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.

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Sprinting to bankrupcy unless Sprint (S) can profit?

A friend of mine recently tweeted that he thought that Sprint Nextel (S) should be bought because he believes it hit the bottom three days ago at $2.39 per share.  I haven’t paid much attention to Sprint because it hasn’t paid a dividend since the end of 2007.  Sprint does not know how to earn profits; it only knows how to lose less than in previous years.  Their only hope is their pricing of plans and customer service because AT&T and Verizon both offer 4G & 4G LTE network services, and they both offer iPhone 4 and iPhone 4S smartphones on their networks.

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Sprint Nextel (S)

Share price: $2.72

Shares: 2.996 billion

Market capitalization: $8.14 billion

Bonds: $18.5 billion

It amazes me that Sprint went from $1.35 in November 2008 to $6.45 May 2011.  There is a lot of speculating going on in this stock because the fundamentals are just plain horrible.

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DIVIDEND RECORD

Sprint has not paid a dividend since the end of 2007.  It paid an annual dividend of $0.50 from 2001 to 2004, then it cut its dividend to $0.30 in 2005, and in 2006 – 2007 it cut the dividend to $0.10 annually.  Sprint offers no current income to its remaining shareholders.

EARNING POWER

                EPS                         Net inc.                Shares                  Adj EPS

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2006       $0.45                     $1,327 M              2,972 M                $0.44

2007       ($10.27)                ($29,580 M)        2,898 M                ($9.89)

2008       ($0.98)                  ($2,796 M)          2,863 M                ($0.94)

2009       ($0.84)                  ($2,436 M)          2,886 M                ($0.81)

2010       ($1.16)                  ($3,465 M)          2,988 M                ($1.16)

2011E    ($0.93)*               ($2,786 M)          2,996 M                ($0.93)

*mean loss according to Wall Street estimates I looked up on Morningstar.com

Sprint would have to lose $0.40 per share in 4Q2011 to meet the mean Wall Street estimates.  I don’t think that will happen since the iPhone 4 users start adding to Sprint’s revenues in 4Q2011.  I think Wall Street analysts have set the bar so low than even Sprint can beat their estimates.

Results from the first three quarters of 2011:

1Q          ($0.15)                  ($439 M)              2,992 M                ($0.15)

2Q          ($0.28)                  ($847 M)              2,994 M                ($0.28)

3Q          ($0.10)                  ($301 M)              2,996 M                ($0.10)

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Total      ($0.53)                  ($1,587 M)          2,996 M                ($0.53)

Six year average adjusted earnings per share is ($2.22).  I wouldn’t buy Sprint until it becomes profitable for several years.

BALANCE SHEET

Sprint’s balance sheet is frightening.  Assets are falling more than liabilities, so equity keeps disappearing.  It will be interesting to see

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Book value per share: $4.35 as of 3Q2011

Price to book value: 0.625 (this is good, but book value keeps shrinking)

Current ratio: 1.12 (over 2.0 is good)

Quick ratio: 0.49 (over 1.0 is good)

CONCLUSION

Sprint offers no dividend, no profits, and shrinking shareholder equity.  These three facts do not add up to safety of principal and a satisfactory return.  The purchase of Sprint at $2.72 per share is speculative.  AT&T (T) and Verizon (VZ) offer high dividends, profits, and increasing shareholder equity.

Almost everyone who has bought Sprint stock in the past 12 years has lost large amounts of money.  This company has forgotten how to make money.  It will take a few profitable years and some hefty dividends to attract me to their stock.  Sprint offers no safety of principal with its horrible yearly losses and the bad economic backdrop.  What is their unique selling proposition?  As best I can tell it is the download speed of their 4G network.  They claim it is up to 10x faster than their 3G service.  AT&T and Verizon both make the same claims.  Perhaps they have the largest 4G network, but that doesn’t come across in their advertisements.  It will take huge infrastructure costs to build out their 4G network.  The large yellow circles mask the smallness of their 4G network.  I’m not impressed after visiting the Verizon and AT&T websites to examine their 4G offerings.  Sprint is sprinting to bankruptcy.

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For example, there are many areas in Denver that you would only get good 4G service while outside on the street.  Most people are inside their work locations most of the day.

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DISCLOSURE  I don’t own Sprint Nextel (S)

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A Second Look at Verizon (VZ) following it dividend growth.

Verizon (VZ) was in the news today for raising its dividend from $0.48 to $0.50 per quarter.  http://www.reuters.com/finance/stocks/VZ/key-developments/article/2394529 .  Is Verizon a buy at $36.17 given its dividend increase?

Verizon (VZ)

Market price: $36.17

Market cap: $102.38 billion

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Dividend record: VZ has been paying dividends for over a decade.  There are some gaps and some cuts.

Dividend: $0.50 quarterly (raised from $0.48 last quarter)

Dividend yield: 5.5% ($2.00 annual dividend / $36.17 price)

Dividend payout ratio: 89% (if you use the $2.00 dividend / $2.24 TTMs EPS), 116% (if you use $2.00 / $1.72 five year avg. EPS)

Earning power: $1.72 @ 2.833 billion shares

            EPS       Net inc.             Adj. EPS            Shares

2006     $2.12    $6,197 M           $2.19                2.938 B

2007     $1.90    $5,521 M           $1.95                2.902 B

2008     $2.26    $6,428 M           $2.27                2.850 B

2009     $1.29    $3,651 M           $1.29                2.841 B

2010     $0.90    $2,549 M           $0.90                2.833 B

Five year average adjusted EPS = $1.72

Consider buying at or below $20.64 (12 times average earnings).  This price was last seen in November 2009.

Consider selling at or above $34.40 (20 times average earnings)

It is selling time because Verizon is trading at 21 times average earnings.  This is speculative.

Balance sheet: down slightly and stagnant; not strong.

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Book value: $13.61 per share

Price to book value: 2.66  ($36.17 price / $13.61 BV).  This is good.

Current ratio: 0.82 (latest quarter; over 2.0 is good)

Quick ratio: 0.67 (latest quarter; over 1.0 is good)

Disclosure: I don’t own Verizon (VZ)

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TIP OF THE WEEK - Find Corporate Bond Info On Your Stocks Easier Than You Ever Imagined

Find Corporate Bond Info on Your Stocks Easier Than You Ever Imagined

Jason Brizic

Apr. 8, 2011

The high dividend stock investor must be aware of a company’s corporate bond exposure to understand its potential threat to earning power.  A surge in bond interest due can threaten the earnings available for dividends.

You can avoid a tragic investment mistake by examining a company’s bond exposure before you make a common stock purchase.  Two stocks with the same earning power can have different bond exposures.  It is not enough to know the overall long-term debt total.  You must go slightly deeper to gain an edge over the market’s other investors.

Morningstar has an excellent corporate bond analysis feature within its stock pages to help you quickly, graphically, and easily understand the magnitude and maturity of a company’s corporate bond issuances.  Many high dividend stocks are large well established companies like AT&T (T) and Verizon (VZ) have many outstanding bonds.

Click on the link below to go directly to Morningstar’s bond tab for AT&T to see what I’m talking about:

http://quicktake.morningstar.com/StockNet/bonds.aspx?Symbol=T&Country=USA

Here is the link to Verizon’s (VZ) bond tab:

http://quicktake.morningstar.com/StockNet/bonds.aspx?Symbol=VZ&Country=USA

These two telecom companies are similar in many respects.  They should be compared.  Their bonds might be the deciding factor when deciding on which common stock to add to your high dividend stock portfolio.  Note: I haven’t scrutinized their bonds yet.  I’m just providing and examples with lots of bond info.

For more tips, go here:

http://www.myhighdividendstocks.com/category/tip-of-the-week