Monday, December 14, 2015

Recent Buy (Tax Deferred) - EV


I recently added EV to my tax deferred 401k account. This is not fresh capital. I recently liquidated one of the funds for DGI investments.

Details of Purchase

Today, I bought 118 shares of Eaton Vance (EV).

Action
Security
Price
Quantity
Amount
Buy
EV
$31.49
118
3715

This purchase increases my forward annual dividends by $125.08.


About Eaton Vance

You can read more about this Asset Management company here: http://www.wikinvest.com/stock/Eaton_Vance_(EV)


EV 12/2015
Area
Criteria
CheckList
Comment
Quality Company
Dividend Growth
>5 years
Yes
34 Years
ROE/Op Margin
Stable
Yes
Stable
Long term Avg Growth
Stable
Yes
Stable
FCF over Dividends
Yes
Yes in general except 2014 and TTM
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 1.66
Interest Coverage 11.62
Debt to Equity 136.57
M* & S&P Stars
> 3 Stars for both
Yes
M* 4 Stars
S&P CapIQ 4 Stars
Payout Ratio
<60%
Yes
48%
Dividend Growth
& Yield
Dividend Yield
>3%
Yes
3.39%
Dividend Growth
>5%
Yes
7.16%
Chowder
>12%
No
10.56%
Valuation
Yield/Avg Yield
>1.1
Yes
1.35
Dividend Yield Theory Mid Point
Below Mid Point
Yes
Mid Point 44.01
Low Point 31
P/E
Below Mid Point
Yes
Median 17.70 Current 16.27 Forward 11.61
DRRM
~10%
Yes
Assuming 4% growth; projected return=9.93%
M* Estimate
<M* est
Yes
M* 38
S&P Estimate
< S&P cap IQ est
Yes
S&P Cap IQ 40
Note: Data from Gurufocus, Google Finance, Yahoo Finance, M*, Vuru

KISS Criteria

The business model of asset managers is pretty simple. The ETFs and Mutual Funds that they manage are tied with annual fees. For most of the public, asset managers are the gateway to the market. Once an asset is held, it is normally pretty sticky - meaning that we tend not to move the funds around. However, fluctuations in interest rates can be double edged sword.

Yield Theory



Steady ROE and Operating Margin
Steady ROIC

Steady Payout Ratio


Steady Revenue and EPS growth


But watch the FCF


Fair Price Calculation

I use the dividend yield theory, PE analysis and DDRM for fair price calculation. Based on these methods, I estimate the fair price to be around $36. Therefore, I believe EV is trading below fair value.

Conclusion

The FCF is the biggest concern here. No FCF → No Dividends. That’s the thing to look out for.
The growth for EV is pretty minimal (3 Yr EPS growth is around 3%), but for a Dividend Champ, I am okay with a less than stellar growth. The dividend yield is relatively high compared with the historical yield. Since this my 401k account, I am happy to just let this one sit there and (slowly) grow over time. The fair price value is also very attractive at this time. Of course, it can go even lower or it can rebound - nobody knows. I’ll monitor the FCF situation going forward.

That's it for now! What do you think of EV?

D4s

4 comments:

  1. Great buy...not a popular stock but EV is a stock you can keep around for years to come! A 3%+ yield with 34 years of dividend increases and a payout ratio in the low 40s, what's not to love. :)

    Keep it up my friend. Best wishes and continued success!! AFFJ

    ReplyDelete
    Replies
    1. Thanks AFFJ. Yes, it is not too popular. TROW is the crowd favorite - but for me I already have a large position in TROW in my taxable account. The dividends related metrics are very good for EV, but I need to watch their FCF. Another thing is that AUMs have been hammered with large outflows.
      D4s

      Delete
  2. Hey Div Son,

    I would agree that it's good value. I have it as the 2nd highest scoring dividend stock in the Financial Sector this week. Solid Dividend, Growth, and Value right now.

    ReplyDelete
    Replies
    1. Thanks Div Chimp. It is definitely good value, but we will see if this e ds up being a good investment. Short term - probably no, but long term, i think it is okay.
      Thanks fir your input - appreciate it!
      D4s

      Delete