Thursday, August 6, 2015

Recent Buy II

Dividend Growth Stock Blog

Hello,



If you follow my blog, UTX appeared again on my August Screen.


http://div4son.blogspot.com/2015/08/august-screen.html


The screen essentially looks for companies that have their PEs below their median PE and yield above their median yields. Moreover, in this month my focus is on companies with wide moat.

United Technologies (UTX) makes products for helicopters and aircraft parts, elevators and escalators and heating and air conditioning systems. 




Their dividend history is impressive with 22 years growth. 

From my analysis of their 10 yr data on ROE, OM, FCF, EPS, revenue, ROIC, the fundamentals are outstanding. 

One thing I noticed is that their EPS is not tightly coupled with the price. In fact the EPS has been generally rising with the exception of 2008 where it dropped a little. However, the price is a bit more erratic - which suggests that the market dictates the price action and not necessary the earning. What does this mean? Nothing if you're a long term investor of quality dividend growth stocks. 

Both morningstar and s&p capital rate them a four star buy. 


The only thing is their recent debt level is higher than usual. 

Also, their chowder number is slightly below 12%. 

Based on the DDRM model, the estimated return on investment assuming a conservative 6% growth is close to 11%. 

Below is a short summary. If I found some time, I will complete the full report. I still need to work on DOV. 

UTX 8/2015
Area
Criteria
CheckList
Comment
Quality Company
Dividend Growth
>5 years
Yes
22 Years
ROE/Op Margin
Stable
Yes
Stable
Long term Avg Growth
Stable
Yes
Stable
FCF over Dividends
Yes
Yes
FCF covers Dividends
M* Moat
Wide Moat
Yes
Wide
M* & S&P
Credit Rating
> BBB+
Yes
A
Cash to Debt & Interest Coverage, Debt to Equity
Cash Debt >1 or Interest Coverage > 5
Yes
Cash to Debt 0.26
Interest Coverage 8.88
Debt to Equity 69.98
M* & S&P Stars
> 3 Stars for both
Yes
M* 4 Stars
S&P CapIQ 4 Stars A+ rated
Payout Ratio
<60%
Yes
35.00%
Dividend Growth
& Yield
Dividend Yield
>3%
Yes
2.60%
Dividend Growth
>5%
Yes
8.90%
Chowder
>12%
No
11.50%
Valuation
Yield/Avg Yield
>1.1
Yes
1.13
Dividend Yield Theory Mid Point
Below Mid Point
Yes
Mid Point 107.11
Low Point 86
P/E
Below Mid Point
Yes
Median 15.33 Current 14.18
DRRM
~10%
Yes
Assuming 6% growth; projected return=10.93%
M* Estimate
<M* est
Yes
M* 120
S&P Estimate
< S&P cap IQ est
Yes
S&P Cap IQ 126

Using a various methods, I estimate the fair price value (ballpark) at around $105 to $115. 

Moreover, both morningstar and s&p capital IQ estimate the fair value to be over $120.

Having said that both the PE and yield theory analysis suggest that the price is just below the mid point which means that the price can drop further. 

I recently initiated a new position with ITX. 
Date
Action
Security
Price
Quantity
Amount
8/5/2015
Buy
UTX
98.9
15
1490.45

This should add another $38 to my estimated forward dividends.

That's it for now. Did you make any recent purchases? What s&p you think of UTX. 

D4s


2 comments:

  1. Here is a new one I haven't seen lately! Thanks for the analysis and the name. Solid dividend growth history here indeed. Stock Price is looking rather attractive at this point as well. Added to my watchlist.

    Thanks D4s!

    ReplyDelete
    Replies
    1. Thanks Adam. UTX appeared on my screen earlier in the week. As soon as I researched the fundamentals, I had to pull the trigger.
      Anyway, just got some fresh capital (I think you know where it came from. ) so I am looking for more opportunities.
      D4s

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