My High Dividend Stocks Blog http://myhighdividendstocks.posterous.com Most recent posts at My High Dividend Stocks Blog posterous.com Thu, 14 Apr 2011 10:19:13 -0700 The practical significance of book value. Plus 15 book values of stocks mention on this blog. http://myhighdividendstocks.posterous.com/the-practical-significance-of-book-value-plus http://myhighdividendstocks.posterous.com/the-practical-significance-of-book-value-plus

There is no hard fast rule for price to book value ratios, but lower is definitely better.  I like the ratio too be less than 2.0.  Here is a list of many of the high dividend stocks mentioned on this blog with their most recent price, book value (BV)/share, Price/BV ratio, and dividend yield.  The results might surprise you.  Most of the book values per share are as of December 21st, 2010 unless otherwise noted.

Ticker              Price                BV/share         P/BV   Div. yield

=================================================

AGNC            $28.58             $24.24             1.18     19.51%

SB                   $8.26               $3.86               2.14     6.79%

SDRL              $34.42             $9.78               3.52     5.6%

TNH                $108.96           $11.35             9.6       4.94%

EXC                $39.97             $20.45             1.95     5.13%

FE                   $37.90             $28.02             1.35     5.99%

FRO                $22.59             $9.57               2.36     1.62%

MCD               $76.66             $13.55             5.66     3.27%

NGG               $48.80             $12.87 (ttm)    3.79     4.28%

PM                  $65.90             $1.90               34.68   4.01%

PCL                 $42.13             $8.47               4.97     3.96%

TNK                $10.15             $10.46             0.97     9.02%

VOD               $28.85             $17.06 (ttm)    1.69     3.18%

WIN                $12.41             $1.77               7.01     7.73%

T                      $30.27             $18.80             1.61     6.11%

Excelon (EXC), First Energy (FE), Teekay Tankers (TNK), and AT&T (T) warrant further examination for their high dividend yields and low price/book value ratios.

Philip Morris (PM) has an extremely high price/book value ratio which needs to be examined to make sure it’s not some weird artifact of how Google Finance and Morningstar display financial information.

Here is quick excerpt for Chapter 42 of Security Analysis 2nd edition on the practical significance of book value.

* * * * * * *

Practical Significance of Book Value. The book value of a common stock was originally the most important element in its financial exhibit. It was supposed to show “the value” of the shares in the same way as a merchant’s balance sheet shows him the value of his business. This idea has almost completely disappeared from the financial horizon. The value of a company’s assets as carried in its balance sheet has lost practically all its significance. This change arose from the fact, first, that the value of the fixed assets, as stated, frequently bore no relationship to the actual cost and, secondly, that in an even larger proportion of cases these values bore no relationship to the figure at which they would be sold or the figure which would be justified by the earnings. The practice of inflating the book value of the fixed property is giving way to the opposite artifice of cutting it down to nothing in order to avoid depreciation charges, but both have the same consequence of depriving the book-value figures of any real significance. It is a bit strange, like a quaint survival from the past, that the leading statistical services still maintain the old procedure of calculating the book value per share of common stock from many, perhaps most, balance sheets that they publish.

* * * * * * *

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Wed, 06 Apr 2011 11:50:28 -0700 Are these two oil tanker companies high dividend stocks? http://myhighdividendstocks.posterous.com/are-these-two-oil-tanker-companies-high-divid http://myhighdividendstocks.posterous.com/are-these-two-oil-tanker-companies-high-divid

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

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