Valuentum Exclusive Analysis for the Discerning Investor

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Nov 3, 2022

Lumen’s Dividend Cut Highlights Effectiveness of Valuentum’s Dividend Methodology and Uniqueness of Dividend Cushion Ratio
A lot of times investors only focus on the dividend payout ratio – dividends paid per share divided by earnings per share – or free cash flow coverage of the dividend, but the balance sheet is so very important to the sustainability of the dividend, too – something that the Dividend Cushion ratio embraces but other dividend health metrics do not. For example, Lumen’s dividend payout ratio was 50% ($0.75 in dividends dividend by $1.50 in earnings per share during the first three quarters of the year), and its free cash flow was enough to cover its cash dividends paid during the first nine months of 2022, too. However, the company held a massive ~$25 billion net debt position at the end of the quarter, which pushed its Dividend Cushion ratio deep into negative territory, raising a huge red flag with respect to the sustainability of the payout. Ignoring the balance sheet both with respect to intrinsic value and dividend analysis could be a recipe for disaster.

Nov 2, 2022

ALERT: Replacing DLR with XLE in DGN and HYDN Portfolios; Public Storage Remains One of Our Favorite REITs
Image: Public Storage's one-time dividend issued this year has been fantastic for income investors. Image Source: Public Storage. The REIT space has had a difficult time this year. Public Storage, which reported results November 1, remains one of our favorite REITs, but we are making a change to remove DLR in the simulated Dividend Growth Newsletter (DGN) portfolio and High Yield Dividend Newsletter (HYDN) portfolio and replace it with the Energy Select Sector SPDR (XLE). The changes will be reflected upon the release of each newsletter's next edition. We continue to monitor the REIT space cautiously as interest rates rise, and as investors seek out alternatives for income, including I-Bonds yielding 6.89% and certificates of deposit approaching 4% yields.

Nov 1, 2022

Phillips 66: A Huge Winner in 2022
Image Source: Phillips 66. Shares of Phillips 66 have soared more than 40% this year, and we believe there is still upside on the basis of the high end of our fair value estimate range ($140 per share). The company’s equity has been mighty volatile this year, however, sporting a 52-week range of ~$67-$111, so investors should continue to expect large swings. Right now, things in the energy markets are favorable, and we see no reason to sour on PSX shares at the moment. The company yields ~3.7% at the time of this writing.

Nov 1, 2022

Enterprise Products Partners Reports Strong 3Q, Impressive ~7.5% Distribution Yield
Image Source: Enterprise Products Partners. The Alerian MLP ETF has faced considerable pressure during the past 10 years, generating a paltry annualized return, but shares of many constituents have improved during 2022 as energy resource prices have bounced back. Though we generally shy away from MLPs, more generally, Enterprise Products Partners is one of our favorites given the increased transparency it provides to investors when it comes to cash-flow metrics. Since its IPO, Enterprise Products Partners has raised its distribution 24 years in a row. Shares yield ~7.5% at this time.

Nov 1, 2022

Newmont Reports Challenging 3Q, But the Stock Is a Key Diversifier in the Dividend Growth Newsletter Portfolio
Image Source: Newmont Mining. Newmont’s performance in the third quarter of 2022 is not what we would be looking for in one of our best ideas. We prefer strong free cash flow generators and those with hefty net cash positions, but as one of the rare ideas in the metals and mining arena in the Dividend Growth Newsletter portfolio, we’re not rushing to remove it. Newmont boasts a solid investment-grade credit rating, and while the near term has been tough for shares, it offers a unique dividend policy that embraces a base annualized dividend of $1.00 per share, payable at $1,200/oz gold price, with an incremental dividend payment targeting 40%-60% of incremental attributable free cash flow above the base gold price assumption. Newmont’s free cash flow generation and dividend payment are heavily tied to the price of gold, and while costs have increased at the mining giant in this inflationary environment, the company remains one of the best dividend plays to gain exposure to potentially rising gold prices in an inflationary environment, in our view. We continue to like its diversification benefits in the simulated Dividend Growth Newsletter portfolio.

Oct 31, 2022

Recent Fair Value Estimate Changes
Let's have a look at recent fair value estimate changes across our coverage universe.

Oct 30, 2022

Something New!
Hi everyone: To stay true to our mission, you'll find something new regarding our methodology. In the coming weeks, you'll see this table in our work going forward.

Oct 28, 2022

In the News: META, AAPL, AMZN, RSG, DLR, VRTX, XOM, CVX
Image Source: Valuentum. Readers should expect a substantial reduction in our fair value estimate of Meta Platforms on the basis of materially reduced forecasts of free cash flow. Apple’s calendar third-quarter results were good, considering that many were worried about iPhone 14 demand heading into the report. Amazon’s results support a cautious tone with respect to consumer spending, while we remain bullish on three of our best-performing ideas so far in 2022 – Vertex Pharma, Exxon Mobil, and Chevron. We didn’t see anything in the Republic Services and Digital Realty reports that would warrant any material changes to our theses at this time.

Oct 28, 2022

Dividend Increases/Decreases for the Week of October 28
Let's take a look at firms raising/lowering their dividends this week.

Oct 27, 2022

VBI Ratings Not as Impressive As We Would Have Liked in 2022
Image: How the VBI rating system has ranked equities so far this year. At Valuentum, we use the Valuentum Buying Index (VBI) to source ideas into diversified simulated newsletter portfolios, and the VBI may be most applicable to the simulated Best Ideas Newsletter portfolio, where we generally like to include ideas when they register a high VBI rating and remove them when they register a low VBI rating. We always use the VBI in a portfolio setting and never by itself. Let's talk more about the VBI rating system in this work.