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.

Gold mining stocks day four: Kinross Gold Corp (KGC)

It is crisis time in the Eurozone and elsewhere.  Stock markets will crash at least as hard as in 2008 when Europe goes into recession.  Gold is a crisis hedge, but it drops in a stock market crash also (just not a badly).  And gold mining stocks are a great performing asset, but only after most of the stock market crisis has passed because the world is dominated by Keynesian economics.  The financial media, government technocrats, and almost all PhD economists practice the voodoo economic religion of Keynesian economics.  Keynesian investors flee stock markets in a panic and run to US government bonds.  Bonds are bought in dollars.  Demand for dollars increases, demand for gold drops.  This is an opportunity of immense proportions if you keep your powder dry.

It is gold miners week at www.myhighdividendstocks.com, but not because gold miners are high dividend stocks.  Most are no or low dividend stocks.  However, gold mining stocks will offer some huge capital appreciation potential once the US and European stock markets crash again.  Every central bank in the world is printing money (Dollars, Euros, Yen, Pounds, and Yuan) and the commodity gold is priced in fiat currencies, so as more money is printed the price of gold expressed in fiat currencies goes up.  It really is that simple.  Gold mining companies can increase their profit margins when the cost of extracting gold from the Earth’s crust goes up a little and the price of gold goes up a lot.  But gold mining companies tend to be more volatile than the price of the underlying commodity.  They amplify gold’s gains and losses as you will see below.

So what is the best price for several of the gold majors that offers capital preservation and maximum opportunity for capital appreciation with maybe some dividends thrown in for good measure?  That’s what I hope to find out this week for you and I.

Next up is Kinross Gold Corp. (KGC)

Morningstar’s take: Kinross Gold is an intermediate-size gold company with operations in the U.S., Russia, Chile, Brazil, Ecuador, Ghana, and Mauritania. The company generates over 90% of revenue from gold sales and the rest from silver. Copper and other metal output is negligible. We do not think the company has an economic moat, as Kinross' mines are generally medium- to high-cost compared to industry peers. Over the years, Kinross has gone through a series of acquisitions and asset swaps to compile a portfolio of gold projects, however, the rising capital costs of these projects and higher production costs will be a big concern going forward.

Kinross Gold is a Canadian-based gold mining company with 62 million ounces of proven and probable gold reserves, 91 million ounces of silver reserves, and an annual production of 2.3 million ounces of gold. The company operates eight producing mines and five projects in the U.S., Latin America, Western Africa, and Russia.

Image002

Price: $13.26

Shares: 1.14 billion

Market capitalization: $15.08 billion

Bonds outstanding: $3.3 billion

Image006

None of Kinross’ bonds are due anytime soon.

Image008

DIVIDEND RECORD – Kinross has been paying a low semi-annual dividend since 2008.  There isn’t much history there, but they have grown the dividend by 50% from $0.04 to $0.06 in 4 years.

Image010

Dividend: $0.06 semi-annually

Dividend yield: 0.9% ($0.12 annual DIV/$13.26 share price)

Dividend payout ratio: 15% to 38% depending on how you calculate ($0.12/$0.81 recent EPS or $0.12/$0.26 avg adjusted EPS over six years)

EARNING POWER – Six year average adjusted earnings of $0.26 per share @ 1.142 billion shares

(Earnings adjusted for changes in capitalization – Kinross has increase the number of shares by 223% since 2006)

                        EPS       Net Inc.             Shares               Adj EPS

2006                 $0.47    $165 M              353 M                $0.14

2007                 $0.59    $334 M              566 M                $0.29

2008                 ($1.28) ($807 M)           629 M                ($0.71)

2009                 $0.44    $310 M              697 M                $0.27

2010                 $0.93    $772 M              829 M                $0.68

----------------------------------------------------------------------------

2011 Q1            $0.22    $256 M              1,139 M             $0.22

2011 Q2            $0.22    $247 M              1,141 M             $0.22

2011 Q3            $0.19    $213 M              1,142 M             $0.19

2011 Q4            $0.24 E $274 M E           1,142 M             $0.24 E

20011 E             $0.87    $990 M E           1,142 M             $0.87 E

Six year average adjusted earnings of $0.26 per share.

Consider contrarian buying at $2.08 (8 times average adj EPS)

Consider value buying at $3.12 (12 times average adj EPS)

Consider speculative selling at $5.20 (20 times average adj EPS)

Kinross Gold Corp is currently trading at 51 times average adjusted annual earnings.  The is highly speculative pricing.

BALANCE SHEET – That is a nice balance sheet, but goodwill accounts for 33% of assets.  It would still be a good balance sheet if goodwill were zero.

Image015

Book value per share: $13.22

Price to book value ratio: 1.00 (good)

Current ratio: 4.43 latest quarter (over 2.0 is good)

Quick ratio: 3.19 latest quarter (over 1.0 is good)

Debt to equity ratio: 0.09 (this is good)

CONCLUSION – Kinross Gold Corp. is a low dividend grower that is speculatively priced for its earning power.  The company’s balance sheet is strong.

Kinross bottomed in the $8.81 dollar range in October 2008 several months before the US stock market bottom in March of 2009.  That represented the best investment entry into Kinross since late 2008.  The gold price will go down at least half of the percentage of the stock market’s decline.  This happened in 2008-2009.  US stocks dropped about 50% and gold dropped about 25%.  However, Kinross dropped even more than the broader market or gold.  It dropped almost 67% from $26.84 in March 2008 down to $8.81 by October 2008.  Don’t think that it won’t happen again.  Wait for another bottom near value territory at $5.20 per share.  Kinross would be yielding about 2.3% if it keeps its new dividend rate at such a low price.  The good news is that gold will continue to go up in price as the world’s sovereign debt crisis worsens, but you have to buy extremely low to preserve your capital when purchasing mining stocks.

DISCLOSURE – I don’t own Kinross Gold Corp. (KGC).

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

Be seeing you!

Dividends Are Sexier Than You Think by Addison Wiggin

Addison Wiggin demonstrates that much of the total return stocks provide comes in the form of dividends.  Also, I love this quote from the article:

“Better the common equity of an adaptive and profitable American enterprise than the inert emissions of the US Treasury” – James Grant

* * * * * * * * * *

Dec 7, 2011

Dividends Are Sexier Than You Think

from The Daily Reckoning

Last month, the dividend yields on American AAA corporations moved above the yield on 30-year Treasury bonds! That had never happened before.

Even after last week’s stock market rally (which pushed dividend yields lower), the stocks of America’s four AAA companies still yield about 3%, on average, which is not quite as high as the yield on 30-year Treasury bonds, but still much higher than the yield on every Treasury bond of 24 years or less.

So you’ve got an opportunity here to forgo the dubious promise of a bankrupt nation and to invest, instead, in some of the strongest companies on the planet — those that are most capable of expanding, those that are most able to respond to government caprice and move operations wherever they need to move them, those with the most cash on their balance sheets. These are the companies that are going to lead the global economy for the next 10, 20, 30 years.

The story is much the same throughout the developed markets of Europe and North America.

In England, the FTSE index yields almost 4%. Ten-year British government bonds yield less than 3%. In France, The CAC 40 index yields 5.0%. Ten-year French government bonds yield around 3%. In Germany, the DAX yields 4%. German 10-year bonds yield 2%. In the US the S&P 500 dividend yield — at 2.08% — is higher than the 10-year Treasury yield for only the second time since 1958.

Image001

In fact, many, many world-leading American companies now pay dividend yields higher than long-dated Treasuries.

As James Grant framed this contrast in the Oct. 7, 2011 edition of Grant’s Interest Rate Observer, “Better the common equity of an adaptive and profitable American enterprise — say, Molson Coors (NYSE: TAP/A) — than the inert emissions of the US Treasury…Today, the stock is quoted at 39… at 11.1 times earnings with the yield of 3.25%. Meanwhile, the utterly unadaptive 10-year note of Timothy Geithner’s negative-cash-flow Treasury is quoted at 1.83% [now 2.03%].”

Grant also highlights Campbell Soup (NYSE:CPB) as a compelling alternative to long-term Treasury securities. At the current quote of $33, Grant observes, this blue chip stock is selling for about 13 times trailing earnings and yielding 3.5%. “Campbell, which traces its corporate ancestry back to 1869 and which incorporated in 1922, early on conceived the bright idea of draining the water from canned soup. The shipping expense thereby saved was enough to allow a price reduction to a dime per can from 30 cents.”

The company has flourished ever since. “From 1955 to the present,” Grant points out, “dividends have grown at an 8.9% compound rate.”

Now, I realize that dividends sound very boring — kind of like watching paint dry… I can almost hear you saying, “C’mon, Addison! This isn’t the Great Depression! I don’t want to invest for dividends, clip bond coupons and store canned peas in my basement. I want something that’s high-growth. Something sexy.”

My answer to that is: Sexy sometimes sneaks up on you.

What if I had told you on Jan. 1, 2000, to sell all your tech stocks — those highflying stocks that were doubling and tripling every few months — and to spread the proceeds equally across three very boring investments: gold, 10-year Treasury bonds and stodgy old dividend-paying stocks — like the ones inside the Vanguard Dividend Growth Fund (VDIGX), the mutual fund we highlighted in Apogee.

You would have looked at me as if I had lost my mind. You might have even felt sorry for me and tried to offer me some intelligent investment advice. But with the benefit of hindsight, we know what happened next.

The high-flying tech stocks that comprised the Nasdaq Composite Index crashed…and still have not recovered their losses, even after all this time. The Nasdaq is down 28% since the end of 1999. Even the “blue chip” S&P 500 stocks are down 15% during that time frame… until you add back those boring dividends.

With dividends included, the S&P 500’s 15% loss flips to a 6% gain. That’s still a miserable return for an entire decade, but it illustrates the point that dividends matter. In fact, for long periods of time in the stock market’s history, dividends have been the only thing that mattered.

Without dividends, the S&P 500 index would have produced a loss for the 25 long years from August 1929 to August 1954. Then again, without dividends, the S&P 500 produced a 5% loss during the 13 years from September 1961 to September 1974. But with dividends included, the S&P’s loss became a 46% gain.

Image002

If you think that’s just a bunch of “ancient history”, think again. During the last 12 years — from early November 1999 until this very moment — the S&P 500 has produced a loss…unless you include dividends.

The moral of the story is simple: Dividends matter. In fact, they may even be a little bit sexy. Over the course of the last half-century, dividends have contributed more than half of the stock market’s total return — 56%, to be exact.

So what happened to all that boring stuff you could have purchased at the dawn of the new millennium? Well, the Vanguard Dividend Growth Fund delivered a total return of 50%, 10-year Treasuries produced a total return of 162% and the “barbarous relic” gold provided a dazzling total return of nearly 500%. Average return of the three investments: 236%!

We would expect the Vanguard Dividend Growth Fund to outperform their low-dividend or no-dividend counterparts over the next few years…and to greatly outperform the return of long-term government bonds. As James Grant observes, “Better the common equity of an adaptive and profitable American enterprise than the inert emissions of the US Treasury.”

Regards,

Addison Wiggin,
for The Daily Reckoning

Dividends Are Sexier Than You Think originally appeared in the Daily Reckoning. The Daily Reckoning provides over 400,000 readers economic news, market analysis, and contrarian investment ideas.

* * * * * * * * * *

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

Be seeing you!

Gold mining stocks day three: Newmont Mining (NEM)

It is crisis time in the Eurozone and elsewhere.  Stock markets will crash at least as hard as in 2008 when Europe goes into recession.  Gold is a crisis hedge, but it drops in a stock market crash also (just not a badly).  And gold mining stocks are a great performing asset, but only after most of the stock market crisis has passed because the world is dominated by Keynesian economics.  The financial media, government technocrats, and almost all PhD economists practice the voodoo economic religion of Keynesian economics.  Keynesian investors flee stock markets in a panic and run to US government bonds.  Bonds are bought in dollars.  Demand for dollars increases, demand for gold drops.  This is an opportunity of immense proportions if you keep your powder dry.

It is gold miners week at www.myhighdividendstocks.com, but not because gold miners are high dividend stocks.  Most are no or low dividend stocks.  However, gold mining stocks will offer some huge capital appreciation potential once the US and European stock markets crash again.  Every central bank in the world is printing money (Dollars, Euros, Yen, Pounds, and Yuan) and the commodity gold is priced in fiat currencies, so as more money is printed the price of gold expressed in fiat currencies goes up.  It really is that simple.  Gold mining companies can increase their profit margins when the cost of extracting gold from the Earth’s crust goes up a little and the price of gold goes up a lot.  But gold mining companies tend to be more volatile than the price of the underlying commodity.  They amplify gold’s gains and losses as you will see below.

So what is the best price for several of the gold majors that offers capital preservation and maximum opportunity for capital appreciation with maybe some dividends thrown in for good measure?  That’s what I hope to find out this week for you and I.

Next up is Newmont Mining (NEM)

Morningstar’s take: Newmont Mining is the world's second-largest gold producer. In 2010, the company had slightly below-average operating costs. However, we expect unit costs to increase materially in 2011, driven by lower production and increases for everything from energy to labor and royalties. The company has two major advanced-stage projects in its pipeline--Conga in Peru and Akyem in Ghana--but first production will not appear until 2013-15 at the earliest. Therefore, we believe Newmont will face slightly declining overall production for the next few years.

Newmont is the world's second-largest gold producer. In 2010, the firm produced 6.5 million ounces of gold (consolidated, equity: 5.4 million) and 600 million pounds of copper (consolidated, equity: 327 million). North America accounted for 30% of consolidated gold production, South America for 23%, Asia Pacific for 39%, and Africa for 8%. As of Dec. 31, 2010, Newmont had 92 million ounces of proven and probable gold equity reserves.

Image003

Price: $67.62

Shares: 494.82 million (504 million fully diluted)

Market capitalization: $33.44 billion

Bonds outstanding: $4.2 billion

The circle near 2019 is $900 million dollars for scale purposes.

DIVIDEND RECORD – Steady dividend payer since at least 1987.  Last dividend cut was in 1997.  Newmont appears to be a decent dividend grower since 2010.

Image011

Dividend: $0.35/quarter

Dividend Yield: 2.08% ($1.40 annual DIV/$67.62 share price)

Dividend Payout Ratio:   ($1.40/$4.72 recent EPS)

EARNING POWER – Six year average adjusted earnings is $1.35 per share @ 504 million shares

(Earnings adjusted for changes in capitalization)

                        EPS       Net Inc.             Shares               Adj EPS

2006                 $1.75    $791 M              452 M                $1.57

2007                 ($4.17) ($1,886 M)        452 M                ($3.74)

2008                 $1.83    $831 M              455 M                $1.65

2009                 $2.66    $1,297 M           487 M                $2.57

2010                 $4.55    $2,277 M           500 M                $4.52

--------------------------------------------------------------------------

2011 Q1            $1.03    $514 M              501 M                $1.02

2011 Q2            $0.77    $387 M              501 M                $0.77

2011 Q3            $0.98    $493 M              504 M                $0.98

2011 Q4            $1.38 E $682 M  E          504 M                $1.35 E

--------------------------------------------------------------------------

2011 E              $4.16 E $2,076 E           504 M                $4.12 E

Estimates come from Reuters.com consensus for the next quarter

Six year average adjusted earnings per share is $1.35

Consider contrarian buying at $10.80 (8 times average adj EPS)

Consider value buying at $16.20 (12 times average adj EPS)

Consider speculative selling at $27.00 (20 time average adj EPS)

Newmont Mining is trading at 50 times average adjusted earnings.  This stock’s price is highly speculative.

BALANCE SHEET – I don’t like the recent dip in Newmont’s shareholder equity.  And the stock price is way too high compared to book value.

Image014

Book value per share: $27.50

Price to book value ratio: 2.45 (close to 1.0 or under is good)

Current ratio: 1.42 latest qtr (above 2.0 is good)

Quick ratio: 0.63 latest qtr (above 1.0 is good)

Debt to equity ratio: 0.26 (this is good)

CONCLUSION – Newmont Mining is a low dividend grower that is speculatively priced for its earning power.  The company’s balance sheet is okay, but its hard to tell if it is deteriorating without in depth analysis.  There is no need for this deeper analysis since the stock price is so speculative compared to earning power and price to book value per share.

Image017

Newmont bottomed in the $23.82 dollar range in October 2008 several months before the US stock market bottom in March of 2009.  That represented the best investment entry into Newmont since late 2008.  The gold price will go down at least half of the percentage of the stock market’s decline.  This happened in 2008-2009.  US stocks dropped about 50% and gold dropped about 25%.  However, Newmont dropped even more than the broader market or gold.  It dropped almost 60% from $59.87 in January 2006 down to $23.82 by October 2008.  Don’t think that it happen again.  Wait for another bottom near value territory at $16.20 per share.  Newmont would be yielding about 8.6% if it keeps its new dividend rate at such a low price.  The good news is that gold will continue to go up in price as the world’s sovereign debt crisis worsens, but you have to buy extremely low to preserve your capital when purchasing mining stocks.

DISCLOSURE – I don’t own Newmont Mining (NEM).

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

Be seeing you!

(download)

Gold mining stocks day two: Barrick (ABX)

It is crisis time in the Eurozone and elsewhere.  Stock markets will crash at least as hard as in 2008 when Europe goes into recession.  Gold is a crisis hedge, but it drops in a stock market crash also (just not a badly).  And gold mining stocks are a great performing asset, but only after most of the stock market crisis has passed because the world is dominated by Keynesian economics.  The financial media, government technocrats, and almost all PhD economists practice the voodoo economic religion of Keynesian economics.  Keynesian investors flee stock markets in a panic and run to US government bonds.  Bonds are bought in dollars.  Demand for dollars increases, demand for gold drops.  This is an opportunity of immense proportions if you keep your powder dry.

It is gold miners week at www.myhighdividendstocks.com, but not because gold miners are high dividend stocks.  Most are no or low dividend stocks.  However, gold mining stocks will offer some huge capital appreciation potential once the US and European stock markets crash again.  Every central bank in the world is printing money (Dollars, Euros, Yen, Pounds, and Yuan) and the commodity gold is priced in fiat currencies, so as more money is printed the price of gold expressed in fiat currencies goes up.  It really is that simple.  Gold mining companies can increase their profit margins when the cost of extracting gold from the Earth’s crust goes up a little and the price of gold goes up a lot.  But gold mining companies tend to be more volatile than the price of the underlying commodity.  They amplify gold’s gains and losses as you will see below.

So what is the best price for several of the gold majors that offers capital preservation and maximum opportunity for capital appreciation with maybe some dividends thrown in for good measure?  That’s what I hope to find out this week for you and I.

Next up is Barrick Gold (ABX)

Morningstar’s take: Barrick is the world's largest gold producer. The company has middle-of-the-pack operating costs and is growing production by working on two megaprojects: Pueblo Viejo in the Dominican Republic and Pascua-Lama on the border between Argentina and Chile. Production is heavily weighted toward the Americas, where costs and political risks tend to be lower.

Barrick is the world's largest gold producer. In 2010 the firm produced 7.9 million ounces of gold and 368 million pounds of copper. North America accounted for 43% of gold production, South America for 27%, Australia/Pacific for 25%, and Africa for 9%. As of Dec. 31, 2010, Barrick had 140 million ounces of proven and probable gold reserves. Barrick's flagship Goldstrike property produced 1.24 million ounces of gold in 2010. The firm has 25 operating mines.

Image005

Share price: $50.33

Shares: 999.80 million

Market capitalization: $50.32 billion

Bonds: Barrick has some big bonds coming due in 2013 although this miner is not overly indebted.

Image007

DIVIDEND RECORD – Barrick has only started paying a quarterly dividend since the second half of 2010.  It just increased its quarterly dividend from $0.12 to $0.15 per share in its most recent quarter.

Image008

Dividend: $0.15 per share quarterly ($0.60 annually)

Dividend yield: 1.2% ($0.60/$50.33 share price)

Dividend payout ratio: 12% - 50% depending on how you calculate ($0.60/$4.86 expected 2011 EPS = 12%) or ($0.60/$1.21 average adj. earnings = 50%)

EARNING POWER - Six year average adjusted earnings = $1.21 @ 999.8 million shares

(Earnings adjusted for changes in capitalization)

                        EPS       Net inc.             Shares               Adj EPS

2006                 $1.77    $1,506 M           851 M                $1.51

2007                 $1.28    $1,119 M           874 M                $1.12

2008                 $0.89    $785 M              903 M                $0.79

2009                 ($4.73) ($4,274 M)        903 M                ($4.27)

2010                 $3.28    $3,274 M           987 M                $3.27

----------------------------------------------------------------------------

2011 Q1            $1.00    $1,001 M           999 M                $1.00

2011 Q2            $1.16    $1,159 M           1,001 M             $1.16

2011 Q3            $1.36    $1,365 M           1,001 M             $1.36

2011 Q4            $1.34 E $1,339 M E        999.8 M             $1.34 E

Six year average adjusted earnings = $1.21 @ 999.8 million shares

Source: 2011 Q4 consensus estimate $1.34 per share according to Reuters.com

Consider contrarian buying at $9.68 (8 times avg. adjusted EPS)

Consider value buying at $14.52 (12 times avg. adjusted EPS)

Consider speculative selling at $24.20 (20 times avg. adjusted EPS)

Barrick is trading at 41.6 times avg. adjusted EPS.  This is highly speculative pricing.

BALANCE SHEET – Barrick has a decent balance sheet, but I don’t like their rising debt.

Image012

Book value per share: $22.38

Price to book value ratio: 2.24 (not so good; $50.33 share price/ $22.38 BV per share)

Current ratio: 2.27 latest quarter (over 2.0 is good)

Quick ratio: 1.18 latest quarter (over 1.0 is good)

CONCLUSION - Barrick bottomed in the $19.80 dollar range in October 2008 several months before the US stock market bottom in March of 2009.  That represented the best value entry into Barrick since late 2008.  The gold price will go down at least half of the percentage of the stock market’s decline.  This happened in 2008-2009.  US stocks dropped about 50% and gold dropped about 25%.  However, Barrick dropped even more than the broader market or gold.  It dropped almost 63% from $53.31 in March of 2008 down to $19.89 by October 2008.  Don’t think that it happen again.  Wait for another bottom near value territory at $14.52 per share.  Barrick would be yielding about 4.1% if it keeps its new dividend rate at such a low price.  The good news is that gold will continue to go up in price as the world’s sovereign debt crisis worsens, but you have to buy extremely low to preserve your capital when purchasing mining stocks.

Image013

DISCLOSURE – I don’t own Barrick Gold (ABX).

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

Be seeing you!

Gold stock week day one - Goldcorp (GG)

It is crisis time in the Eurozone and elsewhere.  Stock markets will crash at least as hard as in 2008 when Europe goes into recession.  Gold is a crisis hedge, but it drops in a stock market crash also (just not a badly).  And gold mining stocks are a great performing asset, but only after most of the stock market crisis has passed because the world is dominated by Keynesian economics.  The financial media, government technocrats, and almost all PhD economists practice the voodoo economic religion of Keynesian economics.  Keynesian investors flee stock markets in a panic and run to US government bonds.  Bonds are bought in dollars.  Demand for dollars increases, demand for gold drops.  This is an opportunity of immense proportions if you keep your powder dry.

It is gold miners week at www.myhighdividendstocks.com, but not because gold miners are high dividend stocks.  Most are no or low dividend stocks.  However, gold mining stocks will offer some huge capital appreciation potential once the US and European stock markets crash again.  Every central bank in the world is printing money (Dollars, Euros, Yen, Pounds, and Yuan) and the commodity gold is priced in fiat currencies, so as more money is printed the price of gold expressed in fiat currencies goes up.  It really is that simple.  Gold mining companies can increase their profit margins when the cost of extracting gold from the Earth’s crust goes up a little and the price of gold goes up a lot.  But gold mining companies tend to be more volatile than the price of the underlying commodity.  They amplify gold’s gains and losses as you will see below.

So what is the best price for several of the gold majors that offers capital preservation and maximum opportunity for capital appreciation with maybe some dividends thrown in for good measure?  That’s what I hope to find out this week for you and I.

First up is Goldcorp (GG)

Image002

Market price: $51.10

Shares: 809.73 million

Market capitalization: $41.43 billion

Bonds: Goldcorp has very little bonds outstanding

Image006

DIVIDEND RECORD

Image009

Dividend: $0.045/month ($0.54 annually).  Goldcorp just announced a dividend increase from $0.03/mo. to $0.045/mo.  http://www.marketwatch.com/story/goldcorp-increases-monthly-dividend-2011-12-05-73400 .  They have been paying dividends steadily since late 2003.

Dividend yield: ~1.0% ($0.54/$51.10 market price)

Dividend payout ratio:  23.8% to 52.4% depending on what you measure ($0.54/$2.26 latest EPS = 23.8% or $0.54/$1.03 avg adjusted EPS = 52.4%)

EARNING POWER

(Earnings adjusted for changes in capitalization)

                        EPS       Net inc.             Shares               Adj. EPS

2006                 $0.93    $408 M              441 M                $0.50   

2007                 $0.65    $460 M              709 M                $0.57

2008                 $2.06    $1,476 M           715 M                $1.82

2009                 $0.33    $240 M              735 M                $0.30

2010                 $2.13    $1,574 M           786 M                $1.94

-------------------------------------------------------------------------

2011 Q1            $0.81    $651 M              809.73 M           $0.80

2011 Q2            $0.52    $489 M              809.73 M           $0.60

2011 Q3            $0.41    $336 M              809.73 M           $0.41

2011 Q4 (E)       $0.64 E $518 M E           809.73 M E        $0.64 E

Goldcorp’s six year average adjusted earnings* is $1.27 per share

Consider contrarian buying at $10.16 (8 times average adj. EPS)

Consider value buying at $15.24 (12 times average adj. EPS)

Consider speculative selling at $25.40 (20 times average adj. EPS)

Goldcorp is trading at 40.2 times average adjusted earnings.  This is highly SPECULATIVE despite the bull market in gold.

* includes 2011 4Q Reuters concensus earnings estimates of  $0.64 per share

BALANCE SHEET – That is a pretty good looking balance sheet

Image012

Book value per share: $25.76

Price to book value ratio: 1.98 (not bad, but closer to 1.00 is desirable)

Current Ratio: 3.82 (latest quarter; over 2.0 is good)

Quick Ratio: 2.65 (latest quarter; over 1.0 is good)

Debt/equity Ratio: 0.03 (awesome)

CONCLUSION – Goldcorp bottomed in the $17.00 dollar range in October 2008 several months before the US stock market bottom in March of 2009.  That represented the best value entry into Goldcorp since late 2008.  The gold price will go down at least half of the percentage of the stock market’s decline.  This happened in 2008-2009.  US stocks dropped about 50% and gold dropped about 25%.  However, Goldcorp dropped even more than the broader market or gold.  It dropped almost 65% from $48.29 in July of 2008 down to $17.01 by October 2008.  Don’t think that it happen again.  Wait for another bottom near value territory at $15.24 per share.  Goldcorp would be yielding about 3.5% if it keeps its new dividend rate at such a low price.  The good news is that gold will continue to go up in price as the world’s sovereign debt crisis worsens, but you have to buy extremely low to preserve your capital when purchasing mining stocks.

DISCLOSURE – I don’t own Goldcorp (GG) now, but I did own it a few years ago.

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

Be seeing you!

Retailers day two: Target (TGT)

I’m focusing on the retailers this week since they are in the news because of the Thanksgiving and Christmas shopping seasons.  I took a look at Wal-Mart yesterday.  Today I will focus on Target (TGT).

Targets share price in November 2001 was about $36.76.  Today it is at $52.54 (42.9% higher).  But this doesn’t take into account the higher prices of goods caused by Federal Reserve money printing otherwise known as price inflation.  Due to the loss of the dollar’s purchasing power that $36.76 in 2001 now takes $47.00 to buy the same amount of goods.  The good news is that Target’s share price has outgrown the government’s stated inflation.  Plus Target paid dividends along the way.  I like Targets past total return more than Wal-Mart’s.

Image004

Target (TGT)

Share price: $52.54

Shares: 671.4 million

Market capitalization: $35.28 billion

Bonds: $17.5 billion outstanding with about $1.2 billion due in 2012.

Image005

DIVIDEND RECORD – Target missed on quarterly dividend in 2006; otherwise, their dividend record is that of a consistent payer and grower.

Image008
Dividend: $0.30 quarterly

Dividend yield: 2.28% ($1.20 annual DIV / $52.54 share price)

Dividend payout ratio: 30% ($1.20 annual DIV / $3.95 avg. adj. EPS) or 27.5% ($1.20/$4.35 latest EPS)

EARNING POWER - $3.95 average adjusted EPS @ 671.4 million shares.  Target has the same earning power per share as Wal-Mart.  What a coincidence!

(earnings adjusted for changes in capitalization – Target has been buying back shares)

                        EPS       Net inc.             Shares               Adj EPS

1/2007              $3.21    $2,787 M           869 M                $4.15

1/2008              $3.33    $2,849 M           851 M                $4.24

1/2009              $2.86    $2,214 M           774 M                $3.30

1/2010              $3.30    $2,488 M           755 M                $3.71

1/2011              $4.00    $2,920 M           729 M                $4.35

Five year average adjusted EPS = $3.95

Consider contrarian buying below $31.60 (8 times avg. adj. EPS)

Consider value buying below $47.40 (12 times avg. adj. EPS)

Target is trading at 13.3 times avg. adj. EPS

Consider speculative selling above $79.00 (20 times avg. adj. EPS)

BALANCE SHEET – Target’s balance sheet is stagnant just like Wal-Mart’s.  A flat shareholder’s equity is really a loss in equity when you factor in price inflation.

Image012

Book value per share: $21.44 TTM

Price to book value ratio: 2.45 (Okay, but not good)

Current ratio: 1.38 latest qtr (over 2.0 is good)

Quick ratio: 0.57 latest qtr (over 1.0 is good)

CONCLUSION -  March 2009 was the last good time to buy Target (TGT).  The company has a decent dividend grower record that appears safe.  It earns $3.95 per share on average (same as Wal-Mart) and only trades at 13.3 times this average.  But its balance sheet is stagnant.  You will have another opportunity to buy Target below $31.60 when the worldwide recession returns and all stocks get hammered.  The dividend yield will increase to 5% @ $24.00 share price.  This assumes that TGT holds its dividend steady at $0.30.  They have sufficient earnings to do this.

Image014

I will examine Amazon.com tomorrow.

DISCLOSURE – I don’t own Target (TGT) stock.

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

Be seeing you!

Retailers day one: Wal-Mart (WMT)

Let’s take a look at the largest retailers over the next few days since there is a lot of business coverage of Cyber Monday and Black Tuesday before Thanksgiving in the USA.  Up first is Wal-Mart (WMT).

Wal-Mart’s share price was a little above $54.00 per share 10 years ago.  Unfortunately for all savers and investors, the Federal Reserve has inflated the money supply a lot in the past ten years.  Now it takes $67.98 in 2011 to equal the purchasing power of $54.00 in 2002 according to the government’s own numbers (type: BLS inflation calculator into a google search).  Wal-Mart’s stock price was at $56.66 at the time I wrote this article.  Their inflation adjusted share price is about 26% lower than in 2002.

Image003

Wal-Mart (WMT)

Share price: $56.66

Shares: 3.45 billion

Market capitalization: $195.32 billion

Bonds: $57.1 billion outstanding with a good chunk coming due in 2013-2016.

Image005

DIVIDEND RECORD – Measly dividend yield.  Spotty in 2010, but Wal-Mart appears to be a decent dividend grower.  Their dividend dates appear to move around a bit.  They aren’t equally spaced on the Google Finance dividend chart.

Image009

Dividend: $0.37 per quarter

Dividend yield: 2.61%  ($1.48 annual DIV / $56.66 share price)

Dividend payout ratio: 37.5% ($1.48 annual DIV / $3.95 avg adj EPS) or 31.4% ($1.48 / $4.70 TTM EPS)  They should stop buying back shares and payout more of their earnings in the form of dividends.

EARNING POWER -  $3.95 per share @ 3.450 billion shares

(earnings adjusted for changes in market capitalization – Wal-Mart has been buying back shares for the past five years)

                        EPS       Net inc.             Shares               Adj EPS

1/2007              $2.71    $11,284 M         4,168 M             $3.27

1/2008              $3.13    $12,731 M         4,072 M             $3.69

1/2009              $3.39    $13,400 M         3,951 M             $3.88

1/2010              $3.70    $14,335 M         3,877 M             $4.16

1/2011              $4.47    $16,389 M         3,670 M             $4.75

Wal-Mart’s five year average adjusted earning power is $3.95 per share

Consider contrarian buying below $31.60 (8 times average adj. EPS)

Consider value buying below $47.40 (12 times average adj EPS)

Consider speculative selling above $79.00 (20 times average adj EPS)

BALANCE SHEET – Wal-Mart has a stable balance sheet.  I’d like to see them pay off debts to strengthen their balance sheet.  Share holder equity has gone nowhere in five years (inflation adjusted).  According to the BLS Inflation Calculator $61.573 B in 2007 has the same purchasing power as $67.238 B in 2011.  Wal-Mart’s share holder equity is $67.941 as of July 2011.  Its gone nowhere.

Image012

Book value per share: $19.69  ($67.941 billion equity / 3,450 billion share)

Price to book value ratio:  2.87 (Okay, but not good)

Current ratio: 0.86 (over 2.0 is good)

Quick ratio: 0.13 (over 1.0 is good)

CONCLUSION – Wal-Mart (WMT) is still priced for investment at 14.3 times it five year average adjusted earnings.  The company pays a small dividend that they have grown despite some gaps in their dividend payment history.  Its balance sheet is stable, but not strong.  There are many other investments with higher dividend yields, better prices for more earning power, and stronger balance sheets.  You will have an opportunity to buy Wal-Mart below $47.40 as you plainly see in the chart below.  Wal-Mart dividend yield would only improve to 3.1% if the stock price dropped to $47.70.  It is a long way away from a high dividend stock.

Image013

I will look at Target tomorrow and then Amazon.com on Wednesday.

DISCLOSURE – I don’t own Wal-Mart stock.

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

Be seeing you!

Why that corporate cash pile isn't so impressive

David Stockman, a former U.S. budget director, says, “The record cash story is bull market baloney.”  Stockman has credibility because he has been on a crusade against the massive deficit spending of the US government.  He knows big, false numbers.

Companies that were gaining cash from retained earnings and reducing debts would have their vectors on the graphic below look like this.

Image003

This would be the position of increased cash and decrease debts.  But what is actually happening is contrary to the myth that ignorant financial journalists publish.

Image004

Read the article here.  It is a good one:

http://www.google.com/hostednews/ap/article/ALeqM5i6tLiuurVg3WrOtzNjIlwT1_tscQ?docId=3fa6a9d085854d979a7e9b5abf45fe37

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

Be seeing you!

A First Look at Lennar (LEN)

I know some people that work for Lennar (LEN), so I’m always interested in how their employers are financial positioned.  The bottom lines is that I think Lennar is going lower from today’s market price of $17.93.

Lennar (LEN)

Share price: $17.93

Shares: 187.01 million

Market capitalization: $3.35 billion

Bonds: $4.8 billion outstanding

Here is a graphic of Lennar’s bonds outstanding and their due dates:  The good news is that nothing is due until 2013.

Image005

What does Lennar do to earn money?

Lennar builds and sells new homes targeted at value-oriented, first-time, and move-up purchasers in 14 states across the country. In 2010, the company delivered approximately 11,000 homes at an average price of roughly $240,000. Lennar also provides title and mortgage-related services. Outside of its core operations, Lennar maintains investments in a portfolio of numerous joint ventures and operates a distressed real estate focused unit, Rialto Investments.

Lennar’s stock price peaked in 2005 just above $60 per share.  Since then the stock price has lost 70% down to today’s $17.93.  I think it will go lower when the world reenters recession sometime in the next year.

Morningstar’s take (not mine)- Lennar sits poised to reap major economic gains from an eventual rebound in housing. The firm has fortified its operations and balance sheet amid the collapse in demand during the last few years. Core construction benefits from streamlined designs, more centralized purchasing, and closer-to-order building practices. Overhead cuts of more than 50% from peak further ensure that eventual increases in revenue fall meaningfully to the bottom line. At the same time, Lennar has bolstered its balance sheet with liquidation of once-bloated inventory, multiple debt refinancings to extend maturities, and strategic equity sales during the last several years. The company also has reduced risk by trimming its once voluminous joint venture portfolio to stable partners, reducing contingent recourse debt liabilities by approximately $1 billion or 80%.

Image008

DIVIDEND RECORD

Lennar has paid a dividend every quarter since 1988 as far as I can tell with the Google Finance data.  However, it cut its quarterly dividend from $0.16 to $0.04 in the 4th quarter of 2008.  The dividend has remained at $0.04 for thirteen consecutive quarters.

Dividend: $0.04 quarterly

Dividend yield: 0.8% ($0.16 annual dividend / $17.93 share price)

Dividend payout ratio: 33.3% ($0.16 annual dividend / $0.48 mean EPS estimate for 2011)

Image010

EARNING POWER – Lennar’s six year average adjusted earnings is ($2.40) per share.  If you believe that the new housing market will recover in the next few years (I don’t), then you would ignore the “bust” years of 2007 – 2009.  Today’s Lennar does not resemble the Lennar of 2006, so throw out that year also.  This leaves you with 2010 and most of 2011.  Lennar has an earning power of $0.495 per share at 187.01 million shares in the past 2 years (assuming $0.16 EPS in 4Q 2011).

                        EPS                   Net Inc.             Shares               Adj EPS

2006                 $3.69                $593.9 M           160.7 M             $3.18

2007                 ($12.31)            ($1,941.1 M)     157.7 M             ($10.38)

2008                 ($7.00)             ($1,109.1 M)     160.6 M             ($5.93)

2009                 ($2.45)             ($417.1 M)        170.5 M             ($2.23)

2010                 $0.51                $95.3 M             188.9 M             $0.51

2011E               $0.48 E             $87.76 M E        187.01 M           $0.48 (mean estimate)

Six year average adjusted EPS = ($2.40)

Quarterly earnings results for 2011:

            Q1        $0.14                $27.4 M                                     $0.146

            Q2        $0.07                $13.8 M                                     $0.073

            Q3        $0.11                $20.7 M             187.01 M           $0.11

            Q4        $0.16 E             $29.9 M E          187.01 M           $0.16 E

            Total     $0.48 E             $87.76 M E        187.01 M           $0.48 (mean estimate on Morningstar.com)

If you believe the new housing market will not recover in the next few years, then do not buy Lennar because it is barely profitable in the last six quarters.  A continued recession will likely return them to unprofitability.

If you believe that the new housing market will at least stabilize in the next few years, then use the following valuations to help you buy low:

Consider contrarian buying below $3.96 (8x the 2 year avg. adjusted EPS)

Consider value buying below $5.94 (12x the 2 year avg. adjusted EPS)

Consider speculative selling above $9.90 (20x the 2 year avg. adjusted EPS)

Lennar is currently trading at 36.2 times the two year average adjusted earnings.  This is highly speculative pricing.

BALANCE SHEET

Lennar has stabilized its balance sheet since the end of 2010.  It has more than enough money to cover short term liabilities.

Image011

Book value per share:  $14.28

Price to book value ratio: 1.26 (that’s pretty good)

Current ratio: 6.48 in the latest quarter (that’s really good; over 2.0 is good)

Quick ratio: 1.91 in the latest quarter (that is also very good; over 1.0 is good)

CONCLUSION

I think that the new housing market will not recover in the next few years because the US government is taking actions to stabilize then stimulate the housing market.  The market price system is being retarded by government intervention and accounting rules changes that are incentivizing banks not to put all the bank owned properties on the market (this is known as the shadow inventory).  There will be an eventual turnaround in the new housing market because of increased populations, but it is many years away.  Please visit this link (http://tinyurl.com/7fx5o2b ) to read many articles on the ill-fated housing recover based on the Austrian economics perspective.

Lennar is speculatively priced at over 36 times it 2 year average earnings.  It has a puny dividend yield below the S&P 500 average.  And its balance sheet is nothing to boast about.  Its Rialto real estate fund/portfolio is heavily dependent on short term financing and an economic rebound that isn’t going to happen thanks to the Keynesian fools that run the Federal Reserve and the US government.  Pass on Lennar until much lower prices and higher dividend yields.

Just for giggles I looked up the earnings for the past 10 years on Morningstar.com (unadjusted).  With boom and bust years of the past ten years its average EPS only comes out to $0.73 per share.  The stock price would have to fall to $8.71 just to equate to 12 times its ten year average EPS.  That’s not even value pricing.  Lennar is overpriced by any measurement you wish to consider.

DISCLOSURE – I don’t own Lennar (LEN)

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

Be seeing you!

Is Safeway (SWY) safe at $19.00 per share?

I know several people that work for Safeway at various levels.  So I was naturally curious to discover Safeway’s dividend record, earning power, and strength of balance sheet.  I didn’t even know they paid a dividend until yesterday.

Safeway (SWY)

Share price: $19.00

Shares: 339.9 million

Market capitalization: $6.46 billion

Bonds outstanding: $5.3 billion

Safeway is one of the largest food and drug retailers in North America. The company operates stores in California, Oregon, Washington, Alaska, Colorado, Arizona, Texas, the Chicago metropolitan area, the Mid-Atlantic region, British Columbia, Alberta, and Manitoba. Safeway has a 49% ownership interest in Casa Ley, which operates food and general merchandise stores in Mexico. The company also owns a third-party gift card provider, Blackhawk.

Visit Company Website

Image003

DIVIDEND RECORD

Safeway has been a consistent dividend grower since 2005.  The company paid no dividend prior to 2005.

Image005

Dividend: $0.145 per quarter

Dividend yield: 3.05% (this is a decent dividend yield, but it is not a high dividend stock)

Dividend payout ratio:  34%  ($0.58 DIV/$1.70 EPS)

EARNING POWER  $1.37 per share @ 339.9 million shares

            EPS                   Net inc.             Shares               Adj. EPS

2006     $1.94                $870.6 M           447.8 M             $2.56

2007     $1.99                $888.4 M           445.7 M             $2.61

2008     $2.21                $965.3 M           436.3 M             $2.84

2009     ($2.66)             ($1,097.5 M)     436.3 M             ($3.22)

2010     $1.55                $589.8 M           379.6 M             $1.74

2011E    $1.70*              $577.8 M           339.9 M             $1.70

*mean earnings estimate according to Wall Street valuations on Morningstar.com

I think Wall Street analysts have overestimated Safeway’s ability to earn $1.70.  They’re 75% through the fiscal year, but they have only earned 51% of the analyst’s estimates.  I don’t think the company will earn another $0.82 in the fourth quarter of 2011.

Results from the first three quarters of 2011:

1Q        $0.07                $25.1 M             339.9 M             $0.07

2Q        $0.41                $145.8 M           339.9 M             $0.43

3Q        $0.38                $130.2 M           339.9 M             $0.38

Total     $0.86                $301.1 M           339.9 M             $0.88

Six year average adjusted earnings per share is $1.37.

Consider a contrarian buy below $10.96 (8x average adjusted earnings)

Consider a value buy below $16.44 (12x average adjusted earnings)

Consider speculative selling above $27.40 (20x average adjusted earnings)

Safeway is currently trading at 13.8 times average adjusted earnings.

BALANCE SHEET

Assets and shareholder equity are trending slightly down.  That isn’t good.  Safeway does not possess a strong balance sheet.

Image008

Book value per share: $12.79

Price to book value ratio: 1.48  (this is good)

Current ratio: 0.87 (over 2.0 is good)

Quick ratio: 0.16 (over 1.0 is good)  Safeway has very little cash to cover current liabilities.

CONCLUSION

Safeway is not safe at $19.00 per share.  Its falling earnings this year and the horrible US economy will hurt the price of Safeway’s shares.  However, Safeway is a buy when its price is below $16.44.  Its mediocre dividend yield is bolstered by its growth pattern.  I need to investigate more to determine why its balance sheet is shrinking.  The Balance sheet is average right now.

Image012

DISCLOSURE  I don’t own any positions in Safeway (SWY).

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

Be seeing you!