Innophos is the leading producer of specialty grade phosphate products for the Food, Pharmaceutical and Industrial market segments. Their products cover a broad range of applications including water, paper and metal treatment, agriculture, electronics, textiles, tablets, meat preservation and detergents. Their specialty phosphates are used as flavor enhancers in beverages, leavening agents in baked goods and cleaning agents in toothpaste.
For over a century Innophos and its predecessor companies have pioneered the processes by which complex phosphates are derived from organic phosphate rocks. They also hold a number of key patents governing the manufacture and use of phosphates. In addition they continue to develop new and innovative phosphate based products to address the specific applications and needs of their customers.
Key Facts: • Annual revenues $844 million (FY 2013) • Total assets: $745 million (FY 2013) • Nasdaq symbol: IPHS • Employs approximately 1,400 people worldwide • Formerly part of Rhodia, taken private by Bain Capital in 2004 • Innophos IPO date: November 2, 2006 • Corporate headquarters: Cranbury, New Jersey USA • Chairman of the Board of Directors & CEO: Randolph Gress
Innophos Holdings, Inc. (IPHS), through its subsidiaries, produces performance-critical and nutritional specialty ingredients with applications in food, beverage, dietary supplements, pharmaceutical, oral care, and industrial end markets. It operates through Specialty Phosphates US & Canada, Specialty Phosphates Mexico, and GTSP & Other segments. The company’s specialty ingredients include specialty phosphate salts, specialty phosphoric acids, and other mineral and botanical based specialty ingredients that are used as flavor enhancers in beverages; electrolytes in sports drinks; texture modifiers in cheeses; leavening agents in baked goods; mineral and botanical sources for nutritional supplements; pharmaceutical excipients; and abrasives in toothpaste, as well as in industrial applications, such as asphalt modification and petrochemical catalysis. It also provides food and technical grade purified phosphoric acid (PPA) used in the production of fertilizer, and specialty phosphate salts and acids, as well as in beverage and water treatment applications; technical grade sodium tri polyphosphate (STPP), a specialty phosphate, which is used as an ingredient in cleaning products, such as industrial and institutional cleaners, automatic dishwashing detergents, and consumer laundry detergents, as well as in water treatment, clay processing, and copper ore processing activities; and detergent grade PPA that is primarily used in the production of STPP. In addition, the company offers granular triple super phosphate (GTSP), a fertilizer product line used for enhancing crop yields in various agricultural sectors. It serves primarily consumer goods manufacturers, distributors, and specialty chemical manufacturers in the United States, Mexico, Canada, and internationally. Innophos Holdings, Inc. was founded in 2004 and is headquartered in Cranbury, New Jersey. (Daily Chart)
Innophos was originally part of Rhodia Corporation but was taken private by the private equity firm Bain Capital. In 2006 the company was sold to the general public through an initial public offering (IPO). Since going public, Innophos has struggled with returns which have been strong but volatile, reduction of leverage in the balance sheet, growth in emerging markets, reduction in margin volatility, and increasing the dividend payouts to investors.
27 January 2015 Price $60.28 1yr Target $67.00 Analysts 3 1yr Cap Gain 11.15% Dividend $1.92 Yield 3.19% 1yr Est Tot Return 14.33%
Market Cap $1.30 Bil Beta 1.02 EPS (ttm) $3.04 Payout Ratio 51.75% EPS next yr $3.71 Forward P/E 16.27 Debt/Equity 0.27 ROA 9.10% ROE 14.30% ROI 9.10% Sales $841.20 Mil Income $67.60 Mil Profit Margin 8.03%
Revenues, Earnings and Dividends
Below is a listing of the revenues, earnings, dividends and the payout ratios of the company since once again going public in 2006. Revenues have increased by 45% and dividends by 113% since going public through both internal growth as well as acquisitions.
Year 2015 Est 2014 Est 2013 2012 2011 2010 2009 2008 2007
Revenues $858.60 Mil $838.10 Mil $844.12 Mil $862.39 Mil $810.48 Mil $714.23 Mil $666.75 Mil $934.75 Mil $578.98 Mil
Innophos has created a lot of wealth for its shareholders who bought into the IPO at $12 and now sits at just above $60. They've also increased their dividend from $0.68 to $1.45, with additional estimates of $1.76 for 2014 and $2.20 for 2015. The company also has a share buy back program in place with the intent of buying back approximately 10% of the outstanding shares. These are all typical of the actions that conservative dividend growth investors look for in their investments.
With one year estimates of Innophos's earnings and dividends increasing at a very robust pace, I believe this may just be the time to start a position in this company and this industry. I intend to do just that in the near future as funds become available in my accounts.
China's anti-corruption campaign, its tightening of credit and its restrictions on transit visas are putting pressure on casinos operating in Macau and providing an opportunity for investors who see this as a temporary event. Of special interest is Wynn Resorts. Wynn Resorts operates casinos in Macau and Las Vegas, but its main raison d'être is entertainment.
Wynn Resorts, Limited (WYNN), together with its subsidiaries, develops, owns, and operates destination casino resorts. It operates in two segments, Macau Operations and Las Vegas Operations. The company operates Wynn Macau and Encore at Wynn Macau resort located in the People’s Republic of China. Its Macau resorts feature two luxury hotel towers with a total of 1,008 rooms and suites; 493 table games; 866 slot machines; a poker pit in approximately 280,000 square feet of casino gaming space; 8 restaurants; 2 spas and 1 salon; lounges; meeting facilities; 2 health clubs and spas; and approximately 57,000 square feet of retail space featuring boutiques, as well as a show in the rotunda. The company also owns and operates Wynn Las Vegas and Encore at Wynn Las Vegas resort with a total of 4,748 hotel rooms, suites, and villas; 230 table games; 1,854 slot machines; a race and sports book and poker room in approximately 186,000 square feet of casino gaming space, including a sky casino and private gaming salons; 34 food and beverage outlets; 2 spas and salons; lounges; and approximately 96,000 square feet of retail space featuring various boutiques. Its Las Vegas resorts also offer 3 nightclubs; a beach club; a Ferrari and Maserati automobile dealership; wedding chapels; an 18-hole golf course; approximately 283,000 square feet of meeting space; a theater; and an Encore theater presenting various headliner entertainment acts, as well as provides 2 showrooms and a beach club. Wynn Resorts, Limited was founded in 2002 and is based in Las Vegas, Nevada. (Daily Chart)
January 2015 Price $146.99 1yr Target $198.24 Analysts 17 1yr Cap Gain 34.86% Dividend $6.25 Yield 4.25% 1yr Est Tot Return 39.11%
Market Cap $14.90 Bil Beta 1.49 EPS (ttm) $8.20 Payout Ratio 76.21% EPS next yr $7.44 Forward P/E 19.77 Debt/Equity 77.53 ROA 9.40% ROE UNK ROI 19.80% Sales $5.82 Bil Income $836.10 Mil Profit Margin 14.36%
It appears that the fundamentals began leveling off after 2011 for revenues and after 2013 for earnings. This is not the kind of numbers I normally like to see when I'm researching companies for new buys. I also don't like to see dividends that are volatile and somewhat unpredictable.
Year 2015 Est 2014 Est 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003
Revenues $5.37 Bil $5.51 Bil $5.62 Bil $5.15 Bil $5.26 Bil $4.18 Bil $3.04 Bil $2.98 Bil $2.68 Bil $1.43 Bil $0.72 Bil $0.30 Bil $0.10 Bil
I'm interested in Wynn Resorts for a couple of reasons. It's in the the very lucrative casino business. I currently own stock in Las Vegas Sands and I've been very pleased with that investment. I also like the fact that Wynn Resorts goes further by emphasizing the entire entertainment package of staying at the Wynn Resorts. With Wynn opening an additional casino/resort in Macau, the recent opening of the Encore in Las Vegas, and the construction of the Wynn Boston, I intend to continue to monitor this stock for future purchases. I think there's something special going on with this company but I'm just not ready to commit funds until my research encourages me to.
While looking for companies with high dividend growth rates I found six companies that have a relatively high rate of growth and wrote about them in the article titled "Six Companies Growing Their Dividends" dated 5 January 2015. One of those companies peaked my interest because it not only has a three year dividend growth rate near 30%, it recently announce it is upping its dividend by 50% and changing its dividend from a quarterly dividend to a monthly dividend.
JMP Group Inc. (JMP), together with its subsidiaries, provides investment banking and asset management services in the United States. The company operates through Broker-Dealer, Asset Management, and Corporate Credit segments. The Broker-Dealer segment offers services, such as underwriting and acting as a placement agent for public and private capital markets raising transactions; and financial advisory services in mergers and acquisitions, restructuring, and other strategic transactions. This segment also provides institutional brokerage services and equity research services to institutional investor clients. The Asset Management segment is involved in the management of a range of pooled investment vehicles, including the hedge funds of funds. The Corporate Credit segment includes the management of collateralized loan obligations, small business loans, and various principal investments. JMP Group Inc. was incorporated in 2000 and is headquartered in San Francisco, California. (Daily Chart)
Price $7.63 1yr Target $9.72 Analysts 3 1yr Cap Gain 27.39% Dividend $0.22 Yield 2.88% 1yr Est Tot Return 30.27%
Market Cap $156.80 Mil Beta 1.76 EPS (ttm) $0.50 Payout Ratio 44.00% EPS next yr $0.84 P/E 15.26 PEG 0.85 Forward P/E 9.05
Debt/Equity 0.69 ROA 1.00% ROE 9.30% ROI 7.10% Sales $210.60 Mil Income $12.20 Mil Profit Margin 5.79%
The JMP Group is a group of specialized companies that conduct full service banking and asset management. The group consists of JMP Securities, Harvest Capital Strategies, and JMP Credit Services.
JMP Securitiesis a full-service investment bank that provides equity research, institutional brokerage and investment banking services to growth companies and their investors.
Harvest Capital Strategies LLC is a San Francisco-based, SEC-registered investment adviser with approximately $1.6 billion in alternative assets under management that focuses on long-short equity hedge funds, private equity and middle-market lending.
JMP Credit Advisors LLC is an asset management platform established to underwrite and manage investments in senior secured debt. We currently manage approximately $1.1 billion through three collateralized loan obligations, or CLOs.
Revenues, Earnings and Dividends
Year 2015 Est 2014 Est 2013 2012 2011 2010 2009 2008 2007
Revenues $183.13 Mil $173.40 Mil $149.21 Mil $100.92 Mil $111.55 Mil $144.71 Mil $149.48 Mil $81.24 Mil $97.86 Mil
Revenue Growth Rate 1 yr = 47.84% 2 yr = 15.65% 3 yr = 1.01% 4 yr = -0.05% 5 yr = 12.92%
Earnings Growth Rate 1 yr = 33.33% 2 yr = N/A 3 yr = -27.84% 4 yr = -24.41% 5 yr = N/A
Dividend Growth Rate 1 yr = 7.69% 2 yr = 18.32% 3 yr = 32.26% 4 yr = 29.35% 5 yr = 47.57%
This company doesn't have a long history to base a reliable judgement on, and the history it does have is quite volatile. However it has two very nice things going for it. The estimated one year projections of the revenues, earnings and dividends are growing at a very phenomenal rate and the dividend growth rate in not only spectacular but is in fact increasing going forward. With The JMP Group recently announcing that they are changing from a $0.07 quarterly dividend to a $0.35 monthly dividend, the dividend is being increased by 50% for 2015.
I feel that they are doing this because they have confidence in their future. As a consequence I am currently accumulating a position in this security with the expectations that I will hold the stock as long as the dividends continue to increase.
Waste Connections, Inc. (WCN), an integrated municipal solid waste company, provides solid waste collection, transfer, disposal, and recycling services primarily in the United States. The company operates in four segments: Western, Central, Eastern, and Exploration and Production (E&P). It offers collection services to residential, commercial, industrial, and E&P customers; landfill disposal services; and recycling services for various recyclable materials, including compost, cardboard, office paper, plastic containers, glass bottles, and ferrous and aluminum metals. The company also owns and operates transfer stations that receive, compact, and load waste to be transported to landfills or treatment facilities via truck, rail, or barge; and intermodal services, including repositioning, storage, maintenance, and repair of cargo containers for international shipping companies for the rail haul movement of cargo and solid waste containers in the Pacific Northwest through a network of intermodal facilities. In addition, it treats, recovers, and disposes waste resulting from oil and natural gas exploration and production activity, such as drilling fluids, drill cuttings, completion fluids, and flowback water; production wastes and produced water during a well’s operating life; contaminated soils that require treatment during site reclamation; and substances that require clean-up after a spill, reserve pit clean-up, or pipeline rupture. Further, the company provides container and chassis sales and leasing services to its customers. As of December 31, 2013, it owned or operated a network of 148 solid waste collection operations; 66 transfer stations; 7 intermodal facilities; 36 recycling operations; 55 landfills; 20 E&P liquid waste injection wells; 17 E&P waste treatment and recovery facilities; and 20 oil recovery facilities. Waste Connections, Inc. was founded in 1997 and is headquartered in The Woodlands, Texas. (Daily Chart) (Weekly Chart)
12 January 2015 Price $42.46 1yr Target $55.00 Analysts 8 1yr Cap Gain 29.22% Dividend $0.52 Yield 1.22% 1yr Est Tot Return 30.44%
3yr DivGR 54.36% 5yr DivGR N/A P/E 23.99 PEG 1.89
Market Cap $5.27 Bil Beta 0.38 EPS (ttm) $1.77 Payout Ratio 29.37% EPS next yr $2.20 Forward P/E 19.27 Debt/Equity 0.90 ROA 4.40% ROE 10.50% ROI 6.40% Sales $2.04 Bil Income $221.20 Mil Profit Margin 10.83%
As of December 31, 2013, Waste Connections served residential, commercial, industrial and E&P customers in 31 states: Alabama, Alaska, Arizona, California, Colorado, Idaho, Illinois, Iowa, Kansas, Kentucky, Louisiana, Massachusetts, Michigan, Minnesota, Mississippi, Montana, Nebraska, Nevada, New Mexico, New York, North Carolina, North Dakota, Oklahoma, Oregon, South Carolina, South Dakota, Tennessee, Texas, Utah, Washington and Wyoming.
Waste Connections seeks to avoid highly competitive, large urban markets and instead target markets where the company can attain high market share either through exclusive contracts, vertical integration or asset positioning. The company also targets niche markets, like E&P waste treatment and disposal services, with similar characteristics and higher comparative growth potential. Waste Connections is a leading provider of waste services in most of its markets, and the key components of the company's operating strategy, which are tailored to the competitive and regulatory factors that affect our markets, are as follows:
Target Secondary and Rural Markets. By targeting secondary and rural markets, Waste Connections believes that the company is able to garner a higher local market share than would be attainable in more competitive urban markets, which they believe reduces their exposure to customer churn and improves financial returns. In certain niche markets, like E&P waste treatment and disposal, early mover advantage in certain rural basins improves market positioning and financial returns given the limited availability of existing third party owned waste disposal alternatives.
Control the Waste Stream. In markets where waste collection services are provided under exclusive arrangements, or where waste disposal is municipally owned or funded or available at multiple sources, Waste Connections believes that controlling the waste stream by providing collection services under exclusive arrangements is often more important to our growth and profitability than owning or operating landfills. In addition, in certain E&P markets with “no pit” rules or other regulations that limit on-site storage or treatment of waste, control of the waste stream allows the company to generate additional service revenue from the transportation of waste, as well as the waste treatment and disposal, thus increasing the overall scope and value of the services provided.
Optimize Asset Positioning. Waste Connections believes that the location of disposal sites within competitive markets is a critical factor to success in both MSW and E&P waste services. Given the importance of and costs associated with the transportation of waste to treatment and disposal sites, having disposal capacity proximate to the waste stream will provide a competitive advantage and serve as a barrier to entry for competitors.
Provide Vertically Integrated Services. In markets where Waste Connections believes that owning landfills is a strategic advantage to a collection operation because of competitive and regulatory factors, the company generally focuses on providing integrated services, from collection through disposal of solid waste in landfills that it owns or operates. Similarly, the company sees this strategic advantage in E&P waste services where they offer closed loop systems for liquid and solid waste storage, transportation, treatment, and disposal.
The Growth Strategy
Waste Connections's operations include market areas where the company has exclusive arrangements, including franchise agreements, municipal contracts and governmental certificates, under which the company is the exclusive service provider for a specified market. These exclusive rights and contractual arrangements create a barrier to entry that is usually obtained either through the acquisition of a company with such exclusive rights or contractual arrangements or by winning a competitive bid.
Waste Connections intends to expand the scope of the company's operations by continuing to acquire MSW and E&P waste facilities and companies in new markets and in existing or adjacent markets that are combined with or “tucked in” to the company's existing operations. Waste Connections focuses their acquisition efforts on markets that the company believes will provide significant growth opportunities for a well-capitalized market entrant and where they can create economic and operational barriers to entry by new competitors. This focus typically highlights markets in which the company can: (1) provide waste collection services under exclusive arrangements such as franchise agreements, municipal contracts and governmental certificates; (2) gain a leading market position and provide vertically integrated collection and disposal services; or (3) gain a leading market position in a niche market through the provision of treatment and disposal services.
During the year ended December 31, 2013, Waste Connections completed eight acquisitions, none of which individually accounted for greater than 10% of our total assets. The total fair value of consideration transferred for the eight acquisitions completed during the year ended December 31, 2013 was approximately $64.2 million. During 2012, the company acquired the business of R360 Environmental Solutions, Inc., or R360, a leading provider of non-hazardous E&P waste treatment, recovery and disposal services, for total fair value of consideration transferred of $1.38 billion. During the year ended December 31, 2012, the company completed 12 other acquisitions, none of which individually or in the aggregate accounted for greater than 10% of our total assets. The total fair value of consideration transferred for the 12 other acquisitions completed during the year ended December 31, 2012 was approximately $275.8 million. During the year ended December 31, 2011, the company completed 13 acquisitions, none of which individually accounted for greater than 10% of our total assets. The total fair value of consideration transferred for the 13 acquisitions completed during the year ended December 31, 2011 was approximately $375.7 million.
The company's revenues have been on a consistently higher trajectory for the last ten years. Earnings have been less consistent but they have, for the most part, increased over those ten years also. Fortunately for investors, the company started paying dividends in 2010 and have raised them ever since.
Based on analysts estimates going forward, it appears that dividends will continue into the future. Notice that dividends have been growing at a slower rate than both the revenues and the earnings so I believe that the dividend growth rate will have to excel in order to keep up with the expanding revenues and earnings. In fact, just to maintain a 25% payout the company will have to increase dividends at nearly 15% per year. And with the current payout ratio at only 25% there's plenty of room for increases.
Year 2015 Est 2014 Est 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003
Revenues $2.20 Bil $2.09 Bil $1.92 Bil $1.66 Bil $1.50 Bil $1.31 Bil $1.19 Bil $1.04 Bil $0.95 Bil $0.82 Bil $0.72 Bil $0.62 Bil $0.56 Bil
Revenue Growth Rate 1 year = 15.66% 2 year = 13.13% 3 year = 13.44% 4 year = 12.70% 5 year = 13.04% 10 year = 13.11%
Earnings Growth Rate 1 year = 20.61% 2 year = 4.38% 3 year = 10.73% 4 year = 14.78% 5 year = 10.02% 10 year = 9.45%
Dividend Growth Rate 1 year = 10.81% 2 year = 15.00% 3 year = 54.36%
Waste Connections, Inc., is part of the Waste Management Industry which is part of the Industrial Goods Sector of the economy. Below are a few of the major corporations included in this industry that pay at least a minimal dividend. They are listed in the order of their market capitalization.
Waste Connections Inc. has everything I'm looking for in a company except for a dividend above 2.00%, a long track record of raising dividends and a P/E under 20. But based upon analyst's estimates it appears that the earnings and dividends will continue to grow for at least the next two years which would make these goals attainable.
I like how the company enters entire territories that can be acquired and then defended against competitors. I also like how they sell additional products into that same space and then expand into adjacent areas to leverage their expertise.
I expect to start accumulating a position in this company in the next few weeks as funds become available.
As the overall business environment continues to increase during this new year, it's almost intuitive that the steel industry will benefit from a better economy. It's also intuitive that as the oil and oil services industries contract the requirement for tubular steel will contract too. But steel is everywhere and isn't going anywhere anytime soon.
It's also true that the steel industry of fifty years ago is not the steel industry of today because the world of fifty years ago isn't the world of today either. The steel industry today competes internationally and is dominated by steel companies in other countries around the globe. As a result, I decided to take a look at today's American steel and iron companies and see what I could find out.
With this in mind, and the fact that Nucor Corporation keeps showing up on my best ideas list, I thought it was time to take a look at the big names in the American steel industry. Listed below are six of the largest (by market capitalization) steel and iron companies headquartered in the United States. This group may or may not contain one or two real gems that an investor may feel fits in with their own investing style. Of course additional research will probably be needed before making any investments, but this may be just the initial analysis needed to start that research.
Before digging into the company fundamentals below, it may be advantageous to watch the following video which explains the steel making processes and what's required to turn iron ore into rolled or slab steel. It's a very interesting summary of just how the processes work. As you will see, the steel industry is a very sophisticated and competitive industry and often the winner is the one that adds the most value for their customers.
Nucor Corporation (NUE), together with its subsidiaries, manufactures and sells steel and steel products in North America and internationally. It operates through three segments: Steel Mills, Steel Products, and Raw Materials. The Steel Mills segment produces and distributes hot-rolled, cold-rolled, and galvanized sheet steel; plate steel; structural steel comprising wide-flange beams, beam blanks, H-piling, and sheet piling; and bar steel, such as blooms, billets, concrete reinforcing bars, merchant bars, and special bar quality products. This segment sells its products to service centers, fabricators, and manufacturers. It serves automotive, energy, agricultural, heavy equipment, and transportation sectors. The Steel Products segment offers steel joists and joist girders, steel decks, fabricated concrete reinforcing steel, cold finished steel, steel fasteners, metal building systems, steel grating and expanded metal, and wire and wire mesh. Its products are used by contractors in constructing highways, bridges, reservoirs, utilities, hospitals, schools, airports, stadiums, and high-rise buildings. This segment sells its products to general contractors, fabricators, distributors, and manufacturers. The Raw Materials segment produces direct reduced iron; brokers ferrous and nonferrous metals, pig iron, hot briquetted iron, and direct reduced iron; supplies ferro-alloys; and processes ferrous and nonferrous scrap metal. This segment sells its products to electric arc furnace steel mills and foundries that use ferrous scrap as a raw material in their manufacturing process; and aluminum can producers, secondary aluminum smelters, steel mills, and other processors and consumers of various nonferrous metals. Nucor Corporation was founded in 1940 and is based in Charlotte, North Carolina. (Daily Chart)
11 January 2015 Price $47.78 1yr Target $59.06 Analysts 17 1yr Cap Gain 23.60% Dividend $1.49 Yield 3.11% 1yr Est Tot Return 26.71%
Market Cap $15.24 Bil Beta 1.29 EPS (ttm) $2.10 Payout Ratio 70.95% EPS next yr $3.43 Forward P/E 13.94 Debt/Equity 0.59 ROA 4.40% ROE 8.80% ROI 6.00% Sales $21.00 Bil Income $671.80 Mil Profit Margin 3.19%
Reliance Steel & Aluminum Co. (RS) operates as a metals service center company. The company provides metals processing services and distributes a line of approximately 100,000 metal products, including alloy, aluminum, brass, copper, carbon steel, stainless steel, titanium, and specialty steel products to small machine shops and fabricators, and OEM customers. Its principal processing services comprise cutting, leveling, sawing, machining, or electro polishing. The company also offers a range of metal perforating and fabrication services; and steel and alloy pipes, tubes and bar products, and precision manufacturing of various tools designed for the energy service companies. Reliance Steel & Aluminum Co. serves general manufacturing, non-residential construction, transportation, aerospace, energy, electronics, and semiconductor fabrication and related industries. As of February 20, 2014, it maintained a network of approximately 290 metals service center processing and distribution facilities in 39 states in the United States, as well as in Australia, Belgium, Canada, China, Malaysia, Mexico, Singapore, South Korea, the United Arab Emirates, and the United Kingdom. The company was founded in 1939 and is headquartered in Los Angeles, California. (Daily Chart)
11 January 2015 Price $57.09 1yr Target $74.60 Analysts 10 1yr Cap Gain 30.67% Dividend $1.40 Yield 2.45% 1yr Est Tot Return 33.12%
Market Cap $4.46 Bil Beta 1.71 EPS (ttm) $4.34 Payout Ratio 32.25% EPS next yr $5.80 Forward P/E 9.84 Debt/Equity 0.57 ROA 4.40% ROE 8.50% ROI 6.70% Sales $10.18 Bil Income $341.00 Mil Profit Margin 3.34%
Steel Dynamics, Inc. (STLD), together with its subsidiaries, manufactures and sells steel products, processes and sells recycled ferrous and nonferrous metals, and fabricates and sells steel joist and decking products in the United States and internationally. The company operates in three segments: Steel Operations, Metals Recycling and Ferrous Resources Operations, and Steel Fabrication Operations. The Steel Operations segment provides a range of sheet steel products, including hot rolled, cold rolled, and coated steel products; structural steel beams, pilings, and various rail products for the railroad industry; rounds and round-cornered squares; angles, plain rounds, flats, and channels, as well as billets; and merchant beams and specialty structural steel sections. This segment offers its products for automotive, agriculture, construction, commercial, transportation, energy, and industrial machinery markets. The Metals Recycling and Ferrous Resources Operations segment is involved in the purchase, process, and resale of ferrous and nonferrous scrap metals into reusable forms and grades. Its ferrous products include heavy melting steel, busheling, bundled scrap, shredded scrap, steel turnings, and cast iron products; and nonferrous products comprise aluminum, brass, copper, stainless steel, and other nonferrous metals for use in foundry, mill refining, and smelting applications. This segment also produces liquid pig iron and hot briquetted iron; and iron nugget products. The Steel Fabrication Operations segment produces steel building components comprising trusses, girders, steel joists, and steel decking products for the non-residential construction industry. The company also serves steel service centers, steel fabricators, various manufacturers, cold finishers, forgers, intermediate processors, original equipment manufacturers, steel service centers, and distributors. The company was founded in 1993 and is headquartered in Fort Wayne, Indiana. (Daily Chart)
11 January 2015 Price $18.90 1yr Target $26.73 Analysts 15 1yr Cap Gain 41.42% Dividend $0.46 Yield 2.43% 1yr Est Tot Return 43.85%
3yr DivGR 4.72% 5yr DivGR 7.52 P/E 17.66 PEG 0.62
Market Cap $4.54 Bil Beta 1.64 EPS (ttm) $1.07 Payout Ratio 42.99% EPS next yr $2.10 Forward P/E 8.99 Debt/Equity 1.03 ROA 4.00% ROE 9.30% ROI 6.20% Sales $8.10 Bil Income $256.70 Mil Profit Margin 3.16%
United States Steel Corporation (X) produces and sells flat-rolled and tubular steel products in North America and Europe. The company operates in three segments: Flat-Rolled Products (Flat-Rolled), U. S. Steel Europe (USSE), and Tubular Products (Tubular). The Flat-Rolled segment offers slabs, rounds, strip mill plates, sheets, and tin mill products, as well as produces iron ore and coke. This segment serves customers in the service center, conversion, transportation, construction, container, appliance, and electrical markets. The USSE segment provides slabs, sheets, strip mill plates, tin mill products, and spiral welded pipes, as well as heating radiators and refractory ceramic materials. This segment serves customers in the construction, service center, conversion, container, transportation, appliance and electrical, oil, gas, and petrochemical markets. The Tubular segment offers seamless and electric resistance welded steel casing and tubing; and standard and line pipe and mechanical tubing products. This segment serves customers in the oil, gas, and petrochemical markets. The company also provides railroad services; and owns, develops, and manages various real estate assets. The company was founded in 1901 and is headquartered in Pittsburgh, Pennsylvania. (Daily Chart)
11 January 2015 Price $24.57 1yr Target $42.63 Analysts 16 1yr Cap Gain 73.50% Dividend $0.20 Yield 0.81% 1yr Est Tot Return 74.31%
Market Cap $3.57 Bil Beta 1.76 EPS (ttm) $0.65 Payout Ratio 30.76% EPS next yr $3.50 Forward P/E 7.02 Debt/Equity 0.89 ROA 0.70% ROE 2.70% ROI -18.40% Sales $17.70 Bil Income $97.00 Mil Profit Margin 0.54%
Worthington Industries, Inc. (WOR), a metals manufacturing company, focuses on value-added steel processing and manufactured metal products in the United States, Europe, Mexico, Canada, and internationally. It operates through three segments: Steel Processing, Pressure Cylinders, and Engineered Cabs. The Steel Processing segment provides stainless and flat-rolled steel processing services to customers in the automotive, construction, lawn and garden, hardware, furniture, office equipment, leisure and recreation, appliance, agricultural, HVAC, container, and aerospace markets. It also toll processes steel for steel mills, large end-users, service centers, and other processors; and designs and manufactures reusable custom steel platforms, racks, and pallets for supporting, protecting, and handling products in the shipping process for customers in industries, such as automotive, lawn and garden, and recreational vehicles. The Pressure Cylinders segment manufactures and sells high-pressure and seamless steel cylinders for compressed natural gas, and other industrial gas storage applications; and filled and unfilled pressure cylinders, tanks, and various accessories and related products for various end-use market applications comprising consumer products, alternative fuels, industrial products, and energy. The Engineered Cabs segment designs and manufactures custom-engineered open and closed cabs, and operator stations for heavy mobile equipment in a range of industries; and manufactures other specialty weldments, kits, accessories, and cab components primarily to original equipment manufacturers. The company was founded in 1955 and is headquartered in Columbus, Ohio. (Daily Chart)
11 January 2015 Price $26.25 1yr Target $41.67 Analysts 6 1yr Cap Gain 58.74% Dividend $0.72 Yield 2.74% 1yr Est Tot Return 61.48%
Market Cap $1.76 Bil Beta 1.79 EPS (ttm) $2.09 Payout Ratio 34.44% EPS next yr $2.92 Forward P/E 8.98 Debt/Equity 0.79 ROA 6.50% ROE 17.10% ROI 5.20% Sales $3.40 Bil Income $147.40 Mil Profit Margin 4.32%
Commercial Metals Company (CMC) manufactures, recycles, and markets steel and metal products, and related materials and services in the United States and internationally. It operates through five segments: Americas Recycling, Americas Mills, Americas Fabrication, International Mill, and International Marketing and Distribution. The Americas Recycling segment processes scrap metals for use as a raw material by manufacturers of new metal products through 29 scrap metal processing facilities to steel mills and foundries, aluminum sheet and ingot manufacturers, brass and bronze ingot makers, copper refineries and mills, secondary lead smelters, specialty steel mills, high temperature alloy manufacturers, and other consumers. The Americas Mills segment operates 5 steel mills producing reinforcing bars, angles, flats, rounds, small beams, fence-post sections, and other shapes; 2 scrap metal shredders and 10 scrap metal processing facilities; and a railroad salvage company. The Americas Fabrication segment operates fence post manufacturing plants, construction-related product facilities, and plants that bend, weld, cut, and fabricate steel; warehouses that sell or rent products for the installation of concrete; facilities that produce steel fence posts; and facilities that heat-treat steel. The International Mill segment engages in mill, recycling, and fabrication operations through the operation of two rolling minimills that produce reinforcing bar (rebar) and merchant products; a specialty rod finishing mill; scrap processing facilities; and four steel fabrication facilities for rebar and mesh products. The International Marketing and Distribution segment processes, sells, and distributes steel products, ferrous and nonferrous metals, and other industrial products to manufacturers in the steel, nonferrous metals, metal fabrication, chemical, refractory, construction, and transportation businesses. The company was founded in 1915 and is headquartered in Irving, Texas. (Daily Chart)
11 January 2015 Price $14.21 1yr Target $20.00 Analysts 8 1yr Cap Gain 40.74% Dividend $0.48 Yield 3.37% 1yr Est Tot Return 44.11%
Market Cap $1.67 Bil Beta 1.49 EPS (ttm) $0.86 Payout Ratio 55.81% EPS next yr $1.56 Forward P/E 9.11 Debt/Equity 0.96 ROA 3.20% ROE 8.60% ROI 6.70% Sales $7.04 Bil Income $102.10 Mil Profit Margin 1.44%
In case you feel like you're suffering from whiplash from a market that seems to change its mind every day, or every few hours, you might want to relax just a little.
You may be experiencing a certain level of excitement one day only to have it turn into stress the next. But by looking at a simple daily chart of the Dow Jones Industrial Average it's easy to see that the last thirty days haven't been as bad as you may think they've been. In the last thirty days the DJIA hasn't penetrated the upper or lower Bollinger Bands and the RSI has stayed below 70 and above 30. While this is a market demonstrating a lot of volatility, it really hasn't ended up in over bought or over sold territory in the last thirty days.
So before I make the mistake of over trading my accounts, I always check the charts. I believe that stocks and averages can become over bought and over sold, but I also believe that stocks and markets can exhibit a lot of volatility at times. I've learned over the years that trading the extremes can often be lucrative for a nimble investor but trying to trade the normal market volatility can be devastating to an investor's portfolio.
Based on a review of the chart below, a smart investor would have moved out of the market during the first week of December and then moved back into the market at mid month. He would not have moved out of the market at the end of the month and therefore would not need to move back into the market today. A smart investor would buy only at the extreme points when the money is easiest to make and the probability is in his favor.
Anyone over 2 years old knows who Ronald McDonald is. And just about everyone over 2 years old has been to a McDonald's restaurant. So despite the challenges the company has recently experienced, the world is not going to give up on its most popular meal -- the all American hamburger.
McDonald’s Corporation (MCD) franchises and operates McDonald's restaurants in the United States, Europe, the Asia/Pacific, the Middle East, Africa, Canada, and Latin America. The company’'s restaurants offer various food items, soft drinks, coffee, and other beverages, as well as breakfast menus. As of December 31, 2013, it operated 35,429 restaurants, including 28,691 franchised and 6,738 company-operated restaurants. The company was founded in 1940 and is based in Oak Brook, Illinois. (Daily Chart) (Weekly Chart)
Data as of 4 January 2015
Price $93.26 1yr Target $95.99 Analysts 20 1yr Cap Gain 2.92% Dividend $3.40 Yield 3.64% 1yr Est Tot Return 6.56%
Market Cap $90.76 Bil Beta 0.35 EPS (ttm) $5.09 Payout Ratio 66.79% EPS next yr $5.44 P/E 18.32 PEG 3.54 Forward P/E 17.14
Debt/Equity 1.11 ROA 13.80% ROE 32.70% ROI 20.40% Sales $27.96 Bil Income $5.06 Bil Profit Margin 18.09%
McDonald's recent quarterly reports have been mildly disappointing to investors. Revenue and earnings growth rates have been half of what they were just a couple of years ago. Traffic at the European store was down 1.4% and traffic at US stores was down 3.3%. If this wasn't enough, traffic at stores in the Middle East, Africa, and the Asia/Pacific was even worse due to concerns over food quality. As most investors know, the food quality problem was caused by one of McDonalds suppliers but that didn't matter. The damage to McDonalds image had already occurred.
In addition, other menu items like Chicken McNuggets and Big Macs were in short supply as McDonalds scrambled to find new suppliers. This has dented revenues and earnings in the short term but should not have a materiel effect on the long term fundamentals of the company since McDonalds has already corrected these problems. Bringing traffic back into the stores will not occur overnight but in time the company will attract more and more customers.
McDonalds is also experimenting with a number of initiatives. One idea they are implementing is bring back selective seasonal items like they recently did with the McRib. Another idea is allowing individual restaurants to cater to the local tastes of their customers. The parent company is also remodeling some of their restaurants to improve their look and feel as well as the traffic flow.
Analysts estimates are showing that the company will eventually get it's fundamentals back on track but like most things in life, timing is everything. In the meantime the company continues to increase the dividend by raising the payout ratio in the hope that they can lower the payout ratio in the future as earnings improve at the faster historical rate.
Year 2015 Est 2014 Est 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003
Revenues $30.25 Bil $28.75 Bil $28.38 Bil $27.49 Bil $26.44 Bil $22.85 Bil $21.12 Bil $21.09 Bil $19.55 Bil $17.93 Bil $16.20 Bil $15.01 Bil $13.58 Bil
Revenue Growth Rate 1 yr = 3.23% 2 yr = 3.60% 3 yr = 7.41% 4 yr = 7.66% 5 yr = 6.11% 10 yr = 7.64%
Earnings Growth Rate 1 yr = 3.54% 2 yr = 2.62% 3 yr = 6.39% 4 yr = 8.66% 5 yr = 8.86% 10 yr = 14.52%
Dividend Growth Rate 1 yr = 8.71% 2 yr = 11.04% 3 yr = 11.22% 4 yr = 11.07% 5 yr = 13.86% 10 yr = 22.80%
As can be seen in the company's weekly price chart that the stock has been going sideways for the last two years. What little variability there has been has obviously occurred between a low of approximately $90 and a high of approximately $100.
It can also be seen in the momentum indicators that the rise and fall of the price occurred simultaneously with the rise and fall of the RSI and the MACD. Using just these two indicators for confirmation would have allowed a swing trader to make quite a lot of money moving into and out of this stock.
The technicals are ultimately telling the average investor that there doesn't seem to be any hurry in accumulating shares of this company. Waiting for a more seductive price at or below $90 is probably the best entry point for both short term traders as well as long term investors.
This is not the first time I've written an article on McDonalds Corp. On August 16, 2014 I wrote the article "McDonald's Corp" and even today it's worth reading again. Then, as now, McDonald's Corporation is a great dividend growth story that fits well into my portfolio if bought at the right price. But timing is everything, right?
If I had between $20,000 and $50,000 to throw at any one stock I wouldn't be interested in this stock at this time. For the most part I would wait for McDonalds to sort out its problems and then invest as it rose above $100 per share. That way I would be assured that its problems were behind it. I would look for investors to be moving the stock into new high territory on higher volume. That's usually an obvious sign the things are improving quickly.
Unfortunately I don't have that sort of money (or anywhere near that sort of money) just laying around waiting for an opportunity. As a small investor I have to build up positions in companies a few shares at a time when I think they're undervalued. And I think these shares are currently undervalued and, to a greater extent, unwanted at this time. This is the kind of knowledge a contrarian investor likes to hear.
McDonalds is a great company that I believe will once again recapture their customer base. Regardless of the fact that the millenials tend to prefer the casual dining experience over the fast food experience, I believe they too will return as customers before long. As every generation has transitioned from living the single lifestyle to being married and having families, they soon rediscover the benefits of Happy Meals and Playgrounds.
I intend to accumulate shares at or below $90 per share with the intent of collecting the 3.6% dividend (which is near the highest the dividend has ever been!) while waiting for the shares to move higher. Hopefully the shares will continue to move sideways so I will have the opportunity to accumulate a decent position before the stock becomes significantly more expensive.
The key focus for Dividend Growth Investors is obviously and quite simply, dividend growth. Or at least that's what it should be. A true DGI's intent should always be to find all those companies that grow their dividends at a pretty fast pace and on a regular and consistent basis over time. And then he should prioritize those companies based on their growth rates.
This can be done quite easily by any investor since the research and the lists are posted all over the internet. The lists are usually made up of companies that pay consistent and improving dividends over different periods of time. Some of the most popular lists are the two that identify the Dividend Kings and the Dividend Aristocrats. These two lists are extremely popular these days primarily because all the hard work has already been done by other investors who have simply posted that information out there for everyone to see.
In analyzing any company from a dividend growth perspective, it's helpful to identify whether the rate of growth in the dividend is greater than the current and expected rate of inflation so that the investor's purchasing power will increase over time. This sounds important, simple and obvious, but most things in life are more difficult than they appear at first (usually due to expectations and assumptions).
Assuming that an investor has his entire life in front of him, or he is buying a stock that will eventually be handed down through the generations, the higher the sequential rate of dividend growth for a given company the better, regardless of the current yield. Most junior high school students can calculate the point at which the dividends on a high growth rate, low yield stock will surpass the dividends on a low growth rate, high yield stock. It's just a simple math problem. It may end up taking a few years but the higher dividend growth rate will always result in a larger dividend payout over time.
If your intent is to live forever, or to simply pass along all of your positions to your descendants, you needn't worry about the price you may end up paying for any given stock. You also don't have to worry the stock's current yield because regardless of whether you may or may not have gotten the best bargain on the stock of the company you just bought, in the end you'll have a larger stream of dividend income distributed to you than if you had bought a stock with a lower dividend growth rate. Be assured that eventually you, your children or your grandchildren will be better off having bought the company with the highest dividend growth rate than the one with the lower dividend growth rate.
So the obvious questions that immediately fall out of the above discussion are "Why analyze companies at all? Why not just buy the stock with the highest rate of dividend growth?" These are great questions. Many investors ignore all the research and do exactly that. For those who have the money to invest when they are young adults and end up living into their 90s, it's been an effective strategy and one that has built wealth and income beyond those investor's wildest dreams.
For the rest of us, however, this strategy just won't work. Buying stocks that are overpriced will create a portfolio that goes nowhere fast for years. It will take too many years, and sometimes decades, to overcome those bad entries into the market. What we need to do is find those companies that have a high rate of dividend growth and then determine where the best entry point occurs. It's those great entry points that give investors the highest starting dividend income that immediately starts to compound.
Below I've listed six companies that have relatively high dividend growth rates, nice annual dividend yields, reasonable price per earnings ratios, and relatively low payout ratios that will allow those companies to continue those dividend to continue and increase into the future. I've also included a four month daily price chart which includes the MACD Histogram in the background for visual coordination. As I have mentioned before, the MACD is my favorite confirming momentum indicator but I do use others as well.
Hopefully the information below will provide a few ideas that will drive other investors to do additional research into the fundamentals and technicals of these companies. There may just be a gem among these that can provide that desired financial freedom and security in the future.
JMP Group Inc. (JMP), together with its subsidiaries, provides investment banking and asset management services in the United States. The company operates through Broker-Dealer, Asset Management, and Corporate Credit segments. The Broker-Dealer segment offers services, such as underwriting and acting as a placement agent for public and private capital markets raising transactions; and financial advisory services in mergers and acquisitions, restructuring, and other strategic transactions. This segment also provides institutional brokerage services and equity research services to institutional investor clients. The Asset Management segment is involved in the management of a range of pooled investment vehicles, including the hedge funds of funds. The Corporate Credit segment includes the management of collateralized loan obligations, small business loans, and various principal investments. JMP Group Inc. was incorporated in 2000 and is headquartered in San Francisco, California.
3yr DivGR 29.71% 5yr DivGR 40.62% 1yr Est Cap Gain 20.30% Annual Div Yield 3.47% Est 1yr ROIC 23.77% P/E Ratio 15.84 Payout Pct 54.90%
Cummins Inc. (CMI) designs, manufactures, distributes, and services diesel and natural gas engines, and engine-related component products. It operates in four segments: Engine, Components, Power Generation, and Distribution. The Engine segment offers a range of diesel and natural gas powered engines under the Cummins and other customer brand names for the heavy-and medium-duty truck, bus, recreational vehicle, light-duty automotive, agricultural, construction, mining, marine, oil and gas, rail, and governmental equipment markets. This segment also provides new parts and service, as well as remanufactured parts and engines. The Components segment supplies after treatment systems, turbochargers, filtration products, and fuel systems for commercial diesel applications. It offers filtration systems for on-and off-highway heavy-duty and mid-range equipment, as well as supplies filtration products for industrial and passenger car applications. This segment serves engine and distribution segments, truck manufacturers, and other original equipment manufacturers. The Power Generation segment designs and manufactures components that make up power generation systems, including engines, controls, alternators, transfer switches, and switchgear, as well as power generation systems, components, and services. The Distribution segment provides maintenance contracts, engineering services, and integrated products. The company sells its products to original equipment manufacturers, distributors, and other customers worldwide. Cummins Inc. was founded in 1919 and is headquartered in Columbus, Indiana.
3yr DivGR 28.31% 5yr DivGR 32.04% 1yr Est Cap Gain 12.65% Annual Div Yield 2.14% Est 1yr ROIC 14.79% P/E Ratio 16.40 Payout Pct 35.10%
Invesco Ltd. (IVZ) is a publicly owned investment manager. It primarily provides its services to institutional clients including major public entities, corporations, unions, non-profit organizations, endowments, foundations, pension funds, and financial institutions. The firm manages separate client focused equity, fixed income, balanced portfolios. It also launches equity, fixed income, and balanced mutual funds for its clients. The firm invests in the public equity and fixed income markets across the globe. It invests in core, growth, and value stocks of small-cap, mid-cap, and large-cap companies. The firm employs a fundamental and quantitative analysis with a bottom-up stock picking approach to make its investments. It conducts in-house research to make its investments. Invesco Ltd. was founded in December 1935 and is based in Atlanta, Georgia.
3yr DivGR 27.01% 5yr DivGR 19.38% 1yr Est Cap Gain 10.60% Annual Div Yield 2.48% Est 1yr ROIC 13.08% P/E Ratio 17.63 Payout Pct 43.67%
Innophos Holdings, Inc. (IPHS), through its subsidiaries, produces performance-critical and nutritional specialty ingredients with applications in food, beverage, dietary supplements, pharmaceutical, oral care, and industrial end markets. It operates through Specialty Phosphates US & Canada, Specialty Phosphates Mexico, and GTSP & Other segments. The company’s specialty ingredients include specialty phosphate salts, specialty phosphoric acids, and other mineral and botanical based specialty ingredients that are used as flavor enhancers in beverages; electrolytes in sports drinks; texture modifiers in cheeses; leavening agents in baked goods; mineral and botanical sources for nutritional supplements; pharmaceutical excipients; and abrasives in toothpaste, as well as in industrial applications, such as asphalt modification and petrochemical catalysis. It also provides food and technical grade purified phosphoric acid (PPA) used in the production of fertilizer, and specialty phosphate salts and acids, as well as in beverage and water treatment applications; technical grade sodium tri polyphosphate (STPP), a specialty phosphate, which is used as an ingredient in cleaning products, such as industrial and institutional cleaners, automatic dishwashing detergents, and consumer laundry detergents, as well as in water treatment, clay processing, and copper ore processing activities; and detergent grade PPA that is primarily used in the production of STPP. In addition, the company offers granular triple super phosphate (GTSP), a fertilizer product line used for enhancing crop yields in various agricultural sectors. It serves primarily consumer goods manufacturers, distributors, and specialty chemical manufacturers in the United States, Mexico, Canada, and internationally. Innophos Holdings, Inc. was founded in 2004 and is headquartered in Cranbury, New Jersey.
3yr DivGR 23.87% 5yr DivGR 20.94% 1yr Est Cap Gain 14.02% Annual Div Yield 3.27% Est 1yr ROIC 17.29% P/E Ratio 19.33 Payout Pct 63.16%
Steelcase Inc. (SCS) designs, manufactures, and distributes an integrated portfolio of furniture settings, user-centered technologies, and interior architectural products. The company operates through Americas, EMEA, and Other Category segments. Its furniture systems portfolio comprises panel-based and freestanding furniture systems; and complementary products, such as storage, tables, and ergonomic worktools. The company’s seating products include ergonomic chairs; seating for collaborative or casual settings; and specialty seating for specific vertical markets, such as healthcare and education. Its interior architectural products consist of full and partial height walls and doors. The company also manufactures and sells surface materials consisting of textiles and wall coverings to architects and designers; and ceramic steel surfaces primarily for third-party fabricators to create static whiteboards and chalkboards. In addition, it provides workplace strategy consulting, lease origination, furniture and asset management, and hosted space services. Steelcase Inc. markets its products to corporate, government, healthcare, education, and retail customers under the Steelcase, Nurture, Coalesse, Details, Turnstone, Designtex, and PolyVision brands in the United States and internationally. The company distributes its products and services through a network of independent and company-owned dealers, as well as directly to end-use customers. Steelcase Inc. was founded in 1912 and is headquartered in Grand Rapids, Michigan.
3yr DivGR 20.28% 5yr DivGR 21.29% 1yr Est Cap Gain 18.87% Annual Div Yield 2.30% Est 1yr ROIC 21.17% P/E Ratio 23.37 Payout Pct 53.85%
The Dow Chemical Company (DOW) manufactures and supplies chemical products for use as raw materials in the manufacture of customer products and services worldwide. The Electronic and Functional Materials segment produces materials for chemical mechanical planarization; materials used in the production of electronic displays, including films and filters; metalorganic precursors for light-emitting diodes; organic light-emitting diode materials; materials used in the fabrication of printed circuit boards; integrated metallization processes for metal finishing and decorative applications; semiconductor design products; and materials for industrial applications. The Coatings and Infrastructure Solutions segment provides insulation, air sealing and weatherization products and systems, construction chemical solutions, building-integrated photovoltaics, water resistance and lower systems; purification and separation technologies; and acrylates, methacrylates, and vinyl acetate monomers. The Agricultural Sciences segment offers crop protection and plant biotechnology products, urban pest management solutions, seeds, traits, and oils. The Performance Materials segment produces amines; chlorinated organics; materials for automotive systems, formulated systems, and oil and gas, and mining industrial applications; plastic additives; epoxies; oxygenated solvents; polyglycols, surfactants, and fluids; polyurethanes; and propylene oxide/glycol. The Performance Plastics segment offers elastomers; wire and cable insulation, semiconductive and jacketing compound solutions, and bio-based plasticizers; and acrylics, polyethylene, polyethylene, polyolefin emulsions, and polyolefin plastomers. The Feedstocks and Energy segment provides ethylene, chlorine, caustic soda, and purified ethylene oxide. The Dow Chemical Company was founded in 1897 and is headquartered in Midland, Michigan.
3yr DivGR 19.13% 5yr DivGR 20.58% 1yr Est Cap Gain 17.69% Annual Div Yield 3.65% Est 1yr ROIC 21.34% P/E Ratio 15.09 Payout Pct 55.08%
I'm always searching for those unique companies that have both a large estimated one year capital gain and a nice annual dividend yield to add to my portfolio. Two companies that fit that description are Ares Capital Corporation and Main Street Capital Corporation.
Ares and Main Street are both classified as Business Development Companies (BDC) and both companies offer a large one year estimated capital gain and a large annual dividend. BDCs are companies that make loans to companies that aren't large enough to gain the attention of the large banks but too large or too well developed for the Venture Capitalists.
BDCs were initially created to fill the needs of small businesses that had previously outgrown their need for early stage venture capitalism and had now entered into the realm of the publicly traded companies. These companies are usually in their initial stages of expanding beyond the startup stage. These small companies are often still too small for the Big Banks to consider doing business with them so they're generally forced to turn to BDCs for help.
To qualify as a BDC, companies must be registered in compliance with Section 54 of the Investment Company Act of 1940. A major difference between a BDC and a venture capital fund is that BDCs allow smaller, non-accredited investors to invest in startup companies. Some of the reasons why BDCs have become so popular among investors is that they provide permanent capital to their management, they allow investments by the general public and they use mezzanine financing opportunities. Ultimately they're fulfilling the financial needs of a certain sector of the economy.
BDCs allow any investor who's interested in participating in the realm of venture capitalism or small business equity loans to participate through the open market. This feature allows BDCs to raise money and grow faster than Venture Capital Funds which are generally closed end funds created by, and for, wealthy investors only.
There are quite a few publicly traded BDCs and many of them are listed on this site in the section labeled "Business Development Companies" which can be found in the Investing drop down menu above or by clicking here. While there are many great companies listed, and I own stock in a number of those listed companies, two of my favorites are Ares Capital Corporation and Main Street Capital Corporation.
Ares Capital Corporation
Ares Capital Corporation (ARCC) specializes in acquisition, recapitalization, mezzanine debt, restructurings, rescue financing, and leveraged buyout transactions of middle market companies. It also makes growth capital and general refinancing. It prefers to make investments in companies engaged in the basic and growth manufacturing, business services, consumer products, health care products and services, and information technology service sectors. The fund will also consider investments in industries such as restaurants, retail, oil and gas, and technology sectors. It focuses on investments in Northeast, Mid-Atlantic, Southeast and Southwest regions from its New York office, the Midwest region, from the Chicago office, and the Western region from the Los Angeles office. The fund typically invests between $20 million and $200 million and a maximum of $400 million in companies with an EBITDA between $10 million and $250 million. It makes debt investments between $10 million and $100 million The fund invests through revolvers, first lien loans, warrants, unitranche structures, second lien loans, mezzanine debt, private high yield, junior capital, subordinated debt, and non-control preferred and common equity. The fund also selectively considers third-party-led senior and subordinated debt financings and opportunistically considers the purchase of stressed and discounted debt positions. The fund prefers to be an agent and/or lead the transactions in which it invests. The fund also seeks board representation in its portfolio companies. (Daily Chart) (Weekly Chart)
30 December Price $15.77 1yr Target $18.23 Analysts 14 1yr Cap Gain 15.59% Dividend $1.52 Yield 9.63% 1yr Est Tot Return 25.22%
Market Cap $4.95 Bil Beta 0.96 EPS (ttm) $1.91 Payout Ratio 79.58% EPS next yr $1.51 P/E 8.26 PEG 2.12 Forward P/E 9.89 Debt/Equity 0.70 ROA 6.70% ROE 11.40% ROI 5.50% Sales $951.80 Mil Income $571.40 Mil Profit Margin 60.03%
Main Street Capital Corporation
Main Street Capital Corporation (MAIN) is a business development company specializing in long-term equity, equity related, and debt investments in small and lower middle market companies. The firm focuses on investments in warrants, PIK (Payment in Kind) interest, convertible securities, junior secured or unsecured, subordinated loans, private equity, venture debt, mezzanine investments, mature, mid venture, industry consolidation, later stage, late venture, emerging growth, management buyouts, ownership transitions, recapitalizations, strategic acquisitions, business expansion, growth financings, and other growth initiatives primarily for later stage businesses. It does not seek to invest in start-up companies or companies with speculative business plans. It seeks to invest in traditional or basic businesses. The firm primarily invests in companies based in the Southern, South Central, and Southwestern regions of the United States but also considers other domestic investment opportunities. It invests between $2 million and $15 million in companies with revenues between $5 million and $300 million, enterprise values between $3 million and $50 million, and EBITDA between $1 million and $20 million. The firm seeks to charge a fixed interest rate between 12 percent and 14 percent, payable in cash, in case of its mezzanine loan investments. The firm typically invests in the form of term debt with equity participation and/or direct equity investments. It prefers to maintain fully diluted equity positions in its portfolio companies of 5 percent to 50 percent, and may have controlling interests in some instances. The firm also co-invests with other investment firms. It seeks to exit its debt investments through the repayment of the investment from internally generated cash flow and/or refinancing within a period of three to seven years. Main Street Capital Corporation was founded in 1997 and is based at Houston, Texas. (Daily Chart) (Weekly Chart)
30 December Price $29.30 1yr Target $35.40 Analysts 5 1yr Cap Gain 20.81% Dividend $2.04 Yield 6.96% 1yr Est Tot Return 27.77%
Market Cap $1.32 Bil Beta 0.83 EPS (ttm) $2.32 Payout Ratio 87.93% EPS next yr $2.38 P/E 12.63 PEG 1.80 Forward P/E 12.29 Debt/Equity 0.63 ROA 6.80% ROE 11.50% ROI 5.80% Sales $135.40 Mil Income $99.90 Mil Profit Margin 73.78%
I believe that both of these companies are solid companies fundamentally and are also in great shape technically. I own stock in both of these companies and I continue to monitor each of them for further accumulation. I've found both of these companies to be extremely beneficial in providing nice dividends that I have used to reinvest in these companies and to accumulate shares in many additional companies.
While there may be BDCs listed on the exchanges that either pay higher dividends or have a greater one year estimated capital gain, I still want to own these particular two companies. I'm very comfortable having these shares in my portfolio. I've found each of them to be conservative growth companies that are also growing their dividends over time. I expect each of these to remain as core holdings in my accounts for a very long time.
I am an Individual Investor with specific interest in long term growth and then enhancing my returns with income from dividends and derivatives. I don't recommend stocks to anyone (it's a good way to lose friends) and no one reading this should misinterpret my blog as a recommendation for any type of investment. I am writing this solely for myself and my kids.
DISCLAIMER I am not a licensed investment adviser, and I am not providing investment advise for you on this site. Please consult with an investment professional before you invest your money. Any opinion expressed here should not be treated as investment advice. I am not liable for any losses suffered by any party because of data or information published on this blog. Past performance is not a guarantee of future performance. Unless your investments are FDIC insured, they may decline in value.