Wednesday, July 22, 2015

Recent Buys (....Again)

Hello,

Easy come, easy go. But, in a good way. 

I believe in the concept of investing regularly to grow the dividends income snowball. Therefore, as soon as I get some fresh capital, I look for new opportunities. New Dividend Growth Stocks!

The market has been up and down lately.  For the last couple of weeks, some really good companies in the industrial sector are seeing 12 months lows. 

So, let's see what's out there...




Earlier today, I bought some shares in CAT, EMR and DOV. See below for the details. 

Date
Action
Security
Price
Quantity
Amount
7/22/2015
Buy
CAT
80
15
1206.95
7/22/2015
Buy
EMR
51.95
20
1045.95
7/22/2015
Buy
DOV
64.44
20
1295.75

These are not new positions. I added DOV near the end of last year. CAT was added during the last dip. I averaged down on EMR, and now I am adding more shares. 

Here's my quick criteria checklist for CAT.

CAT 7/2015AreaCriteriaCheckListComment
Quality Company
Dividend Growth>5 yearsYes21 Years
ROE/Op MarginStableYesStable
Long term Avg GrowthStableYesStable
FCF over DividendsYesYesFCF covers Dividends
M* MoatWide MoatNoWide
M* & S&P
Credit Rating
> BBB+YesA-
Cash to Debt & Interest Coverage, Debt to EquityCash Debt >1 or Interest Coverage > 5NoCash to Debt 0.2
Interest Coverage 4.81
Debt to Equity 227.62
M* & S&P Stars> 3 Stars for bothYesM* 3 Stars
S&P CapIQ 3 Stars A rated
Payout Ratio<60%Yes43.00%
Dividend Growth
& Yield
Dividend Yield>3%Yes3.70%
Dividend Growth>5%Yes6.70%
Chowder>12%No10.40%
Valuation
Yield/Avg Yield>1.1Yes1.54
Dividend Yield Theory Mid PointBelow Mid PointYesMid Point 103.26
Low Point 59
P/E Below Mid PointYesMedian 14.53 Current 12.77
DRRM~10%YesAssuming 5% growth; projected return=10.95%
M* Estimate<M* estNoM* 79
S&P Estimate< S&P cap IQ estYesS&P Cap IQ 90

The biggest concern for CAT is the high debt level. It's growth is also stagnating (though S&P capital IQ quotes a 7% 3 yr CAGR). In my calculations, I used a very modest 5% growth rate, and the projected ROI is still slightly higher than my 10% threshold (using the DDRM model). Overall, I would like to complement my CAT investments with my DE investments. 

Here's my qick criteria checklist for DOV.

DOV 7/2015AreaCriteriaCheckListComment
Quality Company
Dividend Growth>5 yearsYes59 Years
ROE/Op MarginStableYesStable
Long term Avg GrowthStableYesStable
FCF over DividendsYesYesFCF covers Dividends
M* MoatWide MoatNoNarrow
M* & S&P
Credit Rating
> BBB+YesA
Cash to Debt & Interest Coverage, Debt to EquityCash Debt >1 or Interest Coverage > 5Yes - but TTM Debt/Equity > 50Cash to Debt 0.19
Interest Coverage 9.23
Debt to Equity 79.44
M* & S&P Stars> 3 Stars for bothNoM* 3 Stars
S&P CapIQ 2 Stars B+
Payout Ratio<60%Yes32.00%
Dividend Growth
& Yield
Dividend Yield>3%No2.40%
Dividend Growth>5%Yes9.30%
Chowder>12%Yes11.70%
Valuation
Yield/Avg Yield>1.1No1.04
Dividend Yield Theory Mid PointBelow Mid PointYesMid Point 71.01
Low Point 39
P/E Below Mid PointYesMedian 14.12 Current 13.04
DRRM~10%YesAssuming 7% growth; projected return=12.22%
M* Estimate<M* estYesM* 70
S&P Estimate< S&P cap IQ estYesS&P Cap IQ 68

As you may know, DOV missed their targets in the recent Quarter. Am I too concerned? Yes - if I am a short term investor. In the long run (decades) I think DOV is trading a fair value. For an aristocrat, I defintely want to add more to my existing position. That is, if the fundamentals are good. 
So, are we dealing with a quality company? Is the dividend steady or growing? Is it trading at fair value? I think yes in all cases. 

For EMR, you can check out my analysis:

http://div4son.blogspot.com/2015/06/emerson-electric-company-emr-dividend.html

It has definitely been a busy month! I will post my detailed analysis of CAT and DOV in upcoming posts.

All of this means is that I will get an increase of $115.80 in estimated forward dividends - which should grow year over year if the companies continue to do their job.

What do you think of DOV, CAT and EMR? Did you buy other industrials?

D4S



2 comments:

  1. Nice additions to the industrials. The industrial sector seems to be providing good value overall.

    Congrats on the purchase and adding to your div income
    R2R

    ReplyDelete
    Replies
    1. Thanks R2R. CAT just got hammered today. The industrials are looking good. Hopefully, it will hold up for another week so that I can deploy more capital.
      Thanks for you thoughts on this.
      D4s

      Delete