Wednesday, October 2, 2013

Dividend CCC review: September

Each month David Fish at Dripinvesting updates his Dividend Champions spreadsheet. Likewise each month, I go through it in a screening process to see if there are any new companies that warrant further research. Its one of the ways that I add to my watch list.

I deviate a little bit from my watch list scoring method in what I focus in on to keep things simple. Only whats on the sheet. Here I look at 3 dividend fields: Yield, 5 year dividend growth rate, and the EPS payout ratio. I then look at 3 fundamental field: P/E, Graham value, and the Tweed number. Each field is rated on a scale of +2 to -2 points. I then come up with a total score of companies potentially worth my time. With a scoring range of +12 to -12 I want to look at the top companies and 6 is usually my cutoff point.

Name Symbol Industry Score
Triangle Capital Corp. TCAP BDC-Financial Services 9
Lyons Bancorp Inc. LYBC Banking 9
NTT DoCoMo Inc. DCM Telecommunications 9
China Petroleum & Chemical Corp. SNP Oil&Gas 9
First Robinson Financial Corp. FRFC Banking 8
Textainer Group Holdings Ltd. TGH Transportation 8
Nippon Telegraph & Telephone NTT Telecommunications 8
PartnerRe Limited PRE Insurance 7
ACE Limited ACE Insurance 7
1st Source Corp. SRCE Banking 6
Alliance Resource Partners LP ARLP MLP-Coal 6
Chevron Corp. CVX Oil & Gas 6
L-3 Communications Holdings Inc. LLL Aerospace/Defense 6
Farmers and Merchants Bancorp FMAO Banking 6
Landmark Bancorp Inc. LARK Banking 6

Companies quick to cross off...
TCAP: Already on my Watch list.
LYBC: The data on Google Finance, Yahoo Finance, and Morningstar is mostly missing. Not comfortable with that at all.
SNP: I do not invest directly in China. I cannot trust the economic data from there so I am unable to make an informed decision.
FRFC: Less than 200 average volume of shares traded daily.
TGH: They lease out the cargo containers on large bulk oceangoing vessels. I've researched them before and their numbers look great. The deal breaker is that they went heavy into debt at low interest rates in recent years to get market share. When interest rates rise are they going to get slaughtered?  I don't want to worry about it.
NTT: A landline telephone company in Japan doesn't give me the impression of dividend growth.
ARLP: Alliance comes up often on my screens but I believe that coal is a dying industry.
CVX: Good old Chevron. If I wasn't in ConocoPhillips (COP) and heavy in land trusts I would give them a look. COP got a 5 on this screen so its not like it needs to be cut.
LLL: Aerospace and Defense. Today the U.S. government shutdown and November we have the debt ceiling coming back. If this had a pullback I'd consider it but its up 20% for the year without a significant pullback.

New companies for possible review...
PRE: Is a holding company for multiple re-insurance companies out of U.S., Bermuda, and Europe. Their EPS is odd. Every three years they have 0 EPS (2005, 2008, 2011). Then its followed by a large jump to 12 to 23 EPS. The following year has a lower EPS then repeat with 0. I don't want to invest in a company like that but I might research them just to find out why the EPS pattern.

ACE: Another holding company for insurance and re-insurance companies. It too has a 3 year EPS cycle. Though it doesn't go to 0 it drops drastically, rises the second year, rises more the third year, then crashes. The crashes are on the same year as PRE. Ok I will definitely research this. You never know when you will find out something new. This is how I learned about Business Development Companies that are now a part of my portfolio. The share price of both companies did not collapse with the EPS so this must be a known cycle that is no big deal to those who understand the industry.

SRCE: An Indiana and Michigan regional U.S. bank. That alone gives me pause as the manufacturing that made those areas are gone (Gary & Detroit). They had a big EPS hit in 2009 but which bank didn't? The dividend was still covered. Since then they have barely given any raises to work their payout ratio down from 75% to 33%. At least they won't cut the dividend. Their EPS has recovered but I am not seeing anything here getting me excited.

FMAO: An Ohio and Indiana regional U.S. bank. Same exact concerns as with SRCE.

LARK: A Kansas regional U.S. bank. They had declining EPS for several years and have recovered. They gave only token dividend raises when the payout was at 93% and let it work its way down to 34%. A red flag for me is that they cut the dividend in 2008 when the payout was at 33%. Why cut it there when you give a raise at 93%?

This month's research screen winner is...
DCM: Japan's largest mobile phone service company. Its an ADR and a foreign company so there will be two countries and their laws to consider.  They only pay the dividends twice a year which is common for non U.S. companies, but I don't care for it. They do however have a new deal last month with Apple (AAPL) to carry the iPhone. Japan accounts for 7.3% of AAPL's business and that is before this deal. DCM has 62 million subscribers which is half of the Japanese cell phone market.
DCM is a good candidate for more research and has a lot of potential. For me though I must pass. I am already invested in AAPL so will be enjoying any growth DCM has. AAPL fundamentally is cheaper then DCM and has a strong share buyback program.

While I have not looked at the following, here are some other companies that might be worth your own research.
Name Symbol Industry Score
Deere & Company DE Farm Equipment 5
China Mobile Limited CHL Telecommunications 5
ConocoPhillips COP Oil & Gas 5
Murphy Oil Corp. MUR Oil & Gas 5
AFLAC Inc. AFL Insurance 5
Helmerich & Payne Inc. HP Oil & Gas 5
Citizens Financial Services CZFS Banking 5
HCC Insurance Holdings HCC Insurance 5
Travelers Companies TRV Insurance 5
Bar Harbor Bankshares BHB Banking 5
High Country Bancorp Inc. HCBC Banking 5
PSB Holdings Inc. PSBQ Banking 5
Axis Capital Holdings Ltd. AXS Insurance 5
Northeast Indiana Bancorp NIDB Banking 5
American Financial Group Inc. AFG Insurance 5
Teche Holding Co. TSH Banking 5
AmTrust Financial Services Inc. AFSI Financial Services 5
American Equity Investment Life Holding Co. AEL Insurance 5
Alliance Holdings GP LP AHGP MLP-Coal 4
Vanguard Natural Resources LLC VNR MLP-Oil&Gas Services 4
Teekay Offshore Partners LP TOO LNG Transport. 4
Intel Corp. INTC Technology-Hardware 4
Rogers Communications Inc. RCI Telecommunications 4
Acme United Corp. ACU Office Supplies 4
Chesapeake Financial Shares CPKF Banking 4
Universal Corp. UVV Tobacco 4
Unum Group UNM Insurance 4
Assurant Inc. AIZ Insurance 4

Disclaimer: The investments and trades discussed are not recommendations for others. I am not a financial planner, financial advisor, accountant, or tax adviser. The financial actions I talk about are for my own portfolio and money and only suited for my own risk tolerance, strategy, and ideas. Copying another person's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.


  1. It will be interesting to see how all of our spreadsheets will change if the markets experience huge pullbacks. I'm getting cash-heavy sitting on the sidelines. If my pile gets big enough I will pay off one of my properties.

    1. Thats the great thing about cash. It provides opportunity. I think too many blog investors are in a rush to deploy their cash into a dividend stock that they then could miss out on a pullback in the market or other things. Paying off a property is one example.
      I bet that'll do wonders for your cash flow Investing Early.

  2. PMU.... Thanks for a link that web site and the list. Great resource.