My High Dividend Stocks Blog

My High Dividend Stocks
This is my high dividend stocks site where I help site members find high dividend stocks with earning power and strong balance sheets.

Are these two oil tanker companies high dividend stocks?

If you use Google Finance’s basic stock screener to find high dividend stocks, then you might have noticed two oil tanker stocks that appear to be high yielders.  Frontline (FRO) and Teekay Tankers (TNK) appear to yield 7.7% and 11.59% respectively.  But this really isn’t the case.  I have taken a cursory look at both of these stocks and now I will share what I found with you.

Frontline (FRO)  POSSIBLE INVESTMENT at this time, but meager dividend now.

Market price: $24.08

Total shares: 77.86 M

Dividend yield: according to google finance 7.7%, but its computations can be unreliable when a company lowers its dividend.  Frontline cut its dividend to $0.10 per quarter.  The last four dividend payments were: $0.25, $0.75, $0.75, $0.25.  I think the estimated yield is probably more like 1.6% ($0.10 x 4 = $0.40; $0.40/$24.08 = 0.0166 or 1.6%).

            EPS       Net inc.             Adj. EPS

2006     $6.90    $519 M              $6.63

2007     $7.62    $570 M              $7.32

2008     $9.14    $699 M              $8.98

2009     $1.32    $103 M              $1.32

2010     $2.07    $161 M              $2.06

The 5 yr. average earnings were $5.26 per share.  12 times 5 yr. average earnings equals $63.12.  20 times 5 yr. average earnings equals $105.20.  The market price of Frontline is only $24.08.  It is trading at only 4.6 time its 5 yr. average earnings, but tanker rental prices are down over 80% from 2006-2008.  Tanker prices will not rebound to 2006-2008 prices.  There are too many tankers with no cargo due to the global recession.

If we look at the 2 year average instead, then a different valuation becomes clear.  The 2 yr. average earnings are $1.70 per share.  12 times 2 yr. average earnings equals $20.40.  20 time 2 yr. average earnings equals $34.00.  Frontline is trading at 17 times its 2 yr. average earnings.

Frontline appears to be close to a possible value purchase below $20.40.  I would wait to see what their earnings look like in 1Q and 2Q in 2011.  I haven’t really analyzed its dividend record, earnings and balance sheet.  I’ll take a look at it if the price drops below $20.40.

Teekay Tankers (TNK) SPECULATIVE HIGH YIELDER now

Market price: $10.75

Total shares: 77.86 M

Dividend yield: according to google finance 11.59%, but its computations can be unreliable when a company lowers its dividend.  Teekay Tankers has cut its dividend to $0.22 per quarter.  The last four dividend payments were: $0.31, $0.34, $0.37, $0.26.  I think the estimated yield is probably more like 8.2% ($0.22 x 4 = $0.88; $0.88/$10.75 = 0.0818 or 8.2%).

Teekay has more than double the number of outstanding shares in 2010.  This highlights the importance of adjusting reported EPS for changes in capitalization.

            EPS       Net inc.             Adj. EPS

2006     $2.68    $40.153 M         $0.66

2007     $2.76    $40.551 M         $0.67

2008     $2.03    $58.067 M         $0.96

2009     $1.28    $38.934 M         $0.64

2010     $0.37    $14.662 M         $0.24

The 5 yr. average earnings were $0.63 per share.  12 times 5 yr. average earnings equals $7.56.  20 times 5 yr. average earnings equals $12.60.  The market price of Frontline is only $10.75.  It is trading at 17 times its 5 yr. average earnings, but tanker rental prices are down over 80% from 2006-2008.  Tanker prices will not rebound to 2006-2008 prices.  There are too many tankers with no cargo due to the global recession.

If we look at the 2 year average instead, then a different valuation becomes clear.  The 2 yr. average earnings are $0.44 per share.  12 times 2 yr. average earnings equals $5.28.  20 time 2 yr. average earnings equals $8.80.  Teekay appears to be a speculative purchase above $8.80.  It is currently trading at 24.4 times it 2 yr. average earnings.

I would wait to see what their earnings look like in 1Q and 2Q in 2011.  I haven’t really analyzed its dividend record, earnings and balance sheet.  I’ll take a look at it if the price drops below 20 times its 2 yr. average earning of $8.80.

Jason Brizic
Torch Technologies, Inc.
Ground Test Analyst
MDA/DEJ (Engineering Test Analysis)
(719) 721-8359
jason.brizic.ctr@mda.mil
jason.brizic.ctr@mda.smil.mil

“Freedom consists of a lack of desire to control others” – Harry Browne

Should you buy these "High Yielders to Own for Decades" at today's prices? ((Philip Morris Intl., PM, McDonald's, MCD, Vodafone, VOD, Exelon, EXC, Plum Creek Timber, PCL, National Grid, NGG, high dividend stocks, stock that pay small dividends))

I read a Motley Fool article by Jim Royal yesterday titled “The High-Yield Dividends to Own for Decades”.  I wondered which of these might meet my criteria for investment.  The author listed several stocks that yield between 3.3% and 6.6%:  Philip Morris Intl. (PM), McDonald’s (MCD), Vodafone (VOD), Exelon (EXC), Plum Creek Timber (PCL), National Grid (NGG).  National Grid is the only stock with a high dividend yield over 6%.

http://www.fool.com/investing/general/2011/03/24/the-high-yield-dividends-to-own-for-decades.aspx

A purchase of common stock above 20 times average earnings is speculative.  You are relying heavily on future earnings growth to make the stock attractive to other investors who haven’t purchased it yet.  It is best to purchase a common stock with a high dividend at under 12 times average earnings.  I will label stocks with market prices below 12 times earnings as possible value stocks.  I will label common stocks with a market price between 12 and 20 times average earnings as a possible investment.

Philip Morris Intl. (PM)          POSSIBLE INVESTMENT

Shares today: 1,800 M

Market price: $64.88

Dividend yield: ~4.0%

Year    EPS reported   Net inc. available        Adjusted EPS

2006    $2.91               $6,130 M                     $3.41

2007    $2.86               $6,038 M                     $3.38

2008    $3.31               $6,890 M                     $3.83

2009    $3.24               $6,342 M                     $3.52

2010    $3.92               $7,259 M                     $4.03

5 yr. average earnings $3.63.  12 times average earnings equals $43.56.  20 times average earnings equals $72.60.  Philip Morris Intl. (PM) is currently trading at 17.8 times its 5 yr. average earnings.  It is getting close to 20 times average earnings which would be speculative.

McDonald’s (MCD)   SPECULATIVE NOW

Shares today: 1,040 M

Market price: $76.35

Dividend yield: ~3.3%

Year    EPS reported   Net inc. available        Adjusted EPS

2006    $2.83               $3,544 M                     $3.41

2007    $1.98               $2,395 M                     $2.30

2008    $3.76               $4,313 M                     $4.15

2009    $4.11               $4,551 M                     $4.38

2010    $4.58               $4,946 M                     $4.76

5 yr. average earnings $3.80.  12 times average earnings equals $45.60.  20 times average earnings equals $76.00.  McDonald’s is currently trading at 20.1 times its 5 yr. average earnings.  That is speculative.

Vodafone (VOD)       SPECULATIVE NOW

Shares today: 5,160 M

Market price: $28.95

Dividend yield: ~4.8%

Year    EPS reported   Net inc. available        Adjusted EPS

2006    ($3.50)             ($21,976) M                ($4.26)

2007    ($0.98)             ($5,446) M                  ($1.06)

2008    $1.25               $6,756 M                     $1.31

2009    $0.58               $3,078 M                     $0.60

2010    $1.64               $8,645 M                     $1.68

5 yr. average earnings ($0.35).  Vodafone has an average negative earnings due to losses in 2006 and 2007.  I know that the company took an impairment charge of 23.5 B pounds in 2006 to their goodwill, but I don’t know what lead to the large loss in 2007. 

Let’s assume for a moment that Vodafone earns an estimated $1.68 in 2011.  In that case, its new 5 year average earnings would increase to $0.84.  12 times average earnings (2007-2011E) equals $10.08.  20 times average earnings (2007-2011E) equals $16.80.  Vodafone is currently trading at 34.5 times its 5 yr. average earnings (assuming that 2011 repeats the same earnings as 2010).  This is very speculative.

Exelon (EXC) POSSIBLE VALUE

Shares today: 662.21 M

Market price: $41.06

Dividend yield: ~5.1%

Year    EPS reported   Net inc. available        Adjusted EPS

2006    $2.35               $1,592 M                     $2.40

2007    $4.05               $2,736 M                     $4.13

2008    $4.13               $2,737 M                     $4.40

2009    $4.09               $2,707 M                     $4.35

2010    $3.87               $2,563 M                     $4.12

5 yr. average earnings $3.88.  12 times average earnings equals $46.56.  20 times average earnings equals $77.60.  I don’t know why Exelon’s 2006 earnings were nearly half of the amounts of the next four years (2007-2010).  Exelon is currently trading at 10.6 times its 5 yr. average earnings.  This look like a value to me.  Detailed analysis is still necessary to examine the dividend record, an in depth look at earning power, and a thorough review of its balance sheet.

Plum Creek Timber (PCL)      SPECULATIVE NOW

Shares today: 662.21 M

Market price: $44.00

Dividend yield: ~4.0%

Year    EPS reported   Net inc. available        Adjusted EPS

2006    $1.75               $317 M                        $1.96

2007    $1.61               $282 M                        $1.74

2008    $1.37               $233 M                        $1.44

2009    $1.44               $236 M                        $1.46

2010    $1.31               $213 M                        $1.32

5 yr. average earnings $1.58.  12 times average earnings equals $18.96.  20 times average earnings equals $31.60.  Plum Creek Timber is currently selling at 27.8 times the 5yr. average earnings.  This is speculative.

National Grid (NGG) POSSIBLE INVESTMENT

Shares today: 701.62 M

Market price: $48.56

Dividend yield: ~6.6%

Year    EPS reported   Net inc. available        Adjusted EPS

2006    $6.75               $3,848 M                     $5.48

2007    $2.54               $1,394 M                     $1.99

2008    $6.08               $3,190 M                     $4.55

2009    $1.88               $944 M                        $1.35

2010    $2.79               $1,386 M                     $1.98

5 yr. average earnings $3.07.  12 times average earnings equals $36.84.  20 times average earnings equals $61.40.  National Grid is currently selling at 15.8 times the 5yr. average earnings.  This stock warrants further investigation as an investment.  However, these earnings are very volatile.  The reason for the volatility must be understood before investment.

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Buying Seadrill (SDRL) today would be speculative.

Morningstar initiated credit coverage of Seadrill (SDRL) today with an issuer rating of B.  Morningstar is concerned that Seadrill will not be able to pay for existing debt interest, add additional debt interest from planned rig purchases, and maintain its high dividend.  I share their concern.

I haven’t performed the methodical, deep analysis on Seadrill yet, but this information is not encouraging.  I believe that Seadrill common stock is too expensive to be bought as an investment right now.  Let me explain.

I didn’t compute Seadrill’s 2010 earnings in my last article that used Seadrill as one of the examples of investment and speculative stocks: http://bit.ly/SDRLexample .  I only computed the EPS through 2009.  I was attempting to compute Seadrill’s average earnings over 5 years, but Morningstar wouldn’t display the 2010 earnings.  However, the quarterly filings were available and I have since computed the 2010 EPS.

The following table is computed by using the net income available for common shares divided by current quantity of common shares (380.86 M):

            EPS (adjusted for changes in capitalization)

2006    $0.56

2007    $1.32

2008    ($0.43)

2009    $3.31

2010    $3.08

Seadrill’s five year average earnings (2006-2010) were $1.57 per share.  I recommend that you don’t pay more than 20 times the 5 year average earnings for any common stock to make an investment.  $1.57 x 20 = $31.40 per share is the upper limit for an investment basis.  Seadrill’s current market price is $37.21; therefore, Seadrill would qualify a speculative purchase at today’s market price.

I would consider buying Seadrill for under twelve times the 5 year average earnings.  $1.57 x 12 = $18.84 per share for a value investment basis.  SDRL last traded for $18.84 back in September 2009.

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New Credit Rating: Seadrill

by Morningstar Credit Committee | 04 Apr 11 

Morningstar is initiating credit coverage of Seadrill SDRL with an issuer rating of B. Seadrill is a leading offshore drilling contractor for the oil and gas industry. Our rating reflects the firm's aggressive business strategy of fully debt financing its rig construction program, stretched credit metrics, and aggressive dividend policy.

At the end of 2010, Seadrill had about $9.2 billion in total debt versus about $1.4 billion in available cash and marketable securities and $1 billion in investments. The debt is broken into $5.2 billion in credit facilities and debt that is secured by Seadrill's rigs, $1.8 billion in Ship Finance sales and leaseback transactions, and $2.2 billion in bonds, convertible bonds, and credit facilities supported by restricted cash. In early 2011, Seadrill bought two deep-water rigs for $1.2 billion, financed using bank debt. We estimate that at the end of 2011, Seadrill's EBITDA/interest ratio will be around 5.2 times, its debt/capital will be around 0.73, and its debt/EBITDA will be 4.7 times. Despite these stretched credit metrics, Seadrill currently pays out more than $1.0 billion in dividends annually.

In addition, Seadrill faces near-constant financing challenges. The majority of Seadrill's debt matures in five to seven years, and we estimate it has $5.2 billion coming due in the next three years. We do not think Seadrill's cash from operations will be enough for its needs, given its already announced rig construction spending of $4.6 billion. We estimate Seadrill will generate between $1.9 billion and $2.3 billion in operating cash flow annually over the next three years, or about $5.7 billion in the aggregate. Therefore, Seadrill needs to fill a financing gap of about $4.1 billion.

From a risk perspective, Seadrill's financial leverage has amplified its exposure to the inherent cyclicality of the contract drilling industry. Market day rates are volatile and outside drillers' control, which contributes to significant swings in profitability on a short-term basis. In addition, explosions, hurricanes, and government expropriation introduce tail risk to the firm's operations.

Link to original article: http://torontostar.morningstar.ca/globalhome/industry/news.asp?articleid=375748

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Beware the Demon of Inflation.

The Mogambo Guru brings you some horrifying facts concerning price increases reported by several groups that tend to under-report such things.  You need solid high dividend stocks in your stock portfolio because the increase in consumer goods prices are higher than reported.  To get a better understanding of why read this article: http://bit.ly/CPILies
 
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Apr 1, 2011
Beware the Demon of Inflation
from The Daily Reckoning by The Mogambo Guru
The 5-Minute Forecast came to me in an email with the subject line reading “5-Minute Forecast – Everybody Panic.”

Naturally, as a guy who is always on the verge of panic because of the fact that all the monstrously excessive amounts of money that the Federal Reserve is creating will cause inflation in prices, this affected me greatly.

I assume this recommendation to panic is because the monetary base shot up by a whopping $90 billion last week as the Federal Reserve continues its insane over-creation of money so that it can monetize, through the year, a couple of trillion dollars or so in government deficit-spending over the next year, so as to try, try, try to spend our way out of bankrupting debt by creating more debt, to create more money for the government to borrow and spend, all of which will cause prices to rise, rise, rise, which I interpret to mean, “We’re Freaking Doomed (WFD)!”

Well, I was half right in my original conclusions, in that they noted that “Easy money is already having its affect in the US Wholesale prices, which trotted upward in December and January, reached a full gallop in February,” which is when “The producer price index (PPI) rose 1.6%.”

Gulp! This is the rise in prices in one month! And annualized, The 5 calculates it to be 19.2% inflation in prices!

And the bad news is that a 19.2% annual inflation is “for finished goods. If you move further back in the production chain, prices for crude goods rose 3.4% last month.”

My heart was racing at such horrific inflation news, and forcing myself not to start screaming, I instead concentrate on the positives involved here: they did not annualize a compounding 3.4% inflation, and gold and silver will be guaranteed to rise along with the general, roaring inflation, and they will rise even more with a Big Fat Kicker (BFK) from the general sense of panic in the economic/financial world when all those fiat-money chumps will be flooding, in a panic, into the relatively tiny gold and silver markets, bidding the prices of gold and silver to insane levels.

With a subsiding fear, I calmed down enough to read that they went on “And February was no fluke. PPI for crude goods has risen 20.7% over the last six months since February’s gain,” which is so easy to simplistically annualize by merely multiplying 20.7% inflation times 2 to get an annual inflation rate of 41.4% that I am, despite my best efforts, again in a full-fledged Mogambo State Of Panic (MSOP), feeling those familiar crushing pains in my chest and a racing, pounding heartbeat.

Like the kind of stabbing pains and numbness in my left arm I got when the Bureau of Labor Statistics (BLS) announced that the US consumer price index (CPI) rose 0.5% last month – which works out to inflation running at a fast 6% annual clip, and rising.

The Wall Street Journal reported it as, “Energy prices surged 3.4% during the month, while food prices jumped 0.6%.”

Without a soundtrack of kettledrums pounding “boom boom boom” and the sound of ravenous wolves howling close by to tip you off about the sense of terror here, you can still hardly repress a shudder when The Journal goes on, “Even though markets have cooled recently, the rise in commodity prices from recent months is expected to continue making its ways from producers to consumers.”

I love the next part, as it trots out some guy named Alan Levenson of T. Rowe Price saying, “If that holds, by summer this impulse toward higher monthly food-price gains should diminish somewhat,” which appears to mean that prices will keep rising, but not quite as fast for some reason that I cannot imagine, and this makes it OK.

And even with the prices of housing falling, the cost of home ownership (“measured as the cost of renting the home you own”) increased 0.6% y/o/y, which I assume means that although the value of houses is going down, water heaters still need replacing, the television needs updating and there is a leak in the roof over the kid’s head that she is whining about because the stain on the ceiling looks like a werewolf looking at her.

I reassuringly told her that it kind of looks like a werewolf, alright, but it’s better than resembling the horrible demon of inflation getting ready to eat us alive, gobbling the guts out of me, her, and everybody she loves, when prices rise so high because the evil Federal Reserve keeps creating more and more money to buy up government bonds so that the government can try to spend its way out of bankruptcy by going farther into bankruptcy.

“And besides,” I said, “Werewolves are mythical creatures, and don’t really exist, while the devouring demon of inflation is very, very real.”

So she said, “So it is better that it resembles a werewolf?”

I said, “Yes, it is! And even the horrible monster of inflation is easily defeated by merely buying gold and silver. So we are covered both ways, my little darling, so that neither werewolves nor the horrible Federal Reserve can harm us!”

That’s when I asked her, “Can you say ‘Whee! This investing stuff is easy!’”?

Reassured, she closed her eyes, her face radiant with a cute little smile as she said, in a voice almost a whisper, “Whee!” before she fell fast asleep.

The Mogambo Guru
for The Daily Reckoning
 
Link to original article: http://bit.ly/fl8CHD

Marc Faber says gold headed higher long term.

Swiss hedge fund manager, Marc Faber, says gold is going much high in the long run.  Central bankers around the world continue to print massive quantities of money.  All that money will be converted into the M1 measure of the money supply through the fractional reserve banking process.  I agree with him.  Therefore, you should have 20-30% of you net worth in precious metals.

I recommend that gold coins should make up 80% of your PMs and silver coins should make up the remaining 20%.

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INTERNATIONAL. Marc Faber the Swiss fund manager and Gloom Boom & Doom editor says it is a big error to print money because it rarely flows into the assets central banks aim to boost. He says more people have already sold their gold than have increased their positions and he doesn’t think gold is in a bubble.

Speaking from Mexico City to Matt Miller and Carol Massar on Bloomberg Television's "Street Smart" on Wednesday ahead of a speech titled "When everything else fails, policy makers can always be sure of immortality by making spectacular errors" Faber said: "A big error is to print money. I think it doesn't help in the long run. It can give a temporary boost to economic activity but it doesn't lead to sustained economic growth."

"In fact it creates a mispricing of assets and goods & services and has negative implications on the pricing mechanism," he added

Printing money is the easy part of it, knowing where it will flow to is trickier he noted, adding that money printing in the US hasn't flown into the assets the Federal Reserve wants to boost, namely housing. Instead it created other bubbles overseas and in commodities.

Does he expect further easing?

"For sure there will be QE3, but not right away", Faber said, suggesting the Fed would like to see a correction of up to 20% in equities and then" to have an excuse for QE3".

"My view is there will be QE3, QE4, QE5, QE6......until QE26, until the whole system breaks down," he said

Faber, who turned bearish shortly before the 2007-2009 bear market, says QE2 is fully discounted in the markets. He expects some seasonal strength in April, perhaps a new high, but then we will have a more "significant setback in May, June".

What would be the impact of the Fed stopping QE2 today on the market?

The market will go down,  however "the market is designed to go up and down. That is the purpose of having a market economy," he said.

He went on noting that the marginal impact of printing money diminishes, "so every times you need to print more money to push the markets higher".

Faber said the US economy is already out of control and he sees a need for every interest group in the US to make sacrifices.

In the latest edition of the Gloom Boom & Doom report he writes: A level-headed, knowledgeable, and intelligent American friend of mine (she has been buying gold for years) recently observed that, “Only when the American people insist that sound business practices and moral standards be brought back will we be able to give the people of this country a future.” Unfortunately, I believe that the ongoing moral decay among US politicians and the business elite, the irresponsible fiscal and monetary policies, the decline in educational standards and infrastructure, the trade and current account deficit, the weak US dollar, and the heavy- handed and ambiguous meddling in foreign affairs by US officials, are all pieces in a puzzle, which when assembled reads: Failed State.

Where would he suggest investors put their money at this point?

In general terms, Faber recommends real estate, equities, commodities and precious metals.

"An investor should have at least 25%-30% in precious metals," he suggested as he doesn't think the Fed will increase rates to a positive real rate.

Faber also warned precious metals could correct but remain poised to go much higher in the long run and suggested buying the dips.

"I think they [Precious Metals] could also correct," because the breakout in gold above the November-January high is not convincing, "but in the long run with Bernanke at the Fed and Mr. Obama maybe another six years at the White House, gold will go substantially higher," he said.

The price of spot gold for immediate delivery ended March at a new monthly-close record of US$1,439 per ounce at the London Fix.

Thursday saw the Spot Gold Price in Dollars complete its 9th quarterly gain in succession – the longest run since 1979 according to Bloomberg data.

Faber said the number of people owning gold is much lower than many believe.

"Calm down about everybody being long precious metals" he told the Bloomberg anchors. More people have already sold their gold than have increased their position.

"I don't think gold is in a bubble," he stressed.

In fact, "gold is very cheap in comparison to the money and the credit that has been created and in comparison to the size of financial assets in the world," Faber added.

The price of gold slumped 1.4% lunchtime Friday in London, falling back from its highest-ever monthly close as the Dollar jumped on news of stronger-than-expected US jobs hiring in March.

"What we have to see now is how gold fares in an environment of rising interest rates, where holding a non-yielding asset goes against you," reckons RBS commodity strategist Nick Moore, speaking to Reuters.

Note:  Dr Marc Faber was born in Zurich, Switzerland. He went to school in Geneva and Zurich and finished high school with the Matura. He studied Economics at the University of Zurich and, at the age of 24, obtained a PhD in Economics. Between 1970 and 1978, Dr Faber worked for White Weld & Co in New York, Zurich and Hong Kong.

Since 1973, he has lived in Asia. From 1978 to February 1990, he was the Managing Director of Drexel Burnham Lambert (HK). In June 1990, he set up his own business which acts as an investment advisor and fund manager.

In 2000 Faber decided to spend more time writing his newsletters as well as growing his advisory business. He moved back to his home in Chiang Mai, Thailand, maintaining only a small administrative office in Hong Kong.

Dr Faber publishes a widely read monthly investment newsletter 'The Gloom Boom & Doom Report'  which highlights unusual investment opportunities, and is the author of several books.

Link to original article: http://www.bi-me.com/main.php?id=51976&t=1&cg=4 

American Capital Agency Corp. (AGNC) Downgraded by Zacks Investment Research to "Neutral".

I downgraded American Capital Agency Corp. (AGNC) a several months ago because it isn’t earning enough money to sustain the quarterly $1.40 dividend payment.  You can see in this downgrade from Zacks that the company only earned $1.26 last quarter.

Click here to see all my analysis on AGNC: http://www.myhighdividendstocks.com/category/high-dividend-stocks/american-capital-agency-corp

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Link to original article: http://www.americanbankingnews.com/2011/04/01/american-capital-agency-corp-agnc-downgraded-by-zacks-investment-research-to-neutral/#

American Capital Agency Corp. (AGNC) Downgraded by Zacks Investment Research to “Neutral”

April 1st, 2011 • View CommentsFiled Under • by ABMN Staff

Filed Under: Analysts DowngradesMarket NewsZacks

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Equities research analysts at Zacks Investment Research downgraded shares of American Capital Agency Corp. (NASDAQ: AGNC) from an “outperform” rating to a “neutral” rating in a research note to investors on Thursday. The analysts currently have a $30.00 price target on the stock.

Analyst Meenu Goyal wrote, “We are changing our long-term recommendation for American Capital from Outperform to Neutral as we anticipate it to perform in line with the broader market. American Capital focuses exclusively on fixed-rate agency securities guaranteed by the U.S. government, which limits its credit risks. American Capital is also among a selected group of companies who have increased its dividend during the economic crisis. The company paid a total of $364.0 million in dividends or $13.26 per share since its initial public offering in May 2008. However, increased volatility and deterioration in the broader residential mortgage and RMBS markets limits the upside potential of the company going forward. “

Separately, analysts at Keefe, Bruyette & Woods, Inc upgraded shares of American Capital Agency Corp. from a “market perform” rating to an “outperform” rating in a research note to investors on Friday, February 11st. Also, analysts at Deutsche Bank (NYSE: DB) raised their price target on shares of American Capital Agency Corp. from $28.00 to $30.00 in a research note to investors on Wednesday, February 9th. They now have a “hold” rating on the stock.

Shares of American Capital Agency Corp. traded down 0.75% during mid-day trading on Friday, hitting $28.9226. American Capital Agency Corp. has a 52 week low of $24.06 and a 52 week high of $30.68. The stock’s 50-day moving average is $29.43 and its 200-day moving average is $28.91. The company has a market cap of $2.654 billion and a price-to-earnings ratio of 3.69.

American Capital Agency Corp. last announced its quarterly results on Tuesday, February 8th. The company reported $1.26 earnings per share (EPS) for the previous quarter, beating the Thomson Reuters consensus estimate of $1.25 EPS by $0.01. During the same quarter in the prior year, the company posted $1.79 earnings per share. The company’s quarterly revenue was up 185.1% on a year-over-year basis. On average, analysts predict that American Capital Agency Corp. will post $0.00 EPS next quarter.

American Capital Agency Corp. (AGNC) is a real estate investment trust (REIT). AGNC earns income primarily from investing in residential mortgage pass-through securities and collateralized mortgage obligations. These investments consist of securities, for which the principal and interest payments are guaranteed by United States Government-sponsored entities, such as the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) or by a United States Government agency, such as the Government National Mortgage Association (Ginnie Mae). The Company is externally managed by American Capital Agency Management, LLC, a subsidiary of a wholly owned portfolio company of American Capital, Ltd.

For more information about Zacks Investment Research’s equity research offerings, visit Zacks.com.

TIP OF THE WEEK - An Extremely Useful Way to Examine 5 Years of a Company's Financials in Less Than Thirty Seconds.

An Extremely Useful Way to Examine 5 Years of a Company’s Financials in Less Than Thirty Seconds.

Jason Brizic

Apr. 1, 2011

You like to do your own investment analysis or you like to dig deeper than the articles you read on a company.  But you are frustrated with all the free investing services only showing the current financials or just three years.  You are a high dividend stock investor, so three years is just not good enough.  You want at least five years worth of financials without a lot of hassle. 

I’ll show you how to easily access five years worth of financials on any exchange listed stock for free and without registration.

You will be able to quickly view five years worth of income statements, balance sheets, and cash flow statements with Morningstar’s stock tool. 

Go to www.morningstar.com and type your desired stock ticker symbol into the Quote box at the top of the screen.  Then chose the Financials tab and you are there.  That was easy!

You can choose annual or quarterly views.  You can chose five years for free and ten years if you are a paid premium member.  The free info exceeds what I’ve seen on other sites like Google Finance, which only shows three years of financials.  Looking at five years of financials will put you ahead of many investors who are really just speculating.  You can even change the numbers to percentages in a single click.

Here are the financials for one of my favorite high dividend stocks, Safe Bulkers (SB):

http://financials.morningstar.com/income-statement/is.html?t=SB&region=USA&culture=en-US

For more tips, go here:

http://www.myhighdividendstocks.com/category/tip-of-the-week

Examples of Speculative and Investment Common Stocks You've Got to See.

The second edition of Security Analysis provided several examples of speculative and investment common stocks.  The examples are so illustrative, but they are from 1940.  I wanted to bring the text of this section of the book into this blog with examples from several of the stocks that I have blogged about on www.myhighdividendstocks.com .

I chose the following stocks for examples: Goldcorp (GG), Proctor & Gamble (PG), American Capital Agency Corp. (AGNC), Seadrill Limited (SDRL), Safe Bulkers (SB), and AT&T.  Let me tell you why I chose these stocks.  I wanted to also include Terra Nitrogen (TNH), but the results table would have been too unreadable.

Goldcorp (GG)  I used to own Goldcorp when it was priced in the high teens and twenties.  I wanted to revisit it because it is also in many gold mining stock funds such as FSAGX.  I currently own FSAGX in my 401(k) account and I’m considering selling it.  You will see why momentarily.

Proctor & Gamble (PG)  This stock is often written about in dividend aristocrat articles.  It pays a modest dividend and grows its dividend annually like clockwork.  Many people watch this dividend stock.

American Capital Agency Corp. (AGNC)  I’ve included it because I have written many articles on this ultra-high dividend stock.  I don’t like it because its earnings can’t support the current dividend payout.  It balance sheet is horrible like all financial institutions (e.g. banks).

Seadrill Limited (SDRL)  This stock turned up on one of my high dividend stock screens and warrants further investigation to determine if it is speculative or investment grade.

Safe Bulkers (SB)  I love this high dividend stock with earning power and a strong balance sheet.  You will see why in moments.

AT&T (T)  I pays almost a 6% dividend and it is and dividend aristocrat.  Many eyes are on this one so I want to know at what price is it a value buy.

* * * * * * *

Examples of Speculative and Investment Common Stocks.  Our definition of an investment basis for common-stock purchases is a variance with the Wall Street practice in respect to common stocks of high rating.  For such issues a price of considerably more than 20 times average earnings is held to be warranted, and furthermore these stocks are designated as “investment issues” regardless of the price at which they sell.  According to our view, the high prices paid for “the best common stocks” make these purchases essentially speculative, because they require future growth to justify them.  Hence common-stock investment operations, as we define them, will occupy a middle ground in the market, lying between low-price issues that are speculative because of doubtful quality and well-entrenched issues that are speculative, none the less, because of their high price.

* * * * * * *

Image001

There were three groups of examples in Security Analysis.  Group A were common stocks speculative in December 1938 because of their high price (figures were adjusted to reflect changes in capitalization).  The companies in group A were: General Electric, Coca Cola, and Johns-Manville.  Proctor & Gamble and AT&T sort of fit into the Group A category.

Group B were common stocks speculative in December 1938 because of their irregular record.  Group B in 1938 was comprised of the following companies: Goodyear Tire and Rubber, Simmons, and Youngstown Sheet and Tube.  American Capital Agency Corp., Seadrill Limited and Goldcorp are definitely Group B.  Goldcorp also has a poor divided and a high price.  AGNC is irregular with a high price.

Group C were common stocks meeting investment tests in December 1938 from the quantitative standpoint.  They included Adams-Millis, American Safety Razor, and J.J. Newberry.  I have never heard of any of these stocks.  The only stock in my example that makes this cut is Safe Bulkers.  This is why Safe Bulkers is in my best dividend stocks category.

* * * * * * *

Comments on the Various Groups.  The companies listed in Group A are representative of the so-called “first-grade” or “blue-chip” industrials, which were particularly favored in the great speculation of 1928-1929 and in the markets of ensuing years.  They are characterized by a strong financial position, by presumably excellent prospects and in most cases by relatively stable or growing earnings in the past.  The market price of the shares; however, was higher than would be justified by their average earnings.  In fact the profits of the best year in the 1929-1938 decade were less than 8% of the December 1938 market price.  It is also characteristic of such issues that they sell for enormous premiums above the actual capital invested.

            The companies analyzed in Group B are obviously speculative, because of great instability of their earning records.  They show varying relationships of market price to average earnings, maximum earnings, and asset values.

            The common stocks shown in Group C are examples of those which meet specific and quantitative tests of investment quality.  These tests include the following:

1.      The earnings have been reasonably stable, allowing for the tremendous fluctuations in business conditions during the ten-year period.

2.      The average earnings bear a satisfactory ratio to market price.

3.      The financial set-up is sufficiently conservative, and the working-capital position is strong.

Although we do not suggest that common stock bought for investment be required to show asset values equal to the price paid, it is non the less characteristic of Group C that, as a whole, they will not sell for a huge premium above the companies’ actual resources.

            Common-stock investment, as we envisage it, will confine itself to issues making exhibits of the kind illustrated by Group C.  But the actual purchase of any such issue must require also that the purchaser be satisfied in his own mind that the prospects of the enterprise are at least reasonably favorable.

* * * * * * *

Safe Bulkers is a dry bulk shipper with around sixteen ships rented out to various customers.  The dry bulk market suffering due to the global recession and a glut of ships built during the boom, but Safe Bulkers is well positioned to prosper in even that harsh environment.  Its prospects and the industries are good.

Subscribe today for free at www.myhighdividendstocks.com/feed to discover high dividend stocks with earning power and strong balance sheets.

Be seeing you!

Ignore the last post. Formatting was messed up.

The formatting of the table in the last post did not work.  I will repost the article tomorrow with the table as a picture.  Sorry for the mess up.

Be seeing you!

Examples of Speculative and Investment Common Stocks You've Got to See.

The second edition of Security Analysis provided several examples of speculative and investment common stocks.  The examples are so illustrative, but they are from 1940.  I wanted to bring the text of this section of the book into this blog with examples from several of the stocks that I have blogged about on www.myhighdividendstocks.com .

I chose the following stocks for examples: Goldcorp (GG), Proctor & Gamble (PG), American Capital Agency Corp. (AGNC), Seadrill Limited (SDRL), Safe Bulkers (SB), and AT&T.  Let me tell you why I chose these stocks.  I wanted to also include Terra Nitrogen (TNH), but the results table would have been too unreadable.

Goldcorp (GG)  I used to own Goldcorp when it was priced in the high teens and twenties.  I wanted to revisit it because it is also in many gold mining stock funds such as FSAGX.  I currently own FSAGX in my 401(k) account and I’m considering selling it.  You will see why momentarily.

Proctor & Gamble (PG)  This stock is often written about in dividend aristocrat articles.  It pays a modest dividend and grows its dividend annually like clockwork.  Many people watch this dividend stock.

American Capital Agency Corp. (AGNC)  I’ve included it because I have written many articles on this ultra-high dividend stock.  I don’t like it because its earnings can’t support the current dividend payout.  It balance sheet is horrible like all financial institutions (e.g. banks).

Seadrill Limited (SDRL)  This stock turned up on one of my high dividend stock screens and warrants further investigation to determine if it is speculative or investment grade.

Safe Bulkers (SB)  I love this high dividend stock with earning power and a strong balance sheet.  You will see why in moments.

AT&T (T)  I pays almost a 6% dividend and it is and dividend aristocrat.  Many eyes are on this one so I want to know at what price is it a value buy.

* * * * * * *

Examples of Speculative and Investment Common Stocks.  Our definition of an investment basis for common-stock purchases is a variance with the Wall Street practice in respect to common stocks of high rating.  For such issues a price of considerably more than 20 times average earnings is held to be warranted, and furthermore these stocks are designated as “investment issues” regardless of the price at which they sell.  According to our view, the high prices paid for “the best common stocks” make these purchases essentially speculative, because they require future growth to justify them.  Hence common-stock investment operations, as we define them, will occupy a middle ground in the market, lying between low-price issues that are speculative because of doubtful quality and well-entrenched issues that are speculative, none the less, because of their high price.

* * * * * * *

There were three groups of examples in Security Analysis.  Group A were common stocks speculative in December 1938 because of their high price (figures were adjusted to reflect changes in capitalization).  The companies in group A were: General Electric, Coca Cola, and Johns-Manville.  Proctor & Gamble and AT&T sort of fit into the Group A category.

Group B were common stocks speculative in December 1938 because of their irregular record.  Group B in 1938 was comprised of the following companies: Goodyear Tire and Rubber, Simmons, and Youngstown Sheet and Tube.  American Capital Agency Corp., Seadrill Limited and Goldcorp are definitely Group B.  Goldcorp also has a poor divided and a high price.  AGNC is irregular with a high price.

Group C were common stocks meeting investment tests in December 1938 from the quantitative standpoint.  They included Adams-Millis, American Safety Razor, and J.J. Newberry.  I have never heard of any of these stocks.  The only stock in my example that makes this cut is Safe Bulkers.  This is why Safe Bulkers is in my best dividend stocks category.

Item

Goldcorp (GG)

Proctor & Gamble (PG)

American Capital Agency Corp. (AGNC)

Seadrill Limited (SDRL)

Safe Bulkers (SB)

AT&T (T)

Dividend Yield

0.84%

3.14%

19.50%

7.46%

6.85%

5.77%

Earnings per share

2001

?

?

-

-

-

?

2002

?

?

-

-

-

?

2003

?

?

-

-

-

?

2004

?

?

-

-

-

?

2005

$0.35

?

-

-

?

?

2006

$0.51

$3.05*

-

$0.56

$1.48

$1.24

2007

$0.58

$3.64*

-

$1.32

$3.18

$2.02

2008

$1.85

$4.25*

$0.28

($0.43)

$1.81

$2.18

2009

$0.30

$4.73*

$0.94

$3.31

$2.51

$2.05

2010

$1.64

$4.47*

$2.30

?

$1.66

$3.36

10-yr. average

?

?

-

-

-

?

5-yr. average (2006-2010)

$0.98

$4.03

3-yr. average

$1.17

4-yr. average

$1.19

$2.13

$2.17

12 times 5Y average earnings

$11.71

$48.36

$14.08

$14.28

$25.56

$26.04

20 times 5Y average earnings

$19.60

$80.60