Monday, August 1, 2016

August Considerations

Below are 3 companies with my criteria checklist that I am considering for August. Actually, I wanted to buy a couple of them in July, but the prices crept slightly over my buy zone. If there is a pullback, I will definitely consider adding them to my portfolio in small chunks.


Amgen is a biotechnology company that engages in developing, manufacturing and delivering human therapeutics for the treatment of illness in the areas of oncology/hematology, cardiovascular, inflammation, nephrology, and neuroscience.

AMGN 8/2016
Area
Criteria
CheckList
Comment
Quality Company
Dividend Growth
>5 years
Yes
6 Years
ROE/Op Margin
Stable
Yes
Stable
Long term Avg Growth
Stable
Yes
Stable
FCF over Dividends
FCF>Dividends
Yes
FCF covers Dividends
M* Moat
Wide Moat
Yes
Wide
M* & S&P
Credit Rating
> BBB+
Yes
A
Cash to Debt & Interest Coverage, Debt to Equity
Cash Debt >1 or Interest Coverage > 5
Yes
Cash to Debt 1.01
Interest Coverage 12.42
M* & S&P Stars
> 3 Stars for both
Yes
M* 4 Stars
S&P CapIQ 4 Stars
Payout Ratio
<60%
~Yes
36%
Relative Risk Grade
<2.0
Yes
1.51
Dividend Growth
& Yield
Dividend Yield
>3%
No
2.30%
Dividend Growth
>5%
Yes
48.17%
Chowder
>12%
Yes
50.47%
Valuation
Yield/Avg Yield
>1.1
Yes
1.43
Dividend Yield Theory Mid Point
Below Mid Point
Yes
Mid Point 179.34
Low Point 148
P/E
Below Mid Point
Yes for forward
Median 16.23 Trailing 17.82 Forward 14.01
DRRM
~10%
Yes
Assuming 6% growth; projected return=10.17%
M* Estimate
<M* est
Yes
M* 194
S&P Estimate
< S&P cap IQ est
Yes
S&P Cap IQ 214



AbbVie develops, manufactures and sells pharmaceutical products such as HUMIRA.

ABBV 8/2016
Area
Criteria
CheckList
Comment
Quality Company
Dividend Growth
>5 years
No
Split from ABT in 2012
ROE/Op Margin
Stable
Yes
Stable
Long term Avg Growth
Stable
Yes
Stable
FCF over Dividends
FCF>Dividends
Yes
FCF covers Dividends
M* Moat
Wide Moat
No
Narrow
M* & S&P
Credit Rating
> BBB+
Yes
A-
Cash to Debt & Interest Coverage, Debt to Equity
Cash Debt >1 or Interest Coverage > 5
Yes
Cash to Debt 0.27
Interest Coverage 10.13
M* & S&P Stars
> 3 Stars for both
Yes
M* 4 Stars
S&P CapIQ 4 Stars
Payout Ratio
<60%
~
63%
Relative Risk Grade
<2.0
~
2.01
Dividend Growth
& Yield
Dividend Yield
>3%
Yes
3.41%
Dividend Growth
>5%
Yes since 2012
14.00%
Chowder
>12%
Yes since 2012
17.41%
Valuation
Yield/Avg Yield
>1.1
No
1.02
Dividend Yield Theory Mid Point
Below Mid Point
Yes
Mid Point 70.36
Low Point 53
P/E
Below Mid Point
Yes
Median 28.20 Trailing 20.13 Forward 11.89
DRRM
~10%
Yes
Assuming 6% growth; projected return=9.7%
M* Estimate
<M* est
~
M* 73
S&P Estimate
< S&P cap IQ est
Yes
S&P Cap IQ 84


United Technologies Corporation provides technology products to building systems and aerospace industries.

UTX 8/2016
Area
Criteria
CheckList
Comment
Quality Company
Dividend Growth
>5 years
Yes
22 Years
ROE/Op Margin
Stable
Yes
Stable
Long term Avg Growth
Stable
Yes
Stable
FCF over Dividends
FCF>Dividends
Yes
FCF covers Dividends
M* Moat
Wide Moat
Yes
Wide
M* & S&P
Credit Rating
> BBB+
Yes
A
Cash to Debt & Interest Coverage, Debt to Equity
Cash Debt >1 or Interest Coverage > 5
Yes
Cash to Debt 0.3
Interest Coverage 7.53
M* & S&P Stars
> 3 Stars for both
Yes
M* 4 Stars
S&P CapIQ 4 Stars
Payout Ratio
<60%
Yes
58%
Relative Risk Grae
<2.0
Yes
1.28%
Dividend Growth
& Yield
Dividend Yield
>3%
No
2.47%
Dividend Growth
>5%
Yes
7.20%
Chowder
>12%
No
9.67%
Valuation
Yield/Avg Yield
>1.1
No
1.06
Dividend Yield Theory Mid Point
Below Mid Point
Yes
Mid Point 110.
Low Point 88
P/E
Below Mid Point
Yes
Median 16.22 Trailing 12.61 Forward 15.48
DRRM
~10%
Yes
Assuming 4% growth; projected return=10.5%
M* Estimate
<M* est
Yes
M* 122
S&P Estimate
< S&P cap IQ est
Yes
S&P Cap IQ 107

Others on my list - GILD, VFC, DIS, WFC

Disclaimer: You should always do your homework before you invest in anything - especially on something you read over the internet.

Thanks for reading!

D4s

6 comments:

  1. Thanks for sharing your watchlist D4S, WFC seems to be quite popular recently. Looking forward to seeing which one you buy :)

    Tristan

    ReplyDelete
    Replies
    1. Thanks Tristan. I've been adding WFC recently. I wouldn't mind adding more if it dips to the low 40s. Let's see if I get the opportunity to do this.
      D4s

      Delete
  2. I don't follow the first two companies but I own UTX. UTX is still looking good here. Among your other candidates DIS, WFC and VFC all look solid. Looking forward to seeing what you buy.

    ReplyDelete
    Replies
    1. Passive Income Pursuit,
      I had ABBV on the list for at least a month, but I didn't pull the trigger. I have some concerns with Humira being the 'only' product. Having said this, the other metrics are also very good. The risk grade is also at 2.0 - meaning that I should really buy it at the lowest point. I think this would be a risk for me... The other companies are good to add my existing positions (with the exception of AMGN - which is new).
      D4s

      Delete
  3. Hi,

    Abbvie on EV/EBITDA is not so cheap now. I was considering it in June when it was at around $58 and my greed to buy super cheap again made me miss a good trade...

    I like Gilead. With their cash flows it seems that they will generate current market cap within 5-6 years... awesome.

    Best regards,
    DividendTIME

    ReplyDelete
    Replies
    1. DividendTIME,
      I completely agree with you on ABBV. The price point is a little high which is why I didn't pull the trigger to buy. It's also riskier. So, still on my list, but not sure. I've been averaging down on GILD. I will add if it dips further.
      D4s

      Delete