Investing - dennis mccain

September 2014 Investing Articles

9/30/2014

Apple Inc

9/28/2014

It's always difficult to write about a company that has so much information and misinformation swirling around about it. Most of it is based on someone's self interest. Some of those opinions are based on swaying product sales, some are based on influencing the stock price, and some are simply based on the individual egos of the writers of the articles.

I've written a couple of articles on Apple Inc ("Selling Apple Puts" and "Value Investors are Now Buying Apple") and I look at Apple from an investment perspective. To me Apple is a company in transition. It's transitioning from a trader's stock to a value investor's stock. And dividend growth investors are piling on.

There's plenty of articles written about the relationship between Apple's stock price and Apple's product launches which really doesn't need to be repeated here, but it's important to know that the stock in Apple has the tendency to increase in value leading up to each new product launch and then suffers a pullback once the product is announced. It's done it so many times that almost every investor already knows about it.

So if you're a swing trader this stock may just be for you. If you're a dividend growth investor, this stock has transitioned into a company that now pays an increasing dividend and it may just be for you. And if you just believe that Apple ends up owning every market it enters, this may be just the stock for you.

Good Luck and Good Investing.

The Fundamentals

28 September 2014

Price $100.75
1yr Target $110.79
Analysts 42
1yr Cap Gain 9.96%
Dividend $1.88
Yield 1.80%
1yr Est Tot Return 11.76%

Market Cap $603.28 Bil
Beta 0.87
EPS (ttm) $6.19
Payout Ratio 30.37%
EPS next yr $7.16
P/E 16.28
PEG 1.33
Forward P/E 14.07

Debt/Equity 0.26
ROA 17.90%
ROE 31.20%
ROI 25.50%
Sales $178.14 Bil
Income $38.56 Bil
Profit Margin 21.60%

The Products

MAC

MacBook Air
MacBook Pro
Mac mini
iMac
Mac Pro
OS X Mavericks

iPhone

iPhone 6 and 6 Plus
iPhone Accessories
iOS 8 and iCloud

Watch
iPad

iPad mini with Retina display
iPad Air
iPad Accessories

iPod

iPod shuffle
iPod nano
iPod touch

Apple TV
iTunes

Reviewing Those Dividend Increases

9/27/2014

Once again it's Saturday morning and I'm reviewing the week's dividend announcements to see which companies increased their dividend. Over the years I've discovered that a company that increases its dividend is one of the most tangible signals that the company's Board of Directors have a lot of confidence in the future cash flows of the company. For a dividend growth investor like me this is the best use of my Saturday mornings.

Below is a list of the companies that increased their dividend this week. Additional information on each of these dividend increases can be found in the "Dividend Increases" section of this website. There you will not only find this week's dividend increases but past week's dividend increases as well. I'm sure if you spend a few minutes looking at that section you'll find at least one, and probably many more, great dividend growth companies.

CSB Bancorp Inc (CSBB)
Hingham Institution for Savings (HIFS)
Sun Hydraulics Corporation (SNHY)
Lockheed Martin (LMT)
SIFCO Industries (SIF)
OGE Energy (OGE)
Western Asset Mortgage Capital (WMC)
International Bancshares (IBOC)
Hersha Hospitality Trust (HT)

Carlisle Companies Inc

9/26/2014

For 38 years the Board of Directors of Carlisle Cos, Inc, has been increasing the company's dividend to its shareholders annually, and recently they've declared a 14% increase in the regular quarterly dividend to $0.25 per share from $0.22 per share. This is an exceptional accomplishment and this dividend consistency puts this company on the list of Dividend Champions. It also puts it in the crosshairs of every Dividend Growth Investor in the market today. If you're a dividend growth investor you might just want to consider adding this security to your account.

The Company

Carlisle Companies Inc (CSL) operates as a worldwide and diversified manufacturing company. The Construction Materials segment of the company manufactures and sells rubber and thermoplastic polyolefin roofing systems, rigid foam insulation panels for various roofing applications, liquid and spray-applied waterproofing membranes, vapor and air barriers, HVAC duct sealants and hardware for the commercial and residential construction markets, and also markets and sells polyvinyl chloride membrane and accessories. Its Interconnect Technologies segment designs and manufactures wire, cable, contacts, RF/micowave, and fiber optic connectors, specialty cable assemblies, integrated wired racks, trays and airframe subsystem solutions primarily for the aerospace, defense electronics, and test and measurement industries. The company’s Brake & Friction segment provides off highway braking systems and friction products for off highway, on highway, aircraft, and other industrial applications, principally serving the agriculture, construction, aircraft, mining, heavy truck, wind and alternative energy, and performance racing industries. Its FoodService Products segment offers commercial and institutional foodservice permanent ware table coverings, cookware, display pieces, lighting equipment, and supplies to restaurants, hotels, hospitals, nursing homes, schools, and correctional facilities, and industrial brooms, brushes, mops, and rotary brushes for industrial, commercial, and institutional facilities. The company markets its products to original equipment manufacturers, distributors, and directly to end-users. Carlisle Companies Incorporated was founded in 1917 and is headquartered in Charlotte, NC. (Daily Chart) (Weekly Chart)

25 September 2014
Price $80.00
1yr Target $96.14
Analysts 7
1yr Cap Gain 20.17%
Dividend $0.88
Yield 1.10%
1yr Tot Return 21.27%

Market Cap $5.13 Bil
Beta 1.35
EPS (ttm) $4.74
Payout Ratio 18.56%
EPS next yr $4.70
P/E 16.88
PEG 1.05
Forward P/E 17.02

Debt/Equity 0.36
ROA 7.90%
ROE 14.00%

Carlisle has a history which began in 1917, when Charles S. Moomy opened Carlisle Tire and Rubber Company in Carlisle, Pennsylvania, to sell inner tubes to Montgomery Ward and Company.

In 1946, Carlisle purchased a company that produced molded friction products that are used on traditional brake shoes and thus began the starting point of what today is Carlisle Brake & Friction. This also ushered in a new phase for Carlisle as they began growing as a diversified manufacturing company.

Carlisle Brake & Friction is a leading solutions provider for high performance and severe duty brake, clutch and transmission applications to original equipment manufacturers (OEMs) and aftermarket customers in the mining, construction, military, agricultural, motorsports, industrial, and aerospace markets. The company's brands, including Wellman Products Group, Carlisle Brake & Friction, Hawk Performance®, Japan Power Brake, VelveTouch® and Field Pro®, offer a diverse range of the most highly engineered braking and friction products available today. With 10 global manufacturing facilities in the U.S., U.K., Italy, China, Japan and India, Carlisle Brake & Friction serves more than 100 leading OEMs in 55 countries.

Mining. Carlise Brake & Friction (CBF) has been the brake supplier of choice in the mining industry for decades, counting the world's largest and most respected mining OEMs as customers, including CAT, Komatsu, Liebherr, Hitachi and Sany. CBF consistently remains in the braking technology forefront by adapting to the changes in the industry, expanding the technology envelope and ultimately providing superior solutions to world class OEMs around the world.
Construction. The construction machine market has been a cornerstone of CBF for decades. Our products are used by the most recognized construction OEMs in the world in applications around the globe as diverse as articulated dump trucks to backhoe loaders. If you pass a construction site during your day, chances are you've seen a vehicle with a CBF product on it.
Agriculture. CBF has been a significant brake system and friction component supplier to agriculture and forestry industry for over thirty years. Our customer base is an extensive list of industry leaders, including John Deere, CNH, Same Deutz-Fahr, Clark Hurth, Claas and Mahindra.
Aerospace. CBF is one of the largest steel brake friction suppliers for the global aerospace market. Original equipment manufacturers including Goodrich, ABS and Parker Hannifin rely on our product quality, heat capacity, consistent performance and exceptional durability to meet the critical demands of today's aircraft.
Military. CBF products are utilized in virtually every form of military land vehicle including transports, tanks, assault vehicles and construction equipment. CBF is also a primary OEM supplier of brake friction materials for military jets, planes, helicopters and drones.
Motorsports. CBF is a leading supplier of severe duty and high performance products for the motorsports and performance automotive markets. Over the past decade our friction products have won more motorsports championships than any other friction manufacturer. From NASCAR to the weekend racer, our products provide a true competitive edge.
Industrial. CBF has been supplying braking systems and friction components to original equipment manufacturers in a diverse range of industrial markets for over 87 years. Our products can be found on material handling vehicles, oil rigs, telehandlers, transit systems, car and truck commercial fleets, cranes, elevators, amusement park rides, motorcycles, ATVs, snowmobiles, and electromagnetic devices.
Renewable Energy. CBF supplies braking solutions to leading wind OEMs around the globe both for the MegaWatt and KiloWatt class wind markets.

During the 1950s and 1960s, Carlisle continued to acquire a variety of other companies further diversifying their product mix to include insulated wire and cable, which today is known as Carlisle Interconnect Technologies.

Carlisle Interconnect Technologies designs and manufactures high performance wire and cable, fiber optic cable, RF/microwave connectors, avionics trays, racks, integrated system and complex cable assemblies for applications in the aerospace, military and defense electronics, medical, and test and measurement industries.
AerospaceFor over 70 years Carlisle Interconnect Technologies has been providing leading-edge designs in wire and cable for commercial and military aircraft, avionics systems, in-flight entertainment systems and communications systems.

Test and Measurement/ Automated Test Equipment. Carlisle Interconnect Technologies offers test and measurement solutions specially designed for RF/Microwave and high speed analog & digital equipment including multimeters, oscilloscopes, digital analyzers, logic analyzers and network analyzers.
Defense Electronics. Since 1944 Carlisle Interconnect Technologies has been engineering products for the harsh and demanding environments of the defense industry. Typical product applications are for radar systems, missiles, satellites, forward looking infra-red systems, communication and electronic warfare systems.
Medical. Carlisle Interconnect Technologies medical products provide customers a wide range of innovative solutions engineered specifically for the medical equipment industry. Applications include pulse oximetry systems, ECG/EKG monitoring, medical imaging, diagnostic systems including PET scan, MRI, X-ray and ultra sound systems.
Specialty Applications. With years of experience in building products engineered for specialty applications, Carlisle Interconnect Technologies can solve a variety of product needs including unique cable configurations, custom connectors, specialized harnesses and complete assemblies of any complexity with cost sensitivity in mind.

On June 1, 1960, Carlisle Companies Inc. became a publicly traded company on the NYSE with a ticker symbol of “CSL.” By the end of the 1960s, Carlisle was producing aerospace and electronic products, recreational tires, automotive accessories and other divergent products.

In the 1970s Carlisle pioneered rubber sheet roofing. Using highly engineered formulation and processing techniques to produce synthetic rubber sheets capable of competing with traditional roofing materials. This established Carlisle as a formidable player in both the new and replacement roof markets. This was the genesis of what today is Carlisle Constructions Materials.

Carlisle Construction Materials manufactures a complete range of roofing and waterproofing products for commercial and industrial buildings including single-ply roofing, insulation, waterproofing and air/vapor barrier systems focused on the weatherproofing and thermal performance of the building envelope. The company is the U.S. market leader in EPDM (rubber), TPO (thermoplastic) membranes and both polyisocyanurate and expanded polystyrene insulation boards. Through recent acquisitions in Germany and the Netherlands, CCM is now the leading European manufacturer and supplier of EPDM roofing systems and is well positioned to fully exploit Europe's anticipated growth in this segment.

In the 1980s Carlisle acquired a company that manufactured compression-molded plastic and melamine dinnerware, and later a company that manufactured foodservice equipment and supplies, which was the beginning of what today is Carlisle FoodService Products.

Carlisle FoodService manufactures and markets professional-grade product solutions for the restaurant, healthcare, and janitorial segments. Products for these three focused markets include an array of foodservice permanentware supplies, table coverings, cookware, displayware, catering equipment and meal delivery systems. In addition, CFS produces the most comprehensive line of janitorial, waste and material handling product lines for both the foodservice and sanitary maintenance industries.

In 2001, Carlisle purchased a manufacturer of transmission belts for industrial applications and, together with Carlisle Tire & Wheel, was the formed what today is known as Carlisle Transportation Products.

The Fundamentals

The fundamentals are a mixed bag for Carlisle Companies. The revenues and earnings are somewhat erratic but are generally moving higher over time. Looking at the estimates going forward it appears that revenues and earnings are on the right trajectory. Dividends have obviously been managed in such a manner that despite the variability of revenues and earnings, dividends have maintained a consistent upward momentum. In fact, as can be seen below, the dividend growth rate is actually increasing over time. This trend should actually continue in the future.

Year
2015 Est
2014 Est
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003

Revenues
$3.41 Bil
$3.17 Bil
$2.94 Bil
$2.85 Bil
$2.49 Bil
$2.52 Bil
$2.25 Bil
$2.97 Bil
$2.87 Bil
$2.57 Bil
$2.20 Bil
$2.22 Bil
$2.10 Bil

Earnings
$4.70
$4.00
$3.22
$4.22
$2.86
$2.34
$2.34
$0.91
$3.44
$3.46
$1.71
$1.27
$1.44

Dividends
$1.17
$0.97
$0.86
$0.78
$0.71
$0.67
$0.63
$0.61
$0.57
$0.53
$0.49
$0.45
$0.43

Payout Ratio
24.89%
24.25%
26.70%
18.48%
24.82%
28.63%
26.92%
67.03%
16.56%
15.31%
28.65%
35.43%
29.86%

Revenue Growth Rate
1 year = 3.15%
2 year = 8.66%
3 year = 5.21%
4 year = 6.91%
5 year = 0.00%
10 year = 3.42%

Earnings Growth Rate
1 year = -23.70%
2 year = 6.10%
3 year = 11.10%
4 year = 8.30%
5 year = 28.75%
10 year = 8.38%

Dividend Growth Rate
1 year = 10.25%
2 year = 10.05%
3 year = 8.58%
4 year = 8.09%
5 year = 7.11%
10 year = 7.17%

The Technicals

The shorter term trend from the daily chart is such that it is causing the longer term trend from the weekly chart to flatten out. This can also be seen in the momentum indicators. On the daily chart the RSI shows that there's been downward pressure and the stock is now in oversold territory. The MACD is also falling below the zero line and the ADX is starting to show slight pressure to the downside. All of this downward pressure in the daily chart is starting to show up in the weekly chart in a flattening of the curve. Without continued short term pressure, this stock is likely to move sideways for the near future. From a technical perspective it seems logical to wait for the downward pressure to subside at a short term low. Buying when the indicators have bottomed out and turned up is always a good idea when determining the optimum entry point.

Daily Chart

Weekly Chart

Conclusion

This stock is fairly easy to analyze but somewhat difficult to evaluate. On the positive side I really like the stock's estimated one year capital gain, a P/E ratio well below 20, a PEG near 1, a low dividend payout ratio, a low debt to equity ratio, and a high return on equity. What's not appealing is a dividend yield of 1.10%. Even with a dividend growth rate in excess of 10% it'll be 7 years before the yield on initial investment will exceed 2%.

I also like the diversity of the product mix. It provides a dampening effect on the variability of the economy. I believe that some part of this company will be increasing sales and profits regardless of the state of the economy. That in combination with a low dividend payout ratio and it's easy to see that dividend increases should continue for years to come.

I believe this company has a lot of potential to become a very permanent part of my portfolio at some time in the near future. I just have to convince myself that a company with this much potential while at the same time having this little dividend yield is something worth holding for the long term. And that's going to be a difficult decision since there are so many great companies I'd like to accumulate. A significant pullback in the price of this stock resulting in the yield significantly increasing would easily push me into making a very favorable decision. This could be a great buy at the right price.

The Live Interactive Chart

Stocks Are Down, Yields Are Up

9/25/2014

The stock market is having another rough go of it these days. It happens. And in times like these every investor needs to know what he's doing. It's why we develop plans and strategies. In fact, plans and strategies were developed for times exactly like these because who needs a plan when everything is going right?

One of the things I always try to remember is that when stocks are going down, yields are going up. Sometimes way up. And while the target price generally remains the same, the delta between the current price and the target price expands causing the one year estimated gain to increase. In addition, for those that monitor the P/E ratios, the ratio often falls to a level that's acceptable or desirable.

So when stock prices start to fall, as they have this week, dividend growth investors like myself start to get excited. Why? Because when prices are down, yields are up. And for dividend growth investors yield is what matters most. They also know that the price of the stock doesn't affect the dividend because the dividend is based on, and paid each quarter out of, the company's earnings - and earnings aren't affected by the stock price's movement up or down.

In fact, when dividends remain steady or improve while stock prices fall, dividend yields will increases proportionally. And dividend yield is where the dividend growth investors are focused when it comes to buying decisions.

Dividend Growth Investors also keep a keen eye on the company's dividend growth rate as well as the dividend payout ratio, but the dividend yield is usually the most seductive.

Successful Dividend Growth Investors have learned, over the years, how to discover those unique companies that continually increase their dividends over a series of several years. They usually have their own individual rules on just how many years are needed, what’s the minimum acceptable yield that's needed, and what the minimum growth rate is needed in order to initiate a buy. So when the market falls, as it has for the last few days, dividend growth investors dust off their lists, check their accounts for excess funds, and get ready to go on a shopping spree.

A falling market doesn't last for long and when it does, it's definitely a great time to be a Dividend Growth Investor.

Tree Farms Are Farms Too

9/24/2014

Owning timberland is like owning gold.
Only better!

The value of tree farms and timberland, like gold, is the fact that it's a very nice hedge against inflation for your portfolio. But unlike gold, these assets can also produce very generous dividends. Two of the largest companies that own and manage tree farms and timberlands are Weyerhaeuser Company and Plum Creek Timber Company.

The Timber Industry

There are six primary end-markets for most of the timber harvested in the United States: (1) products used in new housing construction; (2) products used in the repair and remodeling of existing housing; (3) products for industrial uses; (4) raw material for the manufacture of pulp and paper and OSB; (5) wood fiber for energy production; (6) and logs for export.

The timber industry also possesses several unique characteristics that distinguish it from the broader paper and forest products industry. The timber industry, which consists primarily of timberland owners, provides raw material and conducts resource management activities for the paper and forest products industry, including the planting, fertilizing, thinning, and harvesting of trees and the marketing of logs. Logs are marketed and sold either as sawlogs to lumber and other wood products manufacturers or as pulplogs to pulp and paper manufacturers, producers of oriented strand board (OSB), and producers of wood pellets for use in bioenergy.

I believe companies that own timberland possess an attractive asset class that would be a nice addition to any portfolio for many reasons, including the following:

Renewable Resource. Timber is a growing and renewable resource that, when properly managed, increases in volume and value as it grows over time. Larger diameter trees command a higher price than smaller trees because they may be converted to higher value end-use products such as lumber and plywood.
Predictable and Improving Growth Rates. Predictable biological growth is an attractive feature of timberland assets because it contributes to predictable, long-term harvest planning. The development and application of comprehensive forest management practices continue to improve biological growth rates.
Harvest Flexibility. Timberland owners have some flexibility to increase their harvests when prices are high and decrease their harvests when prices are low, allowing timberland owners to maximize the long-term value of their growing resource base.

Supply Dynamics. Timber supply can fluctuate based upon a variety of factors. The supply of timber is limited, to some extent, by the availability of timberlands. The availability of timberlands, in turn, is limited by several factors, including government restrictions relating to environmental regulation and land use and alternate uses such as agriculture. The large amounts of capital and length of time required to create new timberlands also limits timber supply. Over the long-term, timber supply increases when modern forestry techniques increase productivity of timberlands and when some marginal agriculture lands revert to timberlands or are planted as forests for conservation purposes. In certain regional markets, log supply can expand when log imports increase relative to log exports.

Demand Dynamics. The demand for timber is directly related to the underlying demand for pulp and paper products, lumber, panel and other wood related products. The demand for pulp and paper is largely driven by general macroeconomic conditions, including population growth, per-capita income levels, and industry capacity. The demand for lumber and manufactured wood products is affected primarily by the level of new residential construction activity, repair and remodeling activity and industrial demand, which, in turn, is impacted by changes in general economic and demographic factors, including population, interest rates for home mortgages and construction loans. The demand for United States timber is also impacted by the amounts of pulp and paper products, lumber, panel and other wood products that are imported into the United States. Significant factors determining the volume of products shipped into the United States by foreign producers are currency valuation shifts as well as tariffs and quotas. Demand for lumber and logs and the volume of products that are shipped from the United States (exports) are also impacted by macroeconomic conditions in foreign markets, primarily China, Canada, Japan and Mexico. In addition to these historically significant factors, the demand for timber may also be affected by emerging markets for wood-based biofuel and bioenergy.

Weyerhaeuser Company

Weyerhaeuser Company (WY), a forest products company, grows and harvests trees, builds homes, and manufactures forest products worldwide. It grows and harvests trees for use as lumber, other wood and building products, and pulp and paper. The company manages 6.4 million acres of private commercial forestland; and has long-term licenses on 13.9 million acres of forestland. It also constructs single-family houses, as well as develops residential lots and land for construction and sale; and master-planned communities with mixed-use property. Weyerhaeuser Company has been elected to be taxed as a real estate investment trust. The company was founded in 1900 and is headquartered in Federal Way, Washington. (Daily Chart) (Weekly Chart)

22 September 2014
Price $31.87
1yr Target $35.91
Analysts 14
1yr Cap Gain 12.67%
Dividend $0.88
Yield 2.76%
1yr Tot Return 15.43%

Market Cap $16.84 Bil
Beta 1.53
EPS (ttm) $1.07
Payout Ratio 82.24%
EPS next yr $1.66
P/E 29.79
PEG 5.96
Forward P/E 19.25

Debt/Equity 0.76
ROA 4.40%
ROE 9.90%

Plum Creek Timber Company

Plum Creek Timber Company, Inc. (PCL) is a publicly owned real estate investment trust (REIT). The trust owns and manages timberlands in the United States. Plum Creek Timber owns 6.7 million acres in the Northwest, Northeast and South - and six wood product conversion facilities in the Northwest. Its products include lumber products, plywood, medium density fiberboard, and related by-products, such as wood chips. The trust also focuses on mineral extraction and natural gas production, communication, and transportation. Plum Creek Timber Company was founded in 1989 and is based in Seattle, Washington. The Timber Company operates independently of Georgia-Pacific LLC as of December 16, 1997. (Daily Chart) (Weekly Chart)

22 September 2014
Price $39.72
1yr Target $44.22
Analysts 9
1yr Cap Gain 11.32%
Dividend $1.76
Yield 4.43%
1yr Tot Return 15.75%

Market Cap $7.04 Bil
Beta 1.01
EPS (ttm) $1.15
Payout Ratio 153.04%
EPS next yr $1.46
P/E 34.54
PEG 4.61
Forward P/E 27.22

Debt/Equity 1.90
ROA 3.70%
ROE 11.90%

Weyerhaeuser Company

Weyerhaeuser is one of the world’s largest private owners of timberlands. They own or control nearly 7 million acres of timberlands primarily located within the U.S., and manage another 14 million acres under long term licenses in Canada. They manage these timberlands on a sustainable basis in compliance with internationally recognized forestry standards. They are also one of the largest manufacturers of wood and specialty cellulose fibers products.

The company started out as Weyerhaeuser Timber Company in Washington state in January 1900, when Frederick Weyerhaeuser and 15 partners bought 900,000 acres of timberland. In 1929, the company built what was then the world's largest sawmill in Longview, WA. Their pulp mill in Longview, was built and went into began production in 1931. In 1959, the company eliminated the word "Timber" from its name to better reflect its operations. In 1965, Weyerhaeuser built its first bleached kraft pulp mill in Canada. Weyerhaeuser implemented its High Yield Forestry Plan in 1967 which drew upon 30 years of forestry research and field experience. It called for the planting of seedlings within one year of a harvest, soil fertilization, thinning, rehabilitation of brushlands, and, eventually, genetic improvement of trees.

Weyerhaeuser consolidated its core businesses in the late 1990s and ended its services in mortgage banking, personal care products, financial services, and information systems consulting. Weyerhaeuser also expanded into South America, Australia, and Asia. In 1999, Weyerhaeuser purchased MacMillan Bloedel Limited, a large Canadian forestry company. Then in 2002 after a protracted hostile buyout, the company acquired Willamette Industries, Inc. of Portland, Oregon. On August 23, 2006, Weyerhaeuser announced a deal which spun off its fine paper business to be combined with Domtar, a $3.3 billion cash and stock deal leaving Weyerhaeuser stock holders with 55 percent ownership of the new Domtar company.

In March 2008, Weyerhaeuser Company announced the sale of its Containerboard Packaging and Recycling business to International Paper for $6 billion in cash. The transaction included nine containerboard mills, 72 packaging locations, 10 specialty-packaging plants, four kraft bag and sack locations and 19 recycling facilities.

Weyerhaeuser converted into a real estate investment trust when it filed its 2010 tax return.

In 2013, Weyerhaeuser purchased Longview Timber for $2.65 billion including debt from Brookfield Asset Management. The acquisition added 645,000 acres of timberland to Weyerhaeuser's holdings in Oregon and Washington. In 2014, Weyerhaeuser spun off its home building unit to TRI Pointe Homes in a $2.8 billion transaction. The company also announced its intention to sell its current Federal Way headquarters and relocate to Seattle's Pioneer Square in 2016. Today Weyerhaeuser generates more than $8.50 billion in net sales and employs approximately 13,700 people worldwide.

Plum Creek Timber Company

Plum Creek is among the largest and most geographically diverse private landowners in the nation. As of December 31, 2013, they owned approximately 6.8 million acres of timberlands located in 19 states. Management analyzes their timberland to assess and realize the inherent value of its timberland in many different ways, including harvesting the trees, selling the timberland or converting the trees to lumber, plywood and other wood products. The company's timberlands are well diversified, not only geographically, but also by species mix and age distribution and their timberland growth rates vary depending on species, location, age and forestry practices.

They manage their timberlands in two business segments: (1) the Northern Resources Segment consisting of timberlands in Maine, Michigan, Montana, New Hampshire, Oregon, Vermont, Washington, West Virginia and Wisconsin; and (2) the Southern Resources Segment consisting of timberlands in Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi, North Carolina, South Carolina, Texas, and Virginia.

Their Energy and Natural Resources Segment includes their natural resource businesses that focus on opportunities for oil and natural gas production, construction aggregates and mineral extraction, wind power and communication and transportation rights of way.

The Real Estate Segment comprises their sales of higher and better use timberlands and their sales of non-strategic timberlands, including sales of large blocks of timberlands. The Real Estate Segment also includes the development of certain properties both internally and through joint venture arrangements.

The Manufacturing Segment includes two lumber mills, two plywood mills and two medium density fiberboard (MDF) production lines in Montana and one lumber remanufacturing facility in Idaho. The Montana facilities, strategically located near their timberlands, convert logs to lumber, plywood and other wood products, and convert chips, sawdust and wood shavings to MDF.

In December 2013 the Weyerhaeuser Company acquired a significant equity investment in MWV-Charleston Land Partners LLC which consists of 109,000 acres of high value rural lands and development quality lands near Charleston, SC. Beginning in 2014, Plum Creek Timber Company intends to begin providing timber and wood-fiber procurement services to certain customers. These activities will consist primarily of harvesting and selling trees from timberlands that are not owned by them.

Conclusion

Similarly to the analysis and conclusion in the article "Betting On The Farm", I am completely convinced that any investment in either one of these companies has to be entered into as a long term investment. And by long term I mean years, not months. Anyone with a shorter term horizon will most likely become disillusioned and/or disappointed in the short term. That said, this may just be one of the best investments of the decade if executed correctly (a big if!). Timberland traditionally increases in value at a rate similar to the inflation rate so it's a great preserver of purchasing power over time, much like gold is. In addition, as population encroaches on today's timberland, the value of the land increases almost exponentially as its use in converted into lots for homes, businesses, golf courses, etc. And while an investor waits for the value of the land (stock) to increase, each of these companies is throwing off a very generous dividend.

Based on the fundamentals above I intend to initiate a position in Weyerhaeuser over the next few weeks. I will also monitor the stock in Plum Creek Timber Company with the intent to start a position as the fundamentals start to improve. I intend to invest in these companies as excess funds become available and then simply hold these stocks for years. I'll also use the dividends distributed by these companies to reinvest back into additional shares and then let these positions grow naturally. Hopefully in the years ahead I'll look back at these investments and smile. A lot!

Additional Articles of Interest

"Betting On The Farm", dated 22 September 2014

Like A Kid In A Candy Store

9/23/2014

When I think about investing and the markets, I feel like a kid in a candy store. Someone who's suddenly confronted with more choices to choose from than he has money in his pockets. It's an exciting feeling to have and I experience that feeling almost every day.

"I feel like a little kid that just walked into a candy store. I think that's something to smile about."
-- Brandon Boyd, Lead Singer for Incubus.

That's because my hobby is investing. It's a great hobby because it's one of the few hobbies you can have where you can make a lot of money rather than spend a lot of money. Very few hobbies can do this. The key to this hobby for me is understanding three things. First is to learn how to find great companies and then learn how to buy their stock at a great price. Next is to learn how to write covered call options and then do it over and over again against my positions to create a flow of income back into my account that reduces my initial costs of ownership. Finally, I relax and enjoy a consistent and growing stream of income through an ever increasing series of dividends.

I refer to my hobby as Buy, Write, Collect. It's a strategy that I've used for quite awhile now and it's a strategy that seems to work well for my personality and my disposition. So I hope this strategy continues to work for many years to come because I could really use the income.

Good Luck and Good Trading.

This article was first published on 26 May 2014 and is resubmitted here because it's just as relevant today as it was when it was first published. For this and many other great articles, please click on the "More Information" button below.

Betting On The Farm

9/22/2014

Owning farmland is like owning gold.
Only better.

Farmland is a lot like gold because it's a nice hedge against inflation, but it's better than gold because farmland can also produce a very generous dividend. There's a number of companies that deal in land development but there are two that deal specifically in buying, selling and leasing farm land - Gladstone Land Corporation and Farmland Partners Inc.

The American Farm - Better than Gold.

Another similarity to gold is that an investor buying farmland buys and holds this type of asset for the very long term. Its value is often thought to be in its ability to grow crops, and that's part of its value. But it can also become very valuable simply because of its location. And we all remember from our business courses that simple rule of supply and demand. In the case of land, the supply will remain constant as the demand continues to grow with the natural increase in the country's population. That increase will not only affect the inherent value of the land itself, it will increase the value of the products that are produced on that land.

Below are two companies that are accumulating farm land for the sole purpose of leasing it back to independent farmers and agribusinesses for cultivation. The idea behind the two companies is that the value of the land purchased will increase over time resulting in the value of the companies' stock also increasing over time. And while waiting for the land values to increase, the land is rented out. Those rents are then naturally distributed to the company's shareholder in the form of dividends. It seems like a no-brainer if held for an extended period of time.

In the short term the companies are dependent on the cost of money and the availability of good farm land with an acceptable amount of available water. These are also the same problems that every American farmer has faced every year since the first Europeans set foot on this continent. It's something to take into consideration when an investor starts a position in these companies.

Gladstone Land Corp

Gladstone Land Corporation (LAND), an agricultural real estate company, owns and leases farmland to both corporate and independent farmers in the US. It also leases a parcel on its farm near Oxnard, California to an oil company. The company leases farms that allow its tenants to grow row crops, such as berries and vegetables, as well as permanent crops, including blueberries. As of August 19, 2014, it owned 6,833 acres on 28 farms. The company was founded in 1997 and is based in McLean, Virginia. (Daily Chart) (Weekly Chart)

21 September 2014
Price $12.61
1yr Target $15.30
Analysts 5
1yr Cap Gain 21.33%
Dividend $0.36
Yield 2.85%
1yr Tot Return 24.18%

Market Cap $82.34 Mil
Beta N/A
EPS (ttm) -$0.24
Payout Ratio N/A
EPS next yr $0.18
P/E N/A
PEG N/A
Forward P/E 72.06

Debt/Equity 0.94
ROA -1.80%
ROE -3.20%

Farmland Partners Inc

Farmland Partners Inc. (FPI), a real estate company that owns and seeks to acquire primary row crop farmland located in agricultural markets throughout North America. The substantial majority of the farms in our current portfolio are devoted to primary crops, such as corn, soybeans and wheat, As of June 23, 2014, its portfolio consisted of 40 farms with approximately 23,000 acres in Illinois, Nebraska, and Colorado. The company was founded in 2013 and is based in Westminster, Colorado (Daily Chart) (Weekly Chart)

21 September 2014
Price $11.55
1yr Target $14.56
Analysts 4
1yr Cap Gain 26.06%
Dividend $0.42
Yield 3.63%
1yr Tot Return 29.69%

Market Cap $89.28 Mil
Beta N/A
EPS (ttm) -$0.19
Payout Raio N/A
EPS next yr $0.36
P/E N/A
PEG N/A
Forward P/E 31.82

Debt/Equity 1.10
ROA -0.40%
ROE -5.00%

Gladstone Land Corporation

Gladstone Land Corporation is an externally managed, agricultural real estate company that was originally incorporated in California on June 14, 1997, and re-incorporated in Maryland on March 24, 2011, having been previously reincorporated in Delaware on May 25, 2004. The company exists primarily to own and lease farmland and the operations consist solely of leasing those farms to medium-sized, independent farming operations and larger, corporate farming operations. The business is managed by Gladstone Management Corporation and after the initial public offering (IPO) on January 29, 2013 the shares of common stock began trading on the NASDAQ Global Market under the symbol “LAND”.

The company currently own 21 farms: 8 in California, 6 in Florida, 4 in Michigan, 2 in Oregon and 1 in Arizona. They also own two cooler buildings and one box barn. These properties are currently leased to 16 separate tenants that are either corporate or independent farmers. They also lease a small parcel on their farm near Oxnard, California, to an oil company. Historically, their farmland has predominantly been concentrated in locations where tenants are able to grow annual row crops, such as certain types of berries, lettuce and other crops, which are planted and harvested annually or more frequently. However, during 2013, they began to diversify the variety of crops grown on their properties, and now own several farms with more permanent crops, such as blueberries, as well as a couple of farms that grow grains, such as corn and beans. While their focus remains on annual row crops, they may also acquire land with fruit or nut trees, bushes, wine berries and wine grapes, as well as land to grow grains. They may also acquire more property related to farming, such as storage facilities utilized for cooling crops, freezer buildings, facilities used for the storage and assembly of boxes for shipping produce (known as box barns), silos, storage facilities, green houses, processing plants, packaging buildings and distribution centers.

They lease their properties with triple-net leases, an arrangement under which the tenant maintains the property while paying the related taxes, maintenance and insurance costs, as well as rent to LAND. They may also sell farmland at certain times, such as when the land could be developed by others for urban or suburban uses. In addition, they may provide senior secured first lien mortgages to farmers for the purchase of farmland and farm-related properties.

They have recently been approved to conduct their business through a REIT structure in which their properties and any mortgage loans they make will be held directly or indirectly by Gladstone Land Limited Partnership. They are the manager and 100% owner of Gladstone Land Partners, LLC, which is the sole general partner of their Operating Partnership, and they currently hold, directly and indirectly through Land Partners, 100% of its outstanding limited partnership units.

Farmland Partners Inc.

Farmland Partners Inc. is an internally managed real estate company that owns and seeks to acquire high-quality primary row crop farmland located in agricultural markets throughout North America. The Company was incorporated in Maryland on September 27, 2013 and is the sole member of the general partner of Farmland Partners Operating Partnership, LP, which was formed in Delaware on September 27, 2013. The operations of the Company are carried on primarily through the Operating Partnership and the wholly owned subsidiaries of the Operating Partnership.

The Company and the Operating Partnership commenced operations upon completion of the underwritten initial public offering of shares of the Company’s common stock on April 16, 2014. The IPO resulted in the sale of 3,800,000 shares of common stock at a price per share of $14.00 which generated net proceeds of approximately $48.0 Mil. The company then contributed the net proceeds from the IPO to the Operating Partnership in exchange for units of limited partnership interest in the Operating Partnership.

Concurrently with the completion of the IPO, the Company’s predecessor business, FP Land LLC, a Delaware limited liability company, merged into the Operating Partnership. The company then issued 1,945,000 OP Units to Pittman Hough Farms LLC which was the sole owner of FP Land and is 75% owned by Paul A. Pittman, the Company’s Executive Chairman, President and Chief Executive Officer. As a result of the FP Land Merger, the Operating Partnership succeeded to the business and operations of FP Land, including FP Land’s 100% fee simple interest in a portfolio of 38 farms and three grain storage facilities. Upon completion of the IPO and the FP Land Merger, the Company owned approximately 67.4% of the OP Units in the Operating Partnership.

The Company converted to a real estate investment trust (REIT) under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended, commencing with its short taxable year ending December 31, 2014. All of the Company’s assets are held by, and its operations are primarily conducted through, the Operating Partnership. The Company is the sole member of the general partner of the Operating Partnership. The Company owned 67.4% of the OP Units at June 30, 2014.

As of June 30, 2014, the Company owned or had a controlling interest in a portfolio of 40 farms as well as three grain storage facilities.

Conclusion

I am completely convinced that any investment in either one of these companies has to be entered into as a long term investment. And by long term I mean years, not months. Anyone with a shorter term horizon will most likely become disillusioned and/or disappointed in the short term. That said, this may just be one of the best investments of the decade if executed correctly (a big if!). Land traditionally increases in value at a rate similar to the inflation rate so it's a great preserver of purchasing power over time, much like gold is. In addition, as population encroaches on today's farm land, the value of the land increases almost exponentially as its use in converted into lots for homes, businesses, golf courses, etc. And while an investor waits for the value of the land (stock) to increase, each of these companies is throwing off a very generous dividend.

I have already initiated a position in LAND and I intend to initiate a position in FPI over the next few weeks. I intend to invest in these companies with excess funds as they become available and then simply hold these stocks for years. I'll also use the dividends distributed by these companies to reinvest back into additional shares and then let these positions grow naturally. Hopefully in the years ahead I'll look back at these investments and smile. A lot!

Additional Articles of Interest

"Tree Farms Are Farms Too", dated 24 September 2014.

Ideas From All Those Dividend Increases

9/20/2014

On Saturday mornings I like to review the week's dividend announcements to see which companies increased their dividend that week. It's a nice signal that the company is doing well. Over the years I've found that a company that increases its dividend is one of the most tangible signals that the company's board of directors can do to demonstrate that they have a lot of confidence in the future cash flows of the company. For a dividend growth investor like me this could be the very place to find the next perfect stock.

Below is a list of this week's dividend increases. More detailed information on each of these increases can be found in the "Dividend Increases" section of this website. There you will not only find this week's dividend increases but past week's dividend increases as well. I'm sure if you spend a few minutes looking at that section you'll find at least one, and probably many more, diamonds in the rough listed there.

Atlantic Tele-Network (ATNI)
Ryman Hospitality Properties (RHP)
Kayne Anderson Energy Total Return Fund (KYE)
Texas Instruments Inc. (TXN)
Idacorp (IDA)
PennyMac Mortgage Investment Trust (PMT)
WSFS Financial (WSFS)
McDonald's (MCD)
The Washington Trust Company (WASH)
Sanderson Farms (SAFM)
Covanta Holding Corporation (CVA)
Artesian Resources Corporation (ARTNA)
Covidien (COV)
Elmer Bancorp, Inc. (ELMA)
City Office Reit (CIO)
Blackstone Mortgage (BXMT)

How Much Money Will I Need To Retire?

9/19/2014

The big question everyone asks when they think about retiring is "How much money will I need to retire?" It's a tough question because everyone's needs, desires, and lifestyles are different. Their expectations are different too. So where does an investor begin? For me, I like to start with the US Census Bureau. I want to know what the average family has to live on so I'll know that in retirement I'll be able to live at least as well as the average American family.

According to new figures from the Census Bureau, inflation adjusted income for the median US household rose by just 0.3% in 2013. This means that the median household income increased $180 last year to $51,939. This is the amount I would need in order to live as well as that average American family and it's probably a good number to shoot for if you're thinking about retiring any time in the very near future.

Another item I look at is debt. I want zero debt going into retirement. If that's not possible, then I want to know what my debt servicing requirements are going to be. Whatever that debt service amount ends up being, I need to add that to the median income identified above so that after debt payments my income will still equal the median US household.

Next I examine the lifestyle of the average family and compare my lifestyle to that. If I expect a higher lifestyle than the average American family, I need to adjust my expected income needs upward. If I desire a somewhat lesser lifestyle I can adjust my income needs lower.

The final thing I do is look at the type of income I expect to receive in retirement. I need that income to increase over time at a rate equal to or greater than the rate of inflation in order to preserve my current purchasing power. If that's not possible then my income and lifestyle will soon get ravaged by inflation and I will slowly fall into a level of poverty that will eventually drive me back to the workforce. And that would be disastrous because there simply aren't very many well paying jobs for 70 and 80 year olds.

Over the years these ideas have provided me with the guidelines I've needed to determine when I'll be financially able to finally retire. I think they're pretty good guidelines and I hope they provide others something to think about too.

Author

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.

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