent Sell – Allianz AG 

Whitbread - A Quality Company from the UK

I'm following a lot of companies from the US, like Kroger and TEVA, but this time I would like to introduce a quality company from the UK. Whitbread Plc (WTB) is the UK's largest hotel, restaurant and coffee shop operator serving millions of customers every week. They serve their customers through their two businesses: Premier Inn & Restaurants and Costa. Premier Inn has over 760 hotels in the UK, and also has hotels in the Middle East and Germany. Costa operates more than 3,500 coffee shops. It's brand include Premier Inn, Beefeather, Table Table, Taybarns and Costa Coffee.

(Source: Capital Market Day 2016 presentation)

The shares of Whitbread Plc are on the London Stock Exchange. The FTSE 100 and the FTSE 350 contains them.

Whitbread Plc increased it's revenue from 1.411 billion GBP to 3.106 billion GBP over the period spanning fiscal years 2006/2007 to 2016/2017. That's a compound annual growth rate (CAGR) of 8.21%.

Over the same 10-year period, the company's diluted earnings per share grew from 1.22 GBP to 2.31 GBP, which is a CAGR of 6.55%.

I think that it's really impressive from such a large company, so take a look at it's dividend.

The company increased it's dividend in the last 12 years, with a ten year CAGR 12.22%. The dividend yield is 2.59% with the yesterday's closing price. (37.02 GBP) The payout ratio is only 41.49%.

I think, that if I look at these numbers I see a good company, which worth further research.

Disclaimer: Long Kroger and TEVA

Recent Buy – TEVA

Teva Pharmaceutical Industries Limited (TEVA) is a pharmaceutical company. The Company is engaged in developing, producing and marketing generic medicines and a portfolio of specialty medicines.

Yesterday TEVA reported second quarter 2017 financial reports, lowered the 2017 business outlook and announced second quarter 2017 dividend of 8.5 cents, down 75% from 34 cents in the first quarter of 2017. Because of the negative news the share price of TEVA presented a huge decline, and it closed on $23.75 (-24.00%).

As I saw this decline of the share price, I decided to buy a few shares of TEVA and I successfully bought it at $23.97.

The company has 224.06 P/E ratio, but the forward P/E ratio is 5.05. TEVA has 0.76 Altman Z-Score, which means that it is in Distress Zone. The Debt/Equity ratio stands at 1.14, but most of them are long-term debt. (LT Debt/Equity: 1.08) I understand that the most of the investors don't like the dividend cut, but I think that the dividend cut will help the company to decrease the debt pile. I know that it is a very risky investment, but I believe that the company worth more.

Full disclosure: Long TEVA.

Related Posts:

1. Recent Buy – Kroger

Archer Daniels Midland – A Fairly Valued Dividend Growth Stock

The company founded in 1902 as Daniels Linseed Co. in Minneapolis, and changed name to Archer Daniels Midland Company in 1923. Today, they are one of the world's largest agricultural processors and food ingredient providers, with more than 32,000 employees in more than 160 countries. The company's primary business segments are Agricultural Services, Corn Processing, Oilseeds Processing and Wild Flacors and Specialty Ingredients.

Archer Daniels Midland (ADM) is a dividend aristocrat, which increased it's dividend in the last 41 years. So I think it has really good track record to look at it's numbers.

ADM increased it's revenue from $44.018 billion to $62.346 billion over the period spanning fiscal years 2007 to 2016. That's a compound annual growth rate (CAGR) of 3.94%. 

 

Over the same 10-year period, the company's diluted earnings per share decreased from $3.30 to $2.16, which is a CAGR of -4.60%.

It's not so impressive, but take a look at a little longer period. ADM increased it's diluted EPS from $0.76 to $2.16 over the period spanning fiscal years 2004 to 2016. That's a compound annual growth rate (CAGR) of 9.09%. I saw that the company's EPS showing great changing from one year to another.

Despite of the changing EPS, the company is paying out a much more predictable dividend. As I mentioned earlier the company increased it's dividend in the last 41 years, with a ten year CAGR 12.08%. The dividend yield is 3.11% with the last closing price. ($41.14) It's higher than the ADM's five year average. (2.4%)

The payout ratio is 51.20% now, which is managable.

Because of the decreasing EPS and increasing dividend the payout ratio increased constantly in the last 10 years. (In the fiscal year 2007 the payout ratio was only 13.03%.)

The Debt/Equity ratio is 0.42, which is really good.

ADM has a 17.4 P/E ratio, which is slightly lower than the ADM's five year average (18.1) and it's below the stock market's P/E ratio. The forward P/E ratio is 13.92, so the company is expecting a better financial performance in fiscal year 2017, than in 2016.

What is the value of ADM?

I valued shares using the dividend discount model. I factored in a 10% discount rate and a long-term dividend growth rate of 7%.

That growth rate is roughly on par with the company’s long-term EPS growth rate, and I think it’s reasonable when also looking at the recent dividend growth or payout ratio. The DDM analysis gives me a fair value of $42.67.

Disclosure: I have no position in ADM.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Recent Buy – Kroger

The Kroger Company (KR) operates supermarkets, multi-department stores, jewelry stores, pharmacies, fuel centers and convenience stores in the United States.

This week was really interesting. On Thuesday Kroger decreased the earnings guidance, on Friday Amazon (AMZN) announced to buy Whole Foods (WFM) for $13.7 billion. What was the reaction? The price of the Kroger shares was falling as a stone. It made me curious, so I looked through the company's financials.

Kroger Co. increased it's revenue from $70.235 billion to $115.337 billion over the period spanning fiscal years 2007 to 2016. That's a compound annual growth rate (CAGR) of 5.67%.

Over the same 10-year period, the company's diluted earnings per share grew from $0.84 to $2.05, which is a CAGR of 10.42%. I think that it's really impressive from such a large company, so take a look at it's dividend.

The company increased it's dividend in the last 11 years, with a ten year CAGR 13.85%. The dividend yield is 2.15% with the Friday's closing price. ($22.29) The payout ratio is really low, it's only 21.60%.

What is the valuation of Kroger Co.?

It has a TTM P/E 10.81, which is greatly below the stock market's P/E ratio. The Debt/Equity ratio is 2.10, which is not so great, but I think it's managable.

I think that the stock market overreacted the Amazon's transaction, and the Kroger Co. proved in the last 10 years that it can improve it's business. The company is buying back it's shares, so the recent decrease of the stock price is not just a good opportunity to buy the shares of this really good company, but it's a good opportunity for the company to buy back it's own shares to improve the shareholder's return.

On Friday I bought a few shares of Kroger Co. at $21.10 which gives me a 2.27% dividend yield.

Full disclosure: Long Kroger.

How to Analyse a Dividend Growth Stock - Video

Jason Fieber (Mr. Free At 33) made a really good video about how to analyse a dividend growth stock. I think it can be really usefull for every investor.

GlaxoSmithKline - A Potential Dividend Cut

A few years ago I bought a few shares of GlaxoSmithKline (GSK) because of it's good dividend yield and dividend-paying track record. I felt myself really good while I was receiving the dividends. But a few month ago, I read the company’s 2016 Annual Report. I saw that the EPS was £0,19 and the dividend was £0,80, so the EPS didn’t cover the dividend. It was not a good news for me, so I read more to see the chairman’s words about it. I found this:

“Ordinary dividends of 80p per share have been declared for 2016, the same level as 2015. The company expects to maintain the same payment in 2017, in accordance with the statements made in 2015. This level of distribution still exceeds the free cash flow generated by the business despite the material improvement in cash generated in 2016 referred to above. Given that 2017 is the last year of the three year dividend commitment made in 2015, the Board will be considering the appropriate dividend policy for 2018 and beyond during the course of the year. ”

(Source: Annual Report 2016 – GSK, 04.p.)

I think that the Board will cut the dividend in 2018. The GSK needs a really good financial performance in 2017 to avoid the dividend cut. The first quater of 2017 was a good beginning, but I sold my shares, because I'm more relaxed to watch it from a little distance.

Full disclosure: I have no position in GlaxoSmithKline.

A Few Words About Me

Today is a great day for me. I have decided to make a blog and write about my financial journey. As a frugal man I put aside at least half of my salary, and I made a few investments over the last two decades. I bought my first shares in 2000. I saw the collapse of the tech bubble and the 2008-2009 crisis. I collected some valuable expreience about investing while I bought and sold shares. I would like to share my thoughts and my experience with my readers on this blog. 

In the last two years I read a lot about dividend growth investing, which greatly inspired me. Nowadays I have an investing style which is the mixture of dividend growth investing and value investing.