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.

Some examples of high price to tangible book values.

Last Friday I wrote my “Tip of the Week” on book value and its calculation.  I used the original writing of legendary value investor Benjamin Graham in that article.  If you missed it, then you can get it here:

http://www.myhighdividendstocks.com/high-dividend-stocks/tip-of-the-week-book-value-or-equity-and-how-to-calculate-book-value-per-share

At the end of the article I calculated the tangible book value of Safe Bulkers (SB).  Today I will take a look at the tangible book value of a few more stocks: AT&T (T), Verizon (VZ), Terra Nitrogen (TNH), Goldcorp (GG), Southern Copper (SCCO), and Apple (AAPL).

AT&T (T) tangible book value

Shareholder equity equals $105.534 billion.  Subtract goodwill and intangibles from share holder equity to calculate tangible book value (aka net book value).  AT&T claimed $70.842 billion in goodwill assets as of 4Q2011 and $59.343 billion in intangibles.  AT&T’s tangible book value is negative $24.651 billion dollars.  The company has 5.93 billion shares outstanding.  AT&T’s tangible book value per share is negative $4.15 dollars.  That really stinks.  Maybe Verizon has a positive net book value per share.  AT&T stock sold for $30.64 recently.  Their price to tangible book value ratio is negative.

Verizon (VZ) tangible book value

Shareholder equity equals $35.97 billion.  Subtract goodwill and intangibles from share holder equity to calculate tangible book value (aka net book value).  Verizon claimed $23.357 billion in goodwill assets as of 4Q2011 and $79.128 billion in intangibles.  Verizon’s tangible book value is negative $66.515 billion dollars.  The company has 2.84 billion shares outstanding.  The tangible book value per share is negative $23.42 dollars.  That really stinks also.  Verizon stock sold for $37.46 recently.  Their price to tangible book value ratio is negative.

Terra Nitrogen (TNH) tangible book value

Shareholder equity equals $269.3 million.  Subtract goodwill and intangibles from share holder equity to calculate tangible book value (aka net book value).  Terra Nitrogen claimed no goodwill or intangibles as of 4Q2011.  Terra Nitrogen’s tangible book value is $269.3 million.  The company has 18.69 million shares.  The tangible book value per share is $14.41.  That is very low compared to the current stock price.  Terra Nitrogen stock sold for $262 per share recently.  Their price to tangible book value ratio is 18.18.  Shareholders that bought at $262 are paying $18.18 for each $1.00 in tangible assets.  That is a whopping premium on invested capital.  A smart businessman would never overpay so much for so little assets.  Stay away from Terra Nitrogen because there is much more risk than reward.

Goldcorp (GG) tangible book value

Shareholder equity equals $21.272 billion.  Subtract goodwill and intangibles from share holder equity to calculate tangible book value (aka net book value).  Goldcorp claimed no goodwill of $1.737 billion as of 4Q2011.  Goldcorps’s tangible book value is $19.535 billion.  The company has 810 million shares.  The tangible book value per share is $24.11.  Goldcorp stock sold for $41.04 per share recently.  Their price to tangible book value ratio is a respectable 1.7.  Goldcorp stock will be cheap when the price is near one times tangible book value.

Southern Copper (SCCO) tangible book value

Shareholder equity equals $4.015 billion.  Subtract goodwill and intangibles from share holder equity to calculate tangible book value (aka net book value).  Southern Copper claimed intangibles of $110 million as of 4Q2011.  Southern Copper’s tangible book value is $3.905 billion.  The company has 840.98 million shares.  The tangible book value per share is $4.64.  Southern Copper’s stock sold for $30.46 per share recently.  Their price to tangible book value ratio is an overpriced 6.56.  SCCO share holders who bought near $30.46 are paying $6.56 for each dollar of invested capital.

Apple (AAPL) tangible book value

Shareholder equity equals $76.615 billion.  Subtract goodwill and intangibles from share holder equity to calculate tangible book value (aka net book value).  Apple claimed $896 million in goodwill and $3.536 billion in intangible in their 4Q2011 financials.  Apple’s tangible book value is $72.183 billion.  The company has 932.37 million shares.  The tangible book value per share is $77.42.  Apple’s stock sold for $636.23 per share recently.  Their price to tangible book value ratio is grotesque 8.22.  AAPL share holder who bought near $636 are paying $8.22 for each dollar of invested capital.

Goldcorp is the only stock on this short list with a price to tangible book value under 2.0 and even that isn’t cheap.  I wrote this article to serve as a warning to value investors and high dividend stock investors.

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

Be seeing you!

Don't Overpay for Apple (AAPL) Despite the New Dividend.

Today I take a first look at Apple (AAPL) since they finally decided to pay a dividend to the owners of the company.  You’ll learn how small the dividend yield will be, how speculative the current share price is, and how all the claims of massive cash stockpiles is not so true.  Read on to find out.

Apple (AAPL)

Price: $608.60

Shares: 932.37 million

Market capitalization: $567.44 billion

Image002

Preferred stock: none

Bonds: none

DIVIDEND RECORD:  Apple has never paid a dividend in 17 years, but they recently announced that they would begin paying a quarterly dividend of $2.65 per share (http://www.bloomberg.com/news/2012-03-19/apple-to-pay-dividend-buy-back-stock-to-return-some-of-its-cash.html) beginning in the period starting July 1st, 2012.  Will they become a dividend grower?  Who knows; they have no track record.  However, the dividend will not be threatened by any debt, preferred stock, or bonds.

Dividend: $2.65 quarterly starting in 2Q 2012

Dividend yield: 1.7% ($10.60 annual dividend / $608.60 share price)

Dividend payout: 30% ($10.60 dividend / $35.11 recent EPS) -0R- 85% ($10.60 dividend / $12.39 average adjusted earning power)

Image005

EARNING POWER: $12.39 per share @ 932.37 million shares

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

EPS

Net income

Shares

Adjusted EPS

9/2007

$3.93

$3,496 M

889 M

$3.75

9/2008

$6.78

$6,119 M

902 M

$6.56

9/2009

$9.08

$8,235 M

907 M

$8.83

9/2010

$15.15

$14,013 M

925 M

$15.03

9/2011

$27.68

$25,922 M

937 M

$27.80

Five year average adjusted earnings per share is $12.39

Consider contrarian buying below $99.12 (8 times average adjusted EPS)

Consider value buying below $148.68 (12 times average adjusted EPS)

Consider speculative selling above $247.80 (20 times average adjusted EPS)

Apple (AAPL) is currently trading at 49 times average adjusted EPS.  This is stock’s price is highly speculative.

BALANCE SHEET – The chart of the balance sheet is beautiful, but the price to book value ratio shows you how overvalued Apple is at the present time.  Investors have forgotten that Apple traded at $82 - $85 a share between November 2008 and March 2009.  You can buy Apple near its book value if you are patient.  Their current ratio is not impressive despite all the pundit talk of Apple having so much cash.

Image009

Book value per share: $81.80 as of September 2011

Price to book value ratio: 7.44 (under 1.0 is good)  You are paying a massive premium to book value for every Apple share at today’s prices.  Remember that is only as good as its last product.  Not every product is going to be a homerun.  When it eventually disappoints the share price is going to crash as the hedge funds retreat.

Current ratio: 1.58 latest quarter (over 2.0 is good)  I thought with all that talk of Apple being loaded with cash that they would have blow the current ratio away.   That simply isn’t the case.  They have $54.771 billion in current assets and $34.607 billion in current liabilities.

Quick ratio: 1.35 latest quarter (over 1.0 is good)  There is the cash showing through.

Debt to equity ratio: 0 (lower is better)  They are long term debt free.  Outstanding.

Percentage of total assets in plant, property, and equipment: 5.64% (the higher the better)  Not a lot of plant and equipment.  Here are where their assets are relative to total assets: Other long term investments 51.72%, current assets 39.49%, and intangibles 3.15%.

CONCLUSION – Apple will be a small dividend payer yielding about 1.7% at today’s stock price.  It will be interesting to see if they become a strong dividend grower over time.  The dividend will be safe at the onset.  Payout ratios are not a problem.  In my opinion the stock price is highly speculative at 49 times average adjusted earning power of $12.39 per share.  Apple’s share price has taken a beating in the past.  In late 2007 the share price peaked at $199.  By March 2009 the stock price had fallen to $85.  Don’t make the mistake to believe that Apple is crashproof.  There is a worldwide recession coming and Apple will take another beating.  I think the dividend it to entice hedge funds from pulling out of the stock with the recession hits.  Apple’s balance sheet is not as strong as I thought.  The price to book value is ridiculous right now and their current ratio is unimpressive.  However, they are in much better shape than most companies.  I recommend you sell it  if you own it now.  I think Apple is a safe buy below $148; otherwise, you’re playing a speculative game of the greater fool theory.  Don’t get trampled by the hedge funds when they exit their positions in Apple.  The dividend yield will be much higher below $148, you won’t be paying through the nose for earnings, and you’ll pay a much smaller premium to book value.

Image012

DISCLOSURE – I don’t own Apple (AAPL).

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

Be seeing you!

Apple dividend

There is news that Apple will begin paying a $2.65 per share quarterly
dividend (http://news.investors.com/article/604927/201203201524/apple-shares-retreat-fr....
That is great news, but I like high dividend stocks. Apple would
become a 6% high dividend stock if it pays its proposed dividend and
its stock price drops to $176.66. Unfortunately for current Apple
investors that would be nearly a 71% price decline from today's
closing price of $605.88 per share. Right now you are laughing at me.
How preposterous!! Ahhh, but you forget that Apple was selling for
$176 in mid-September of 2009. Apple is not market-proof. I will
write a "First Look" article on Apple soon where we can discover their
average earning power together.

There is another way for Apple to become a high dividend stock. They
could pay out 80% of the recent earnings of $35.11 per share in the
form of a dividend. A $7.02 quarterly dividend payment would bring
the yield up to 6%. I'm very confident that Apple will not do this.

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

Be seeing you!