Category Archives: Dividend Achiever Watch List

It was another record breaking week for the market as the bulls continued to march forward. With the Dow Jones Industrial Average and the Dow Jones Transportation Average reaching an all-time highs, there was a lot of talk about Dow Theory. Our team has studied Dow Theory in finer detail than most and would urge all readers to review our latest commentary titled Dow Theory: Myth & Fact. We would not encourage those on the sideline to jump into the market now but here are 18 companies to consider if one choose to do so.

Watch List Review

We mentioned this before and will reiterate again that one shouldn't rush into the market at its all-time high. Recently, our team took a sizable position in Coca-Cola (KO) which is trading at less than 5% above its yearly low. The most recent headline is the change at the top with the current CEO set to step down next year. Perhaps this is a good/bad thing, we do not know. Our action stems from our assessment that downside risk are minimal at the current price. The dividend yield of 3.3% is also enticing for long term investors.

Our team ran some risk-reward profiles for Kimberly-Clark (KMB), Hormel Foods (HRL), Nike (NKE), and VF Corp (VFC) . We are cautious on these companies currently.

There is one company that would be interesting to dive into. It is DENTSPLY International (XRAY). This company is the world's largest manufacturer of professional dental products. The company consistently performed well with an average ROE of 15% since 1988. Dividend yield is negligible now but the company could return more to shareholders in the future.

Disclaimer On our current list, we excluded companies that have no earnings. Stocks that appear on our watch lists are not recommendations to buy. Instead, they are the starting point for doing your research and determining the best company to buy. Ideally, a stock that is purchased from this list is done after a considerable decline in the price and extensive due diligence. Our view is to embrace the worse case scenario prior to investing. It is important to place these companies on your own watch list so that when the opportunity arises, you can purchase them with a greater margin of safety. It is our expectation that, at the most, only 1/3 of the companies that are part of our list will outperform the market over a one-year period.

Top Five Watch List Performance Review

In our ongoing review of the NLO Dividend Watch List, we have taken the top five stocks on our list from November 6, 2015 and have checked the performance one year later. The top five companies on that list can be seen in the table below.

Prior Year Performance Review

The average gain for the top five companies was +11.10% compared to the market performance which was virtually flat. The largest gain came from Questar (STR) which gained +31.60% as a result of a take over from Dominion Resources (D). The agreement was for a $25 cash per share while Dominion assume any outstanding debt.

We spoke briefly about IBM (IBM) as well. Because shares hit 52-week low for three straight years, we thought it was proper to start looking at IBM. Below is an excerpt from last year.

We believe it is a good time to start considering IBM as part of a long-term holding. The company continues to have Warren Buffett's support. The company has a 10% earnings yield and is expected to rise with 2016 expected earnings growth. On October 30th, we modeled IBM's speed resistance line with downside risk to $100 and possible upside to $160.

Shares of IBM rose +10% and after potentially reaching its bottom.

U.S. Dividend Watch List: November 4, 2016

It was a rough week for the bulls as the market fell 2%. This is the last week until the election thus we're not surprised by the volatility. However, it will be interesting to see where we stand at the end of next week. For now, here are 43 companies to ponder about.

Continue reading →

Previous Year Performance Review

In our ongoing review of the NLO Dividend Watch List, we have taken the top five stocks on our list from October 16, 2015 and have checked the performance one year later. The top five companies on that list can be seen in the table below.

The average gain for the top five companies was +16.20% which outperformed the market by a wide margin. The S&P 500 gained less than +5% over the same time frame. the best performer was a farm equipment supplier, Lindsay Corp (LNN). The worst performer was State Street (STT) which was virtually flat. Luckily, our assessment of State Street was not far off from reality. The shares of STT closed the week at $69 when we stated that valuation, based on Value Line Investment Survey, was $71. Below is an excerpt from last year's article.

"Value Line Investment Survey estimates that the company's fair value is at 13x EPS. Applying current estimate of $5.47 for 2016 and we get to $71."

Another company we mentioned last year was Wal-Mart (WMT). Once again, we were lucky enough to have assessed the situation correctly. However, our inaction on the thesis is something we regretted. Below is an excerpt from last year's article.

"Our valuation model suggests that WMT shares below $65 is highly worth considering. However, potential investors should question if Wal-Mart will be around 10 years from now. Would or could Wal-Mart be the next Montgomery Ward, Sears or Woolworths?"

One stock where our assessment didn't quite pan out was Nordstorm (JWN). Our valuation model, at the time, placed fair value at $73 which never came to fruition and is 37% above the current level. On the flip side, we pointed the reader to the possible downside of $35 which we believe is a prudent thing to consider.

U.S. Dividend Watch List: October 14, 2016

Our work of tracking dividend paying company continued this week with 32 companies on our list. Continue reading →

The stock market continues to trade sideways with low volume. The S&P 500 ended the week down -0.6% and the trading range is compressing. Another market indicator, the Dow Jones Transportation Average, appears to be on the verge of breaking 8,100 which has been the resistance all through the year. We'll continue to operate under the bull market assumption and use our dividend watch list as our starting point. Continue reading →

It was another good week for the bulls as the S&P 500 rose more than +1%. As such, the year-to-date gain on the index sits slightly below +6%. This bull market continues to drag along and the only thing left is to break the all-time high back in August 2016. For investors looking for quality companies and a good margin of safety, please review our watch list below. Continue reading →

The S&P 500 lost nearly -2% for the week. While the drop on Friday appears to be dramatic (at -2.43%), the market is only about 3% off the all-time high. This is a great opportunity, in our view, to start building your personal watch list. Below are 17 companies on our dividend watch list. Continue reading →

Previous Year Performance Review

In our ongoing review of the NLO Dividend Watch List, we have taken the top five stocks on our list from August 28, 2015 and have checked the performance one year later. The top five companies on that list can be seen in the table below.

Our average gain from the top five companies was 8.7%. The biggest gain came from Valspar (VAL) (+42%) which received a take over bid from Sherwin-Williams. The biggest decline came from Hyster-Yale Materials (HY). Although we view Hyster-Yale as a company with strong balance sheet, we expected shares to trade lower as expectation were lowered. Below is an excerpt from last year.

Statistically, the HY has decent fundamentals. The company returns 6.7% on its capital and 19% on equity invested. With total cash on hand of $99 million, $54 million in total debt, and $72 million in free cash flow, the company would likely survive the next recession with a strong balance sheet. The street is expecting profit to rise 15% but we'll suspect that a revision downward will occur in the weeks to come and possibly drive shares even lower. Because of the strong balance sheet, further analysis of this company is highly recommended.

U.S. Dividend Watch List: August 26, 2016

The S&P 500 lost 0.7% for the week but remain close to its all-time high. At the end of the week, there are 15 companies on our watch list. Continue reading →

It was another strong week for the market and the continued to make new all-time high. The average was up 0.43% for the week and the Dow gained 0.6%. At the end of the week, there are 10 companies on our watch list. Continue reading →

Previous Year Performance Review

In our ongoing review of the NLO Dividend Watch List, we have taken the top five stocks on our list from July 24, 2015 and have checked the performance one year later. The top five companies on that list can be seen in the table below.

The average gain of the top five companies was exceptional. Average price gained 17.8% with Airgas (ARG) leading the way with 44.6%. Air Liquide announced an acquisition of Air Gas in mid November. We didn't elaborate more on Airgas and in many ways, we wished we did. However, we did touched upon Intel (INTC) and Lincoln Electric (LECO). Below are excerpt from prior year list.

If we look at the current fundamental figure, Intel (INTC) fell to $28 and has dividend of 3.4% which the company has no problem sustaining. Multiple of 12 appears to be low but one should expect the analysts to revise their projection down and bring 2016 EPS estimate down. We guess that F P/E would sit at 15 by the end of next year. As such, shares accumulation at current level is very enticing but with expectation that another 15-20% downside risk is highly likely and a second or third purchase will be needed.

The company (Lincoln Electric) has relatively high profit margin at 10%, return of equity of nearly 20%. Lincoln has $290M in cash, total debt of $170M, and leverage free cash flow of $375M. Based on this information, it's fair to say that the company has strong balance sheet and one shouldn't worry about the debt payment. Dividend payment of $1.16 equate to 2% yield and 30% payout ensure that dividend payout will remain certain. Back in late 2014, the company increase its payout by 26%. While that level of increase will not be likely in the year to come, we speculate that a double growth in dividend would still be likely. Income investor willing to build position now, may want to start researching the story of Lincoln and get comfortable with its tie to China.

We hope that our ongoing review of our prior work serve to benefit us and our readers.

U.S. Dividend Watch List: July 22, 2016

It was another good week for the bull as equity continued to progress higher. The S&P reached another all-time high and ended the week up 0.6%. As our name suggested, we are not one to recommend adding new capital when equity is at the high. The mantra of "buy high and sell higher" does not fit our risk profile so be advice when putting new capital to work at this level. Below are 7 companies appearing on our dividend watch list. Continue reading →

Previous Year Performance Review

In our ongoing review of the NLO Dividend Watch List, we have taken the top five stocks on our list from July 10, 2015 and have checked the performance one year later. The top five companies on that list can be seen in the table below.

The average return of the top five companies was below our expectation with a loss of 3.2%. The market on the opposite end gained more than 2%. Largest decline came from Murphy Oil (MUR)

which was hit hard by the decline in oil price. Back in 2014, Murphy earned more than $900M in net income but saw that figured sink to nearly $2.4B in losses. The best performer was McGrath RentCorp (MGRC) which provide modular buildings for rent. While net earning declined year-over-year, investor paid more for the company and pushed the earning multiple from 16 to 19. As such, the stock rose by 8%. Continue reading →

Previous Year Performance Review

In our ongoing review of the NLO Dividend Watch List, we have taken the top five stocks on our list from June 26, 2015 and have checked the performance one year later. The top five companies on that list can be seen in the table below.

The average return of our the top five companies exceeded the market's performance by a good margin. The best price performance came from a utility company, PP&L (PPL). The search for safety and income was likely the main driver. The worst performer was Norfolk Southern (NSC) which lost 7% of its value.

We touched on Wal-Mart (WMT) briefly in our review. The stock was trading at $72 but dropped as low as $56. We didn't provide any downside target which could have been beneficial because the stock has traded back to $72, a +28% gain from the low. While we mentioned that a rise to $90 isn't likely anytime soon, a rise from the mid-$50s to $70s isn't far fetched. Technically speaking, the stock may have put in the low at $56. Any buying from this point may use the 150 or 200 day moving average as a stop loss.

U.S. Dividend Watch List: June 24, 2016

It was a wild week for the market as Brexit became a reality. The market fell -3.6% on Friday and closed the week -1.6% lower. Our team believes Brexit is a non-event for long-term equity holders. The world will not end so one should use this as an opportunity to build a basket of companies for the long run.  As an example, we are not aware of Nordstrom (JWN) having business any presence in England. Yet the stock was lowered by nearly 3% on Friday. Below are 29 companies on our watch list. Continue reading →

Previous Year Performance Review

In our ongoing review of the NLO Dividend Watch List, we have taken the top five stocks on our list from May 29, 2015 and have checked the performance one year later. The top five companies on that list can be seen in the table below.

The average gain for the top 5 companies slightly exceeded the market. The best performer was Questar (STR) and the largest decline came from Murphy Oil (MUR). We started our review with Procter & Gamble (PG) which gained +6.5% excluding the dividend. It's no secret that Procter & Gamble is a blue-chip name. Our commentary stated that downside risk was limited and research should be initiated at currently level. It's too bad that we didn't heed our own advice on this one.

Last year, Murphy Oil (MUR) was trading at its yearly low with a 3.30% dividend yield. When we wrote about Murphy last year, oil was trading around $60. However, the price tanked and hit a low at $26. The recent rebound brought the price back to $48 but remains more than -20% below where we were a year ago. Our assessment that oil price were closer to the bottom at the time was extremely wrong. One key thing to note is that Murphy didn't cut their dividend payout and as such, their current dividend yield is north of 5%. Despite the fact that Murphy can sustain their dividend, shares should be view as speculative given the negative net income outlook.

Wal-Mart (WMT) was trading just north of $73 and our team believed that if shares could hold above this level AND continue to raise thier dividend, it would be worth considering. One of the two criteria came to fruition when board of director approved a dividend hike from $0.49 to $0.50. Despite that, the company reported a dismal third quarter last year and the techinicals broke down which took the shares down as low as $56.30.

U.S. Dividend Watch List: June 3, 2016

The conventional wisdom of sell in May and go away didn't quite pan out. S&P 500 rose more than +2%. At the end of the week, our watch list contains 15 companies. Continue reading →

Performance Review

In our ongoing review of the NLO Dividend Watch List, we have taken the top five stocks on our list from May 15, 2015 and have checked the performance one year later. The top five companies on that list can be seen in the table below.

Watch List Review

The average gain from the top five companies was satisfactory. The average gain of 6.6% far exceed the decline in the Dow Jones Industrial and S&P 500. Black Hills (BKH) was the biggest contributor to the success. The South Dakota utility company earning was virtually flat for the year. We are not quite sure what driver pushed the stock higher by more than 25%. The only thing we can think of is the search for yield. Similarly, Otter Tail (OTTR), experienced similar rise in share price. As negative yield spread and the search for income continue, utility sector will be the sector which institutions turn to. This is only our thesis but one can look at Dow Jones Utility Average for confirmation. The index rose 14% while the Industrial fell 3.6%.

The biggest drag to the top five came from Norfolk Southern (NSC) which lost nearly 12% for the year. When shares were trading at $97 last year, we pointed that Value Line estimated fair value of $90 which turned out to be a wise call. Operating in rail industry can be profitable because of the oligopoly nature in the industry. However, it is capital intensive and can be very cyclical. The slow down in the energy sector has a large affect on the rail business.

Tiffany Co. (TIF) was one name we highlighted and took position. The purchase didn't pan out as well as we'd hope for. Originally when we purchased the stock in late April of 2015, shares were trading in the mid 80s. It quickly rose to $95 at the end of July before plunging to the current level. The thesis for this purchase is the brand value and double digit return on equity. Those factors remain in tact and we are evaluating whether additional position should be taken at this level.

U.S. Dividend Watch List: May 13, 2016

It was another volatile week with the S&P rose above 2,080 but closed the week below 2,050. The index lost 0.5% for the week and is virtually flat for the year. Weakness in the market is providing long term investor with more companies to comb through. Below are 24 companies on our dividend watch list for the week. Continue reading →

Performance Review

In our ongoing review of the NLO Dividend Watch List, we have taken the top five stocks on our list from April 24, 2015 and have checked the performance one year later. The top five companies on that list can be seen in the table below.

Watch List Review

The biggest gain came from a company unfamiliar to us, Sanderson Farms (SAFM). A year ago we said that this is a new company which we had no exposure to prior to the watch list. This small cap producer of poultry products had net earnings fall by -42% and yet the stock gained +15%! While one may view this as a disconnect in the fundamentals, another could argue that such expectations were baked into the price. When we published the list last year, shares were trading at $76 with projected net income of $7.05 which brings forward P/E to just 10x. Such low multiple imply that any miscalculation in the analysts' estimate (to the downside) would result in a strong recovery in share price. We believe this was the case with Sanderson Farms.

We wrote a quick note on Gorman-Rupp (GRC), which etched out a modest gain of +3%. However, that gain wasn't without some volatility. When we published the list, the stock was trading at $28. The shares traded below $20 in August (hit the low of $18.14 on August 22 but closed above $22). The reversal came the same day and shares traded as high as $32. We stated that shares were worth considering at such level but didn't have complete conviction over the name. However, if one was able to pick up shares on a two part trade, one would have done quite well within one year.

U.S Dividend Watch List: April 8, 2016

It was another strong week for the market as the S&P 500 rose +0.53% pushing the YTD gain at +2.3%. Because of that, there are only 9 companies on our watch list this week. We are not inclined to put new money to work at this point. However, the financial sector is appealing at the moment and any new money needs to be able to generate relatively safe income. Continue reading →