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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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
Thu, 07 Apr 2011 09:13:43 -0700 Two high dividend stocks facing dividend cuts. Put them on the watchlist. http://myhighdividendstocks.posterous.com/two-high-dividend-stocks-facing-dividend-cuts http://myhighdividendstocks.posterous.com/two-high-dividend-stocks-facing-dividend-cuts

Two high dividend stocks facing dividend cuts.  I took notice of Windstream (WIN) and First Energy (FE) the other day when I noticed their dividend yields in the 6-7% range.  These two companies are priced less than 20 times their 5 yr. average earnings which makes them possible investments.  However, both are paying out more in dividends than they are earning.  That is troubling because they won’t be high dividend stocks for long.  Their share prices will likely decline once the managements cut their dividends.  Both might prove to be high dividend stocks in future if their market prices drop more into the value territory of below 12 times average earnings and they keep a sustainable dividend.  Check them out in detail below.

Windstream (WIN)  POSSIBLE INVESTMENT, but wait until after the dividend cut

Market price: $12.58

Shares: 509.98 M

Dividend yield: 7.7% with a quarterly dividend of $0.25

ADJ EPS adjusts for changes in capitalization (share issuance or buybacks)

            EPS     Net inc.           ADJ EPS

2006    $1.25   $545.3 M         $1.07

2007    $1.94   $917.1 M         $1.80

2008    $0.93   $412.7 M         $0.81

2009    $0.76   $334.5 M         $0.66

2010    $0.66   $310.7 M         $0.61

5 yr. average earnings equals $0.99 per share.  12 times the 5 yr. average earnings equals $11.88.  20 times the 5 yr. average earnings equals $19.80.  Windstream is trading at 12.7 times the 5 yr. average earnings.  That makes it eligible for investment, but it is going to have to cut its dividend or issue more shares.  The company is paying over $1.00 per share in annual dividends, but it is only earning $0.61 per share.  I wouldn’t buy WIN at $12.58.  I would wait for the dividend cut and the market price to drop below $11.88 before reconsidering a purchase of WIN.

I have not closely examined Windstream’s dividend record, earnings power, or its balance sheet.  I will if the market price drops significantly below $11.88.

First Energy (FE)  POSSIBLE INVESTMENT, but wait until after the dividend cut

Market price: $37.00

Shares: 418.22 M

Dividend yield: 6.0% with a quarterly dividend of $0.52

ADJ EPS adjusts for changes in capitalization (share issuance or buybacks)

            EPS     Net inc.           ADJ EPS

2006    $3.81   $1,254 M         $3.00

2007    $4.22   $1,309 M         $3.13

2008    $4.38   $1,342 M         $3.21

2009    $3.29   $1,006 M         $2.41

2010    $2.57   $784 M            $1.87

5 yr. average earnings equals $2.72 per share.  12 times the 5 yr. average earnings equals $32.64.  20 times the 5 yr. average earnings equals $54.40.  First Energy is trading at 13.6 times the 5 yr. average earnings.  That makes it eligible for investment, but it is going to have to cut its dividend or issue more shares.  The company is paying a $2.08 per share in annual dividend, but it is only earning $1.87 per share.  I wouldn’t buy FE at $37.00.  I would wait for the dividend cut and the market price to drop below $32.64 before reconsidering a purchase of FE.

I have not closely examined First Energy’s dividend record, earnings power, or its balance sheet.  I will if the market price drops significantly below $32.64.

DISCLOSURE: I don’t own either of these common stocks.

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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, 18 Jan 2011 13:19:04 -0800 A Disturbing Fact Regarding S&P500 Dividend Yields http://myhighdividendstocks.posterous.com/a-disturbing-fact-regarding-sp500-dividend-yi http://myhighdividendstocks.posterous.com/a-disturbing-fact-regarding-sp500-dividend-yi

I recently embarked on a quest to find S&P500 stocks yielding over 6 percent.  I was shocked by the results.  There are only seven S&P500 stocks currently yielding over 6 percent.

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Company

Ticker

Yield

Industry

Frontier Communications

FTR

7.71%

Rural telecom

Windstream

WIN

7.17%

Rural telecom

Diamond Offshore Drilling

DO

6.73%

Oil drilling

Altria

MO

6.42%

Tobacco

Century Link

CTL

6.28%

Rural telecom

Reynolds American

RAI

6.13%

Tobacco

Pitney Bowes

PBI

6.12%

Mail processing

That is just plain sad.  I once read that the S&P500 yielded around 6.7% back in 1982.  Today the index yields a paltry 1.7%.  A depression level bear market could bring the S&P500 yields back to the 6.7% level.  That depression will come when the Federal Reserve stops buying US Treasury debt.  You had better be holding high dividend stocks with earning power and strong balance sheets in your hand when the music stops.

Look for some analysis on these stocks in future posts.

There will be a multitude of stocks currently yielding between 4.00 and 5.99% that will become high dividend stocks when the Federal Reserve tightens and investors run for the exits.  This will mark the return of the bear market.  There will be high dividend stock bargains not seen since March 2009 when that happens.  Subscribe to 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