Friday, May 23, 2014

Recent purchase: Target (TGT)

I bought 50 shares at $56.07 on 05/22/14.
 
Target's market price was low in recent quarters due to data breach and Canadian sales. As a dividend investor, I still have confidence in TGT in the long run. So I took action and bought some shares into my portfolio.

Dividend Analysis



Key points:-

1) From 1983 onwards, Target has been paying dividend quarterly.

2) Dividend has been growing year after year and never fails.  It never has dividend cut or even remain stagnant. It's lowest year-over-year dividend growth rate is 3.58%.

3) Average annual dividend growth is 10%.

4) With its current dividend yield at 3%, annual dividend growth at 10%, it will take around 13 years to reach 10% annual return goal.

From Q1'14 Earnings Call

According the recent quarterly transcript, Target interim CEO expressed below strategy priorities, including dividend.  As a dividend investor, I'd love to hear they will continue support the dividend and build on their record of more than 40 years of annual dividend increases.

Finally, our point of view on capital deployment remains the same. This has always been a Board level discussion and we continue to be aligned with them on the following priorities; invest everything appropriate in our core business on projects that will support Target's growth and generate superior returns; support the dividend and build on our record of more than 40 years of annual dividend increases. And beyond those first two uses, return cash through share repurchase when we have room within our middle A credit ratings. 
Also from their quarterly meeting, they listed out three priorities to boost their sales and regain customers.  I can feel their courage and determination. That's why I have confidence in their long-run prosperity.
As we look ahead to the second quarter and beyond, the Board and our team are aligned on three priorities. 
...The first is growing traffic and sales in our U.S.
...Second, we must improve our Canadian segment performance.

...Finally, we need to accelerate our digital transformation and become a leading Omni-channel retailer. 
Entry Points

My entry point is around $56.  I'll probably buy more when market price goes deeper at around $54.  However, I'll limit my total shares of Target at 100 shares.

Stay tuned.


Monday, May 19, 2014

PG Stock Analysis -- The Procter & Gamble Company

The Procter & Gamble Company is also one of the companies that belong to both lists of dividend champion and dividend aristocrat.

Sound financial fundamental

  (From Morningstar.com)

Key points:-

1) Shares are maintained at around 3,000 mil. There is slight down trend in recent years, but not much. I like it because if shares don't change much over time, earnings per share are more solid data to reflect net income.  +

2) Free cash flow are positive and kind of stable.  +

3) Dividends increase year over year.  +

4) Payout ratio increase in recent years.  It would be preferred to maintain it within 60%.

I read this company's recent quarterly conference script.  The company's focus is more on organizational efficiency to save cost. 

Overall, this company is sound and performance is mainly affected by macro consumer market.

Annual dividend review 




Key points:-

1) In the past 43 years, only one year dividend decrease (2003) from previous year, which is because a sudden dividend increase at 55% in year 2002 from 2001.

2) Dividend growth rate is pretty stable at 10% year over year.  

3) With current initial yield at 3.2%, and annual dividend growth at 10%, it will take around 13 years to make a 10% annual return.  Pretty awesome!


Entry point

 My entry point is set at $76.  I plan to purchase 50 shares when market price dips around my target entry point.

Tuesday, May 6, 2014

MCD Stock Analysis -- McDonald's Corp.

McDonald's is one of the companies which belongs to both lists of dividend champion and dividend aristocrat.

Sound financial fundamental


(Data source: Morningstar)

Key points:-
1) Earnings per share increases year after year.

2) Shares decreases over the last ten years, which is good because it seems that value per share increases.  Earnings per share is a tricky indicator sometimes since some companies buy back stock shares which makes their EPS increase annually.  This is not the case for McDonald's.  If the same shares qty at 1,274 is used for all past 10 years, its EPS is still in a uptrend.

3) Dividend grows year after year, and its payout ratio is within manageable range (less than 60%).

4) Free Cash Flow Per Share increases annually, and the the annual data covers dividend very well.  This is a good indicator to show organic growth.

5) ROE and ROIC are both increasing, even in those difficult years 2007-2010.  ROIC is higher than 12% too.

Annual dividend review 

Key points:-

1) In the past 37 years, average year-after-year dividend growth rate is 24.39%;  Average annual dividend growth rate in the past 10 years is 23.74%; and the 5-year average is 14.10%.
2) In the past 37 years, McDonald's increased its dividend every single year, which is pretty impressive.
3) Based on the 10 by 10 form, take 3% as the initial yield, and annual dividend growth rate at 14%, it will take around 9 years to reach annual 10% return.  This is pretty cool.  It is why I like this stock and give it a rating of 5 stars.

Entry point


Entry point is a very subjective topic.  I usually consider factors such as one year target prices at Yahoo and Scottrade, PE ratio, 52-week high low prices, and current yield. My entry point thus I believe is rather conservative in a long run and leaves me with some cushion. The entry point for McDonald's is $94.

Disclosure:  Long MCD.  Waiting for market price to fall to my entry point for purchasing some shares.