Valuentum Exclusive Analysis for the Discerning Investor

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Jan 12, 2024

Dividend Increases/Decreases for the Week of January 12
Let's take a look at firms raising/lowering their dividends this week.

Jan 11, 2024

Dividend King Leggett & Platt’s Payout May Be Worth the Risk
Image: Leggett & Platt has put together a long track record of consecutive annual dividend increases, but recent performance suggests that the dividend may be at risk in the longer run. Its 7.1% dividend yield may be worth the risk, however. Leggett & Platt has raised its dividend for more than 50 consecutive years, putting it in the coveted category of being a Dividend King. However, the bedding, flooring and textile product maker has fallen on some difficult times. The company sports a Dividend Cushion ratio of -1.2 (negative 1.2), indicating that our future expectations of its dividend payments over the next five years coupled with its net debt position fall far below the cumulative free cash flow that we expect it to generate over the next five years. The company's 7.1% dividend yield may be worth the risk, however.

Jan 8, 2024

Thinking Slow: 3 Research Blind Spots That Changed the Investment World
Image Source: EpicTop10.com. We have to be on high alert about how our minds work. PBS recently delivered a four-part series examining how easily our minds are being hacked, and why it is so important to "think slow." When it comes to the active versus passive debate, does the analysis suffer from parameter risk? With respect to empirical, evidence-based analysis, does the analysis have the entire construct wrong? When it comes to short-cut multiples, are we falling into the behavioral trap of thinking on autopilot?

Jan 4, 2024

It’s All About Free Cash Flow – Walgreens Cuts Its Payout
Image: Walgreens’ shares have been under consistent pressure for years, and a turnaround is not guaranteed. Today, January 4, Walgreens announced that it would slash its quarterly dividend payment to $0.25 per share, a 48% decrease. This should not be surprising to members. Walgreens’ Dividend Cushion ratio stood at -0.3 (negative 0.3), and we hope members have avoided this catastrophe of a Dividend Aristocrat. A Dividend Cushion ratio below 1 signals increased long-term risk to the payout, while a firmly negative Dividend Cushion ratio signals heightened risk. Our cash-based dividend growth process has led to outperformance in the Dividend Growth Newsletter portfolio the past couple years, while other areas have suffered, and it has also shown to be useful in predicting dividend cuts. Walgreens is now one of more than 50 companies across our coverage universe in recent years where the Dividend Cushion ratio has warned of significant risk to the sustainability of the dividend in advance of the cut.

Jan 4, 2024

4 Very Good Reasons Why We Don’t Like Dividends of Banking Stocks
Image: Bank Run in Michigan, USA, February 1933. Source: Public Domain. It’s sometimes easy to lose sight of the fragility of a banking firm’s business model. Let’s examine the reasons why we don’t like banking firms’ dividends. Reason #1: A Bank Run Is Always Possible. Reason #2: Others Have Tried to Invest in Bank Dividends and Have Failed. Reason #3: Cash Flow Is Not Meaningful at Banks. Reason #4: There Are Plenty of Other Options. Let's dig in.

Dec 29, 2023

Kinder Morgan’s ~6.4% Dividend Yield Is Much Stronger These Days
Image: Kinder Morgan is back on track. Image Source: Kinder Morgan. Early in December, Kinder Morgan released financial expectations for 2024 that showed the midstream energy giant is back on track. Excluding its recent purchase of NextEra Energy Partners’ STX Midstream assets, Kinder Morgan expects 5% expansion in adjusted EBITDA and distributable cash flow [DCF] in 2024 thanks to growth in its Natural Gas Pipelines and Energy Transition Ventures segments coupled with rate escalations across its operations. For 2024, management is targeting its 7th consecutive year of dividend increases with a projected annualized dividend of $1.15 in 2024. Net debt-to-Adjusted EBITDA is targeted at 3.8x at the end of 2024, a level that is materially lower than its long-term target of 4.5x. We're liking the continued improvements at Kinder Morgan in recent years.

Dec 29, 2023

Dividend Increases/Decreases for the Week of December 29
Let's take a look at firms raising/lowering their dividends this week.

Dec 28, 2023

6%+ Dividend Yielder Cracker Barrel Needs to Raise Menu Prices More Aggressively
Image: Cracker Barrel remains focused on returning cash to shareholders. We think performance at Cracker Barrel is fixable, but it has to be menu price-driven as commodity price and hourly wage inflation continues to eat into operating income, and traffic remains troubled even with increased spend on marketing. Notwithstanding its long-term unit growth opportunities at its Cracker Barrel and Maple Street stores, Cracker Barrel’s unique concepts continue to resonate with consumers, but the firm is being left behind in a world where other restaurants are sacrificing price-conscious consumers for those less concerned about price increases. Its ~6.3% dividend yield at the time of this writing speaks of heightened risk, as does its 0.5 Dividend Cushion ratio, but if Cracker Barrel can turn things around by ratcheting up its pricing initiatives more aggressively in fiscal 2025 and beyond, the stock could end up being one of the most attractive income ideas on the market today. For now, however, we’re watching and waiting for a strategic shift.

Dec 27, 2023

Dividend Aristocrat Enterprise Products Partners Boasts 7%+ Yield, Investment-Grade Marks
Image: Enterprise Products Partners continues to raise its distribution year after year. Source: Enterprise Products Partners. Though, in general, we’re not too excited by the midstream pipeline space given their capital-intensive nature and hefty net debt positions, Enterprise Products Partners has a lot of things going for it. The company boasts investment-grade credit ratings (A-/A-/A3), has strong and consistent returns on invested capital, and has put up 25 years of consecutive distribution increases. In addition to growing its payout in each year for more than two decades, management has done a great job reducing its leverage ratio (net debt adjusted for equity credit in its junior subordinated notes divided by adjusted EBITDA). For the trailing twelve months ended in the third quarter, its leverage ratio has fallen to 3.0x from 4.1x in 2017. All told, we think Enterprise Products Partners’ growth initiatives will help to solve revenue pressures, and we expect the company to continue to drive distribution growth in the coming years as it keeps its leverage in check.

Dec 26, 2023

5 Questions Advisors Should Ask When Interviewing Fund Managers
Image Source: Investment Zen. These are not your typical questions. These are the questions advisors should ask to find the most analytical fund managers. The questions don’t cover strategy or market outlook, but instead hit upon the analytical foundation of the fund manager, which could be more important than anything else.