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Fundamental data is updated weekly, as of the prior weekend. Please download the Full Report and Dividend Report for any changes.
Dec 11, 2020
Dividend Increases/Decreases for the Week December 11
Let's take a look at companies that raised/lowered their dividend this week.
Dec 10, 2020
FTC Attacks Facebook, Win-Win Scenario for Investors
Image Shown: Facebook Inc has a large digital advertising business with global reach, but it does not have a monopoly on digital advertising or social media by any means. Image Source: Facebook Inc – Third Quarter of 2020 IR Earnings Presentation. Facebook is being sued by the FTC for allegedly engaging in monopolistic activities via its acquisition program. It's important to note that the government is not seizing Facebook's assets and that Facebook investors own the future free cash flow stream of the entire entity under any and every scenario--whether Facebook is retained in current form or whether it is broken into different parts through a potential IPO/spin-off of its Instagram and WhatsApp properties. Under a status quo scenario, we believe Facebook's shares are worth $413 each, an estimate that is backed by the company's vast net cash position and future expected free cash flow stream. In such a scenario, the company would remain one of our favorite ideas, retain its material competitive advantages (i.e. the network effect) and continue to build upon its very healthy financial profile. Further, in light of the FTC news, we believe the market will look to price Facebook more and more on a sum-of-the-parts basis, which could help to accelerate price-to-estimated fair value convergence relative to our intrinsic value estimate. In a highly improbable break-up scenario, Facebook investors could receive more than our status-quo intrinsic value estimate. The IPO market is very, very healthy at the moment, with investor interest in new issues at historic highs and many recent IPOs soaring on their first day of trading. If Facebook is forced to IPO Instagram or WhatsApp, the very, very healthy IPO market could generate proceeds for Facebook investors far in excess of what the implied value of Instagram and WhatsApp contribute to our current $413 per share fair value estimate of the combined company. Further, the cash proceeds of an IPO of Instagram or WhatsApp would stuff the coffers of Facebook's balance sheet with even more excess cash that could be used for material share buybacks or a vast one-time cash dividend--or for other value-generating opportunities. In an IPO or spin-off of Facebook's Instagram or WhatsApp properties, please note that investors are merely capturing the present value of these properties' future free cash flows sooner (not losing them)--and the market may price them at a substantial premium above our implied valuation within Facebook. The FTC news, which was largely expected, will generate headline risk for Facebook's shares, and it will undoubtedly be a source of continued share-price volatility and confusion for investors. In many respects, however, the FTC's attack on Facebook may turn out to be a win-win for Facebook investors. At the very least, if investors start to look at Facebook more and more on a sum-of-the-parts basis (pricing Facebook, Instagram and WhatsApp separately with consideration of current market conditions/relative prices, which are undoubtedly healthy for new issues), it may only accelerate status-quo-scenario price-to-fair value convergence. Facebook remains a top-weighted holding in the Best Ideas Newsletter portfolio, and we will continue to follow developments related to the FTC news.
Dec 7, 2020
Dollar General Continues to Impress
Image Shown: Shares of Dollar General Corporation have surged higher over the past year. On December 3, Dollar General Corp reported third quarter earnings for fiscal 2020 (period ended October 30, 2020) that saw its same-store sales grow by over 12% year-over-year, which when combined with its steadily growing store count, saw the firm’s GAAP revenues jump higher by over 17% year-over-year. Dollar General has made great strides in upgrading its digital operations, expanding its store base, adding new products to its stores, and improving its cost structure during the past several fiscal years. These past initiatives are filtering down to Dollar General’s bottom line as its diluted GAAP EPS was up 63% year-over-year in the fiscal third quarter. We continue to be big fans of Dollar General and include shares of DG in the Best Ideas Newsletter portfolio.
Dec 4, 2020
DocuSign Has All the Makings of a Long-Term Winning Enterprise
Image Source: DocuSign Investor Presentation Winter 2020. DocuSign is executing well on its strategy to transform the foundation of doing business. The company’s large and under-penetrated market opportunity, essential cloud product suite that lines up favorably against the competition, accelerated billings expansion, and growing customer base with well-known brand names (which add credibility to its product offering) represent a number of key positives to the investment thesis. Though GAAP losses continue to pile up, DocuSign is free cash flow positive and sports an asset-light business model with considerable earnings leverage (as sales continue to expand at a rapid clip). DocuSign’s largely subscription-based business model offers a nice degree of visibility into future revenue trends, and its balance sheet is relatively healthy with a decent net cash position. DocuSign has all the makings of a long-term winning enterprise, as long as it avoids any security/execution miscues that could tarnish its brand and/or derail trust among its customers, impairing future growth. We expect to raise our fair value estimate of DocuSign upon its next report update and point to the high end of our existing fair value estimate range of $295 per share for bullish investors.
Dec 3, 2020
This Stock Just Registered a Rare (Perfect) 10 on the VBI!
The Valuentum Buying Index (VBI) combines rigorous discounted cash flow (DCF) analysis, relative (behavioral) valuation, and technical/momentum indicators. For a stock to register a rating of a 10 on the VBI, the company would need to be 'UNDERVALUED' on a DCF basis and 'ATTRACTIVE' on a relative (behavioral) value basis. The stock would also have to be exhibiting 'BULLISH' technicals. The firm would need a ValueCreation rating of 'GOOD' or 'EXCELLENT', exhibit 'HIGH' or 'AGGRESSIVE' growth prospects, and generate at least a 'MEDIUM' or 'NEUTRAL' assessment for cash flow generation, financial leverage, and relative price strength.
Dec 1, 2020
Walking Through the Calculation of the Dividend Cushion Ratio
Image shown: An image found on page 2 of Valuentum's Dividend Report on Kimberly-Clark. The 'Dividend Cushion Ratio Deconstruction,' shown in the image, reveals the numerator and denominator of the Dividend Cushion ratio. At the core, the larger the numerator (or the healthier a company's balance sheet and future free cash flow generation) relative to the denominator (or a company's future expected cash dividend obligations), the more durable the dividend. In the context of the Dividend Cushion ratio, KimberlyClark's numerator is larger than its denominator suggesting strong dividend coverage in the future. The 'Dividend Cushion Ratio Deconstruction' image puts sources of free cash flow in the context of financial obligations next to expected cash dividend payments over the next 5 years on a side-by-side comparison. Because the Dividend Cushion ratio and many of its components are forward-looking, our dividend evaluation may change upon subsequent updates as future forecasts are altered to reflect new information.We believe the Dividend Cushion ratio is one of the most helpful tools an income or dividend growth investor can use in conjunction with qualitative dividend analysis. The ratio is one-of-a-kind in that it is both free-cash-flow based, considers balance sheet health, and is forward looking. Since its development in 2012, we estimate its efficacy at ~90% in helping to forewarn readers of impending dividend cuts. For companies where Valuentum reports are available, the Dividend Cushion ratio can be found in a stock's Dividend Report or in the table on the company's stock landing page. We use Kimberly-Clark as an example of how we calculate the Dividend Cushion ratio and how useful it is for investors of all types.
Nov 27, 2020
Republic Services Is a Great Company
Image Shown: Shares of Republic Services Inc have been on an upward march over the past six months as investors warmed back up to the waste management company. We appreciate the company’s stable cash flow profile and high quality earnings, and we continue to include shares of RSG at a modest weighting in the Dividend Growth Newsletter portfolio. The waste management company Republic Services has proven to be incredibly resilient during the ongoing coronavirus (‘COVID-19’) pandemic. We are big fans of its stable cash flow profile and high quality earnings. According to Republic Services’ 2019 Annual Report the firm “is the second largest provider of non-hazardous solid waste collection, transfer, disposal, recycling, and environmental services in the United States, as measured by revenue.” The firm operated in over 40 US states and Puerto Rico as of the end of 2019. We include Republic Services in our Dividend Growth Newsletter portfolio at a modest weighting. Pricing strength (assisted by industry consolidation), revenue growth (assisted by M&A activity), and the potential for meaningful margin expansion (assisted by economies of scale) underpins Republic Services’ cash flow growth trajectory. Shares of RSG yield ~1.7% as of this writing.
Nov 25, 2020
Dick’s Sporting Goods’ 2%+ Dividend Yield Is Solid
Dick’s Sporting Goods put up impressive third-quarter results that showed strong sales performance across both e-commerce and brick-and-mortar. E-commerce/digital/online sales continue to soar across the broader retail arena. Dick’s Sporting Goods’ gross and merchandising margins were healthy during its third quarter, and its inventory is clean as the sporting goods retailer heads into the all-important holiday season. We’re big fans of Dick’s Sporting Goods’ tremendous free cash flow generation and its balance sheet health. For dividend growth investors, Dick’s Sporting Goods offers a compelling combination of a 2%+ dividend yield and an impressive 3.2 Dividend Cushion ratio at the time of this writing.
Nov 24, 2020
Sonos Showing Signs of Life
Image Shown: Shares of Sonos Inc are showing signs of life in 2020 after its poor showing in the quarters that followed its initial public offering back in August 2018. After treading water over the past two years, shares of Sonos are showing signs of life as its long-term strategy is starting to pay off. Though we caution that Sonos does not appear to have much of a moat in any of the industries it operates in, its financials have been impressive of late and its near-term outlook is improving--two key factors that have caught our attention. Meaningful downside risks remain, but if Sonos delivers on its guidance for fiscal 2021, the company’s long-term outlook may now be significantly brighter than it was back in February 2019. On a final note, Sonos recently partnered up with Disney in an attempt to improve its marketing strategy. It will be interesting to see how that partnership plays out. We are keeping an eye on Sonos.
Nov 17, 2020
Growing Competitive Pressures, Leverage Drive Our Reduced Fair Value Estimate of CVS Health (Walgreens, Too)
The rivalries in the pharmacy space continue to intensify. Just this week, on November 17, CNBC reported that Amazon was launching Amazon Pharmacy in the US, which reportedly will include free delivery for Amazon Prime members. Shares of CVS Health sold off sharply after the news broke, as did shares of Walgreens Boots Alliance. Here, we would like to highlight how recognizing competitive threats (both existing and future) represents one of the qualitative overlays we use during the enterprise cash flow analysis process to model expected future financial performance of the company. These competitive dynamics had a large influence in our decision to reduce CVS Health’s fair value estimate. Note, we also reduced our fair value estimate of peer Walgreens Boots Alliance to $43 per share from $60 per share on November 9, too.



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