Fundamental data is updated weekly, as of the prior weekend. Please download the Full Report and Dividend Report for any changes.
Latest Valuentum Commentary
Dec 31, 2020
2020 Won’t Soon Be Forgotten
2020 won’t soon be forgotten. The tumultuous year brought with it the greatest shock to the U.S. economy in modern history, ushering in the largest-ever decline in U.S. real annualized gross domestic product of 31.4% in the second quarter of the year (surpassing the prior record of a 28.6% collapse in the second quarter of 1921). Strict lockdowns to help contain the outbreak of COVID-19 created the biggest global health emergency in a century, driving a self-inflicted economic collapse worse than the Great Recession, the Great Depression, and any other recession before it (the Depression of 1873-1879, the Panic of 1893, etc.). Millions were put out of work. During the month of April alone, the economy lost a record 20.8 million jobs, with some estimating that the “real” unemployment rate during the depths of the COVID-19 crisis reached nearly 23%. The official 14.7% unemployment rate in April would obliterate prior post-World War II era records, and while it fell short of the peak Great Depression unemployment rate estimated at 24.9%, the pain of many families and households was no less severe as they battled both a financial and health crisis that materialized in a matter of weeks, with little lead time to prepare for what was to come. Pantry stuffing and panic buying of consumer goods became a sign of the times, and a great debate about the efficacy of wearing masks raged across mediums.
Dec 25, 2020
All I Want for Christmas Are Dividend Aristocrats
Image Source: 5 Furlongs. It may not be as catchy as Mariah Carey's Christmas hit, "All I Want For Christmas Is You," but if you ask a dividend growth investor what they might want for Christmas as it relates to an investment, they might start singing about a long list of Dividend Aristocrats--a list of companies that have increased their dividends in each of the past 20-25+ years. Therefore, we wanted to do something special this Christmas for members. We've aggregated a list of every non-financial Dividend Aristocrat in our 16-page stock report coverage universe and made a list conveniently available, including some key data and links directly to their 16-page stock reports (pdf). To access the 16-page stock report of any company on this list, just click on its name, and you'll be prompted to download that particular company's 16-page stock report pdf file. Remember, we provide separate Dividend Reports for stocks, too. For example, the 16-page stock report pdf file that is linked to a company's name in this article is only a portion of the research, commentary, ratings and data on that particular company. Let's take Emerson Electric as an example. Not only does it have a 16-page Stock Report and additional Valuentum commentary via articles and notes, but it also has a Dividend Report. Both pdf reports can be downloaded on its stock web page (the pdf icons are to the right of the stock chart). We hope you enjoy the vast amount of research connected to the download links on this list. Each company's fair value estimate, Dividend Cushion ratio, Economic Castle rating and much more is backed by our three-stage discounted cash flow process with fully populated financial statements, available by request from Gold and Platinum members. Please download away! What's your favorite Dividend Aristocrat? Comments welcome.
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 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 25, 2020
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 is premiering a four-part series examining about how easily our minds are being hacked, and why it is so important to "think slow." Tune in (5). 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?
Nov 11, 2020
Realty Income Remains Resilient and Its Outlook is Improving
Image Shown: An overview of Realty Income Corporation’s asset base and historical financial performance. Image Source: Realty Income Corporation – Third Quarter of 2020 IR Earnings Presentation. On November 2, Realty Income Corp posted third quarter earnings for 2020 that saw the real estate investment trust’s (‘REIT’) funds from operations (‘FFO’) come in flat year-over-year at $0.82 per share, while its adjusted funds from operations (‘AFFO’) declined by 2% year-over-year, hitting $0.81 per share. Realty Income invests in single-tenant commercial properties, and its business has faced headwinds from the ongoing coronavirus (‘COVID-19’) pandemic. However, things are starting to improve, though there is ample room for additional improvement. We like the relative resilience of Realty Income’s financials and continue to include shares of O at a modest weighting in our Dividend Growth Newsletter portfolio. As of this writing, shares of Realty Income yield ~4.4% and for reference, the REIT pays out a monthly dividend.
Nov 4, 2020
Digital Realty’s Momentum Continues, Raises Outlook
Image Shown: An overview of Digital Realty Trust Inc’s asset base. Image Source: Digital Realty Trust Inc – Third Quarter of 2020 IR Earnings Presentation. On October 29, the data center real estate investment trust (‘REIT’) Digital Realty Trust reported third quarter 2020 earnings that beat consensus revenue estimates and consensus funds from operations (‘FFO’) estimates. Please note that while FFO is an imperfect metric, particularly because it does not incorporate the REIT in question’s need to refinance maturing debt and tap capital markets for funds for growth, it provides a useful snapshot of how well the REIT in question can maintain its dividend in the near-term. Digital Realty posted $1.54 per share in core FFO last quarter (an adjusted non-GAAP figure), down 8% year-over-year but flat sequentially. In this article, we will cover Digital Realty’s short-term headwinds and why we expect that the REIT’s financial performance will rebound. Shares of DLR yield ~3.1% as of this writing. Longer term, we use our adjusted Dividend Cushion ratio (includes funds raised via expected equity issuances over the next five full fiscal years) to gauge Digital Realty’s ability to keep making good on its dividend obligations. Digital Realty has an adjusted Dividend Cushion ratio of 1.1, earning the REIT a “GOOD” Dividend Safety rating. These metrics incorporate our expectations that the REIT will push through significant dividend increases over the coming years, and Digital Realty has an “EXCELLENT” Dividend Growth rating. We include shares of DLR as a holding in both our Dividend Growth Newsletter and High Yield Dividend Newsletter portfolios.
Nov 2, 2020
ICYMI -- Dividend Growth Strategies Struggle
Image: A large cap growth ETF (orange) has significantly outperformed an ETF tied to a dividend growth strategy, the SPDR S&P Dividend ETF (SDY), which mirrors the total return performance of the S&P High Yield Dividend Aristocrats Index. To no surprise to many members, several dividend growth strategies have faced tremendous pressure during 2020. The Journal recently wrote a piece on the topic, but from our perspective, the problem with many dividend growth strategies is that they tend to be balance-sheet agnostic and pay little attention to traditional free cash flow expectations, focusing only on the yield itself, sometimes dismissing future fundamentals in favor of historical growth trends and the inferior EPS-based dividend payout ratio. In many dividend-targeted ETFs, for example, it may not matter to the index creator whether a firm has $10 billion in net debt or $10 billion in net cash; as long as management has a track record of raising the dividend in the past, it is included. To us, however, there is a world of difference between a company that has a huge net cash position and a huge net debt position. The more excess cash on the balance sheet a dividend payer has, for example, the more secure its payout. In some cases, entities held in high-yielding ETFs don't even cover their dividends or distributions with traditional free cash flow generation, despite having ominous net debt loads. A look at the high-yielding ALPS Alerian MLP ETF, for example, shows a number of entities that are buried under a mountain of debt and are generating meager free cash flow relative to expected distributions. The lofty yield on that ETF should therefore be viewed with a very cautious eye. If the yield weren't at risk for a big cut, the market would bid up the stock, and down the yield would go. In no way should you believe that you can sleep well at night holding stocks yielding north of 10% when the current 10-year Treasury is well below 1%. The market is just not that inefficient. A dividend growth strategy can never be a passive one either. Only through constant attention to the balance sheet (net cash) and future free cash flow expectations can investors truly sleep well at night. At Valuentum, we do the balance sheet and cash flow work and summarize it succinctly in a key ratio called the Dividend Cushion ratio.
Oct 27, 2020
Crown Castle Continues to Shine
Image Shown: Crown Castle International Corp.’s growth trajectory continued in the third quarter of 2020. Image Source: Crown Castle International Corp. – Third Quarter of 2020 IR Earnings Presentation. Crown Castle International Corp--3.3% yield (as of this writing)--is a real estate investment trust (‘REIT’) that owns 40,000+ cell towers, ~70,000 small cell nodes (on air or under contract) and ~80,000 route miles of fiber that support numerous networking operations all across the US. We include shares of Crown Castle as a holding in our High Yield Dividend Newsletter given its ability to generate sizable free cash flows even after investing heavily in expanding its asset base. From 2017 to 2019, Crown Castle generated ~$0.75 billion in annual free cash flows, though the firm had to tap capital markets to cover its annual common dividend obligations which averaged ~$1.75 billion during this period (its annual preferred dividend obligations averaged just under $0.1 billion during this period). While the REIT is capital market dependent, given the importance of its asset base which is primarily made up of essential infrastructure that supports telecommunications services in the US (including 5G services) and its ability to generate consistent free cash flows (rare in the REIT industry), we see Crown Castle maintaining access to both debt and equity markets at attractive rates going forward. When the REIT reported third quarter 2020 earnings on October 21, management had enough confidence in Crown Castle’s outlook to boost the firm’s quarterly dividend by 11% on a sequential basis. Though management has had to adjust Crown Castle’s 2020 guidance several times (including to the downside), largely due to headwinds created by the ongoing coronavirus (‘COVID-19’) pandemic, the REIT still expects to generate meaningful revenue and adjusted funds from operations (‘AFFO’) growth this year.
Oct 19, 2020
Global Net Lease’s Yield Is Flashing Signs of Trouble
Image Shown: An overview of Global Net Lease’s asset base. Image Source: Global Net Lease – Second Quarter of 2020 IR Earnings Presentation. Global Net Lease is a real estate investment trust (‘REIT’) focused on single tenant net-leased commercial properties in the US, Canada, and Europe. Sale and leaseback transactions are a common way the REIT grows its business. At the end of June 2020, a little less than two thirds of its annualized rental income came from properties in the US and Canada. Global Net Lease generated a little less than half of its annualized rental income from both office properties and industrial/distribution properties, with the remainder coming from retail properties. Shares of GNL yield ~10.2% on a forward-looking basis as of this writing after the REIT cut its quarterly payout in early-2020.
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The High Yield Dividend Newsletter, Best Ideas Newsletter, Dividend Growth Newsletter, Nelson Exclusive publication, and any reports, articles and content found on this website are for information purposes only and should not be considered a solicitation to buy or sell any security. The sources of the data used on this website are believed by Valuentum to be reliable, but the data’s accuracy, completeness or interpretation cannot be guaranteed. Valuentum is not responsible for any errors or omissions or for results obtained from the use of its newsletters, reports, commentary, or publications and accepts no liability for how readers may choose to utilize the content. Valuentum is not a money manager, is not a registered investment advisor and does not offer brokerage or investment banking services. Valuentum, its employees, and affiliates may have long, short or derivative positions in the stock or stocks mentioned on this site.