My High Dividend Stocks Blog http://myhighdividendstocks.posterous.com Most recent posts at My High Dividend Stocks Blog posterous.com Thu, 05 Jul 2012 09:51:03 -0700 First Look at DOW 30 Component Microsoft (MSFT) http://myhighdividendstocks.posterous.com/first-look-at-dow-30-component-microsoft-msft http://myhighdividendstocks.posterous.com/first-look-at-dow-30-component-microsoft-msft

Today I take a look at Dow 30 component stock Microsoft (MSFT).  Microsoft is a decent dividend payer and grower.  The stock is not very attractive at today’s price of $30.76 because of its nearing the lower limits of the speculative price territory.  There is more price risk than reward going forward.  On the bright side, Microsoft’s balance sheet is strong due to huge amounts of cash.  To see how I came to these conclusions read on.

Microsoft (MSFT)

Price: $30.76

Shares: 8.40 billion

Market capitalization: $258.41 billion

What does the company do: Microsoft develops the Windows PC operating system, the Office suite of productivity software, and enterprise server products such as Windows Server and SQL Server. The Windows PC and Office franchises collectively account for nearly 60% of the firm's revenue, and the server and tools business contributes 24%. The firm's other businesses include the Xbox 360 video game console, Bing Internet search, business software, and software for mobile devices.

Morningstar’s take: Cloud computing is a double-edge sword for Microsoft. The impending move to web-based applications threatens to commodify the Windows PC operating system while opening up new revenue and profit opportunities in the deployment and delivery of cloud-based software services. Microsoft's server and business application software products are well positioned to ride the cloud computing wave even as the Windows PC OS franchise bears the brunt of the incoming tide.

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Bonds: $12.0 billion outstanding

Times interest earned: 78 times (MSFT earned $23.15 billion as of 6/2011 / $295 million interest expense).  That far exceeds Benjamin Graham’s recommendation of earning at least five times interest expenses.  Microsoft’s bonds do not threaten the dividend at all.

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Preferred stock: none.

DIVIDEND RECORD: Microsoft started dividend payments in 2003 biannually and maintained that pattern until the start of 2005.  In Q1 2005 Microsoft started paying a quarterly dividend of $0.08 per share.  It has grown the dividend to $0.20 quarterly today.  That is 200% straight-line dividend growth over 7 years, or 28.5% annual growth per year.  That’s pretty impressive growth.

Dividend: $0.20

Dividend yield: 2.6% ($0.80 / $30.76 share price) Microsoft is a 6% high dividend stock at $13.33

Dividend payout: 29% using the Google Finance reported EPS of $2.75 –OR- 42% using the average adjusted earning power of $1.92

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EARNING POWER: $1.92 @ 8.4 billion shares

(earnings adjusted for changes in capitalization – typically share buybacks and/or additional shares created)

EPS

Net income

Shares

Adjusted EPS

6/2005

$1.12

$12,254 M

10,906 M

$1.46

6/2006

$1.20

$12,599 M

10,531 M

$1.50

6/2007

$1.42

$14,065 M

9,886 M

$1.67

6/2008

$1.87

$17,681 M

9,470 M

$2.10

6/2009

$1.62

$14,569 M

8,996 M

$1.73

6/2010

$2.10

$18,760 M

8,927 M

$2.23

6/2011

$2.69

$23,150 M

8,593 M

$2.76

Seven year average adjusted earnings per share is $1.92

Consider contrarian buying below $15.36 (8 times average adjusted EPS)

Consider value buying below $23.04 (12 times average adjusted EPS)

Microsoft (MSFT) is currently trading at 16.02 times average adjusted EPS.  This is stock is priced for investment.

Consider speculative selling above $38.04 (20 times average adjusted EPS)

BALANCE SHEET – Microsoft has a strong balance sheet.  The only problem is the high price to book value ratios.

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Book value per share: $8.17 ($68.659 B equity / 8.4 B shares)

Price to book value ratio: 3.76 (under 1.0 is good) ($30.76 share price / $8.17 BV)  Investors are paying $3.76 for each $1.00 in book value.

Tangible book value per share: $5.50 (equity - $19.698 B goodwill - $2.756 B intangibles)

Price to tangible book value: 5.59 ($30.76 share price / $5.50 TBV)  19.03% of Microsoft’s assets are in intangibles which explains why the P/TBV increased so much.

Current ratio: 2.94 latest quarter (over 2.0 is good) ($76.86 B current assets / $26.17 B current liabilities)

Quick ratio: 2.27 latest quarter (over 1.0 is good) ($59.529 B cash and equivalent / $26.17 B current liabilities)

Debt to equity ratio: 0.17 (lower is better)

Percentage of total assets in plant, property, and equipment: 6.97% (the higher the better) Microsoft has massive current assets at 65.13% of total assets, intangibles were 19.03%, and other long term assets were 8.87%

Working capital trend: Up slightly in the long run.

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CONCLUSION – As usual, the best time to buy MSFT in recent years was in March 2009 when the stock hit bottom at $15.28.  It was a contrarian buy then at just below 8 times average adjusted earning power.  Today the stock trades for double that price.  I think the stock is overpriced given the coming worldwide recession.  Microsoft is a steady dividend payer and grower.  The dividend yield is slightly above the S&P average of 2.2%.  The best part of Microsoft is their balance sheet.  The balance sheet is strong with the exception of their price to book value ratio and tangible book value ratio.  I would ignore this stock until it drops below the $23.04 value stock threshold.

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DISCLOSURE – I don’t own Microsoft (MSFT).

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

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http://files.posterous.com/user_profile_pics/697493/v_for_vendetta_guy_fawkes_mask11.jpg http://posterous.com/users/4wuf4tt8LZzb Jason Brizic myhighdividendstocks Jason Brizic
Tue, 10 Jan 2012 12:36:12 -0800 First look at Sunoco Logistics Partners (SXL) http://myhighdividendstocks.posterous.com/first-look-at-sunoco-logistics-partners-sxl http://myhighdividendstocks.posterous.com/first-look-at-sunoco-logistics-partners-sxl

I’ve been looking for a double digit high dividend stock in the energy sector, so I ran the Google Finance stock screener for all companies over 6% yield in the energy sector.  Sunoco Logistics Partners (SXL) caught my eye at a reported yield of 13.65%.  This company deserves a closer look.

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Sunoco Logistics Partners (SXL)

Share price: $36.34

Shares: 103.33 million

Market capitalization: $3.75 billion

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What the company does - Sunoco Logistics Partners was spun off from Sunoco in an IPO in February 2002. It holds a portfolio of pipelines and terminals that connect refineries to retail distribution systems. The firm also buys and sells crude oil to take advantage of market structures, which works best in periods of high commodity-price volatility. As an MLP, Sunoco Logistics avoids taxation at the company level and requires that the firm pay out all of its excess cash to its investors.

Morningstar’s take - By acquiring and building an attractive portfolio of crude oil and refined products pipelines and terminals, Sunoco Logistics Partners (SXL) has generated steady economic returns for the better part of a decade. Although SXL's track record of impressive growth will likely be more difficult to replicate going forward, we think the master limited partnership's access to shale plays and a supportive general partner bode well for continued distribution growth for years to come.

DIVIDEND RECORD – Sunoco Logistics Partners has been an impressive dividend grower since 2002.

Dividend: $0.41 per quarter (this amount includes the 3:1 split.  Google Finance is wrong because it doesn’t adjust the $1.24 third quarter dividend down to $0.41 per share)

Dividend yield: 4.5% ($1.64 annual dividend / $36.34 share price.  Although the company has issued guidance that it will increase the dividend by 7% in 2012)

Dividend payout ratio: 89%($1.64/$1.84 average adjusted EPS)

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EARNING POWER – $1.84 per share average adjusted EPS @ 103.33 million shares.

(Earnings adjusted for changes in capitalization and include the 3:1 split in Dec 2011)

EPS

Net income

Shares

Adjusted EPS

2006

$0.95

$90 M

83 M

$0.87

2007

$1.12

$121 M

86 M

$1.17

2008

$2.05

$177 M

87 M

$1.71

2009

$2.16

$198 M

92 M

$1.92

2010

$3.11

$298 M

96 M

$2.88

2011 (est)

$2.52

$256.9 M

103.33 M

$2.48

EPS

    Net income

Shares

Adjusted EPS

2011 Q1

$0.36

$36 M

100 M

$0.35

2011 Q2

$0.80

$80 M

100 M

$0.77

2011 Q3

$0.78

$81 M

104 M

$0.78

2011 Q4 (est)

$0.58

$59.9 M

103.33 M

$0.58

2011 total (est)

$2.52

$256.9 M

103.33 M

$2.48

Six year average adjusted earnings per share is $1.84

Consider contrarian buying below $14.72 (8 times average adjusted EPS)

Consider value buying below $22.08 (12 times average adjusted EPS)

Sunoco Logistics Partners is currently trading at 19.75 times average adjusted EPS.  This is a hair below speculative pricing.

Consider speculative selling above $36.80 (20 times average adjusted EPS)

BALANCE SHEET – Sunoco Logistics Partners has a mediocre balance sheet.

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Book value per share: $10.46 ($1,081 M equity / 103.33 M shares)

Price to book value ratio: 3.47 (under 1.0 is good)

Current ratio: 1.14 (over 2.0 is good)

Quick ratio: 0.93 (over 1.0 is good)

Debt to equity ratio: 1.66 (lower is better)

CONCLUSION – Sunoco Logistics Partners has a decent dividend yield at 4.5% that is relatively safe, but it isn’t a high dividend stock as you might thing if you just looked at the Google Finance stock screener.  The company had an earning power of $1.84 per share @ 103.33 million shares.  Therefore, its current price of $36.34 is almost speculative.  There is nothing outstanding about its balance sheet.  I recommend that you buy this stock for under $22 when it is on sale in the upcoming double dip recession.  The stock has had a huge price increase since the lows of 2008.  The stock spent most of 2009 and 2010 in value territory.  Buy it when it goes back down there.

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DISCLOSURE – I don’t own Sunoco Logistics Partners (SXL).

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

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http://files.posterous.com/user_profile_pics/697493/v_for_vendetta_guy_fawkes_mask11.jpg http://posterous.com/users/4wuf4tt8LZzb Jason Brizic myhighdividendstocks Jason Brizic