Memorial Day Notes and News

Even though it is Memorial Day Weekend and the US markets are closed, markets around the world are open for business. There’s some news on CNN, where Bufett is quoted as saying that the US is in a recession.

"I believe that we are already in a recession," Buffet was quoted as saying. "Perhaps not in the sense as defined by economists. ... But people are already feeling the effects of a recession."
"It will be deeper and longer than what many think," he added.

My belief is that Buffet, who knows that markets listen to his every word, is trying to create a self-fulfilling prophecy. His gain would be buying some good quality companies stock at a bargain.
There are rumors floating around that InBev will be buying Anheuser- Busch (BUD) at $65/share. The stock is currently trading at about 36.35 euro/share in Germany, which at 1.5771 US Dollars per Euro equals to about $57.33, or about a 2% increase over last Fridays close.

It’s very intriguing that BUD is the second dividend aristocrat that might be taken over this year, after WWY agreed to be bought by a consortium of Mars Inc and Warren Buffet. Both companies are every value investors dream come true- strong, easily recognizable brand, stable business model as well as long history of paying increasing dividends. The issue with dividend aristocrats is that there are many great value companies within this list. Thus, they could potentially attract competitors, which will buy them at a record price, which will actually turn out to be a bargain in the long term. The dividend investor would have to look for new opportunities for his or her money as a result of the abovementioned happenings.

And last but not least,this Memorial Day I wanted to thank everyone who has fought, or is fighting for the right of american people to live in a free democratic country.

Kimberly-Clark (KMB) Dividend Analysis

Kimberly-Clark Corporation engages in the manufacture and marketing of health and hygiene products worldwide. It operates in four segments: Personal Care, Consumer Tissue, K-C Professional & Other, and Health Care.
Kimberly-Clark is a dividend aristocrat as well as a component in S&P 500 index. It has been increasing its dividends for the past 36 consecutive years. KMB has delivered an average total return of 6.60 % annually to its loyal shareholders. over the past 10 years.

At the same time the company has managed to deliver a 7.50 % average annual increase in its EPS since 1998. The company also managed to buy back 2.60% of its outstanding stock annually on average each year since 1999.

The ROE ratio was declining from its 1999 high of almost 33% to the 25% lows in 2003 and 2006 before shooting back up above 33% in 2007.

Annual dividend payments have increased over the past 10 years by an average of 8.30% annually, which is slightly above the growth in EPS. An 8% growth in dividends translates into the dividend payment doubling every 9 years. If we look at historical data, going as far back as 1988, KMB has indeed managed to double its quarterly dividend payments every nine and a half years on average.

If we invested $100,000 in KMB on December 31, 1997 we would have bought 2122 shares. Your first quarterly check would have been $530.50 in March 1998. If you kept reinvesting the dividends though instead of spending them, your quarterly dividend payment would have risen to $1,409 by December 2007. For a period of 10 years, the quarterly dividend has increased by 112 %. If you reinvested it though, your quarterly dividend income would have increased by 167.50%.

The dividend payout has remained below 50% for the majority of the past 10 years except for the past 3 years. A lower payout is always a plus, since it leaves room for consistent dividend growth minimizing the impact of short-term fluctuations in earnings.

I think that KMB is attractively valued with its low price/earnings multiple of 15, and DPR of 51%. The company also pays an above average yield of 3.60%.

Disclosure: I own shares of KMB

Relevant Articles:

- Wal-Mart Dividend Analysis

- 3M Dividend Analysis

- Procter & Gamble Dividend Analysis

- Sherwin Williams Dividend Analysis

TEPPCO Partners (TPP) Dividend Analysis

TEPPCO Partners, L.P., through its subsidiaries, operates common carrier pipelines of refined products and liquefied petroleum gases in the United States. The company operates in four segments: Downstream, Upstream, Midstream, and Marine Transportation.

Teppco is part of the dividend achievers index. It has been increasing its dividends for the past 18 consecutive years. Over the past 10 years the company has delivered an average total return of 13.40 % annually to its shareholders.

At the same time the company has managed to deliver a 5.50 % average annual increase in its EPS.

The ROE fluctuated greatly, rising as high as 31% in 1999 then falling to as low as 11% in 2003, before settling at 22% in 2007.

Annual dividend payments have increased over the past 10 years by an average of 5.90% annually, which is slightly above the growth in EPS. A 6% growth in dividends translates into the dividend payment doubling every twelve years. If we look at historical data, going as far back as 1995, TPP has indeed managed to double its dividend payments every twelve years.

If we invested $100,000 in TPP on December 31, 1997 we would have bought 4442 shares (Adjusted for a 2:1 stock split in August 2003). Your first quarterly check would have been $1888 in January 1998. If you kept reinvesting the dividends though instead of spending them, your quarterly payment would have risen to $6253 by October 2007. For a period of 10 years, your quarterly dividend has increased by 63.50 %. If you reinvested it though, your quarterly dividend would have increased by 221.20%.

The dividend payout has remained above 100% for the majority of our study period. When put into the perspective of the past 10 year’s average though, it looks pretty normal for the company. A lower payout is always a plus, since it leaves room for consistent dividend growth minimizing the impact of short-term fluctuations in earnings.

I think that TPP is attractively valued at its current price/earnings multiple. The company boasts an above average dividend yield.

Full Disclosure: I own TPP

Relevant Articles:

- Gannett Co (GCI) Dividend Analysis

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Carnivals, Festivals and Blogs

Carnivals and Festivals

Carnival of Personal Finance #153: the Q & A edition, hosted by Money and Values, selected my article Dividend Conspiracies.

Festival Of Stocks: 89th Edition hosted by Stock Pursuit, selected my article American Capital Strategies (ACAS) Dividend Analysis

Money Hacks Carnival #13 — Money Saving Hacks Edition, selected my article on Dividend Champions Watchlist.

Blogs

One of DivGuy's stocks, Diana Shipping (DSX) Increased its Dividend by 41%. This is one of the few dividend blogs which are updated regularly.

If you are still unsure about dividend investing, Dividends4Life presented Seven Important Reasons for Dividend Investing that would turn you into a dividend junkie.

The Dividend Guy asks his readers which one is more important, Dividend Yield or Dividend Growth?.

Living Off Dividends asked his readers How Passive Is Your Passive Income?. He even quoted my analysis of ACAS there.

Rising Dividend Investing presented WW Grainger: Old Fashion is in Style. He believes that GWW is 15-20% undervalued. You could read my analysis of GWW. I personally think that GWW is a buy on dips below 80.

The Money Gardener presented Canadian investment styles diverge. Basically canadian dividend stocks are underperforming the broad market average. Does short term market fluctuations concern MG? Not at all. He believes that when most investors are ignoring these dividend paying firms, is usually the best time to get involved.

Contrarian Value Investing presented Warren Buffett added to Unitedhealth Group. For all of you Buffet Watchers this might be a good tip to invest in. After all, if you had followed Buffet's investments over the past 3 decades, you would have outperformed the S&P 500.

Tyler from Dividend Money posted Why I Like Capstone Mining - CS.TO.

MoneyNing is having a Honeymoon Giveaway of More Than $1000. On June 1st, 2008, he will divide his highest RSS subscriber count (currently at 1,095) by 10 and give away 10 equal prizes for the following 10 days.

Kinder Morgan Energy Partners (KMP) Dividend Analysis

Kinder Morgan Energy Partners, L.P. owns and manages energy transportation and storage assets in North America. It operates in five segments: Products Pipelines, Natural Gas Pipelines, CO2, Terminals, and Trans Mountain.

Kinder Morgan Energy Partners is a not dividend aristocrat but a dividend achiever. It has been increasing its dividends for the past 12 consecutive years. Over that period the company has delivered an average total return of 20.00 % annually to its loyal shareholders.
At the same time the company has managed to deliver an impressive 21.30 % average annual increase in its net income from 1998 to 2007.
The ROE increased from a low of 7% in 1998 to a high of 24 % in 2006, before decreasing to 13 % in 2007.

Annual dividend payments have increased over the past 10 years by an average of 15.30% annually, which is lower than the growth in net income. A 15% growth in dividends translates into the dividend payment doubling almost every five years. If we look at historical data, going as far back as 1993, KMP has indeed managed to double its dividend payments almost every five years.
If we invested $100,000 in KMP on December 31, 1997 we would have bought 5903 shares (adjusted for a 2:1 split in August 2001). Your first quarterly check would have been $1658.75 in January 1998. If you kept reinvesting the dividends though instead of spending them, your quarterly payment would have risen to $9920.24 by October 2007. For a period of 10 years, your quarterly dividend has increased by 213 %. If you reinvested it though, your quarterly dividend would have increased by 498%.
The dividend payout has remained above 100% for the majority of our study period. When put into the perspective of the past 10 year’s average though, it looks pretty normal for the company. A lower payout is always a plus, since it leaves room for consistent dividend growth minimizing the impact of short-term fluctuations in earnings.

I think that KMP is attractively valued at its current price/earnings multiple and solid dividend growth. The company also boasts an above average dividend yield.

Full Disclosure: I own KMP

Relevant Articles:

- American Capital Strategies (ACAS) Dividend Analysis

- Gannett Co (GCI) Dividend Analysis
- Valspar Corporation (VAL) Dividend Analysis

- Dover Corp (DOV) Dividend Analysis