Ted SeeksQuality

Lo curioso es lo poco que sube el dividendo

2 Likes

De momento se mantiene en el doble dígito (este año 11%).
Aunque si la comparas con UNH, APH, ITW, TXN, HD, ABBV, está claro que no llega al 15% que pides.
¿Tiene M* un screener para búsqueda de acciones en función del crecimiento de dividendo?.

1 Like

Haberlo, haylo

Siempre puedes filtrar en el Excel de David Fish.

Así hago, pero estoy valorando sitios de suscripción y por eso preguntaba.
Como es el que menos he manejado para búsqueda de información, M* me resulta bastante opaco.
SSD tiene un buen screener, pero está limitado a USA y vale una leña.

La diferencia entre “defensive” y “quality” usando SJM como ejemplo

I’m probably going to ruffle some feathers with this, but will go ahead and say it anyways…
People often misunderstand the difference between Defense and Quality, and attribute a Moat to companies that in my opinion have little or none.

The difference between a Defensive stock and a Sensitive stock has to do with how the earnings respond to macroeconomic conditions. Consider UTX, for example? Earnings fell from $4.90 to $4.12 between 2008 and 2009. Cash flow fell from $6.38 to $5.43. (All numbers from ValueLine.) Or CSCO? Earnings fell from $1.31 to $1.05 while cash flow fell from $1.66 to $1.37. These are strong companies that were never endangered by that drop in earnings, and they recovered quickly, but there is no denying that they are economically sensitive! In a recession you might expect a 20% decline in earnings in addition to a 20% to 40% decline in P/E multiples.

In contrast, PG is your classic defensive giant. Its earnings fell from $3.64 to $3.58, cash flow from $4.97 to $4.86. We did see P/E multiples contract, along with the rest of the market, but the denominator – earnings – was remarkably steady. Even while the global economy was going to hell in a handbasket, PG was selling product and turning a steady profit.

Once again, all three of these companies are what I would consider High Quality companies. They have strong credit ratings, diversified revenue streams, and the financial strength to make it through an economic downturn without damage to the business. All three companies survived and ultimately did very well. Heck, the Defensive company has been the WEAKEST of the three over the last fifteen years. (Not that anybody is complaining.)

In contrast, we have companies like SJM. SJM is clearly a Defensive company. Their sales ought to be relatively insensitive to macroeconomic conditions. People are not going to stop buying peanut butter and pet food in a recession. Their margins are impacted to a certain extent by currency translation and commodity costs, but have little to do with GDP growth.

Yet the quality of SJM does not compare to the quality of UTX, CSCO, or PG. The Big Heart acquisition stretched their finances, knocking them down from A3 credit (solid) to Baa2 credit (weak). Over the past 4.5 years they have struggled under this burden through a pattern of underinvestment (hurts revenue growth), divestments (hurts revenue growth), and debt reduction (hurts revenue growth). And their debt is STILL more than three times EBITDA.

At this time, SJM is hoping to stabilize revenue. Not grow. Not expand. Survive. They are definitely cheap on a P/E basis, and seem to have ample FCF to cover the dividend, but persistently shrinking revenues are a bad sign for any business, let alone one carrying a heavy debt load.

So you might do well buying and owning SJM. You get a bargain price on the business, and if they can eventually figure things out then the shares will eventually rebound. Moreover, it is very clearly a Defensive company. You don’t need to fear an impending recession, because that is unlikely to be material to their situation. But it is a no-moat company (even Morningstar agrees at this point) with borderline quality metrics. Management needs to execute or things could get really bad in a surprisingly short time. SJM is in better shape than KHC was, but not THAT much better shape.

So don’t confuse Defensive with Quality. A Defensive company need not fear a recession, but may still be at risk from mismanagement (and the incestuous management at SJM is a poor recipe for success). A Quality company has the strength to work through almost anything.

7 Likes

Texto sacado de un comentario acerca de MDT.

The advantage of quality is twofold.

  • First, it is less likely that I will be buying into a value trap. A quality stock purchased at a good valuation is a great recipe for strong returns.
  • Second, it allows me to put a greater sum into the position with minimal risk of loss.

"Quality scores" de su cartera de 40 valores

Keep in mind that this is simply a composite of Jefferson Research, Value Line, Moodys, and SSD numbers – especially the last two. It is a number I have found useful in my own approach, though it may not be appropriate to others. (The concept of “quality” is important to all systems, in my opinion, but is likely defined somewhat differently.)

19+ JNJ, AAPL, MSFT, PG, BRK.B, NSRGY, INTC
18 NKE, CSCO, MRK, HON, MDT, GOOG, HRL, DEO, ITW, PEP, KMB, HD, SYY, UTX, UL, MMM
17 UNH, UNP, GWW, NEE, DIS, AMGN, PFE
16 ETN, NVS, VFC, CVS, WEC, DUK, WTR
15 T, D
14 SO

Note that the last six are utilities (and T which is a semi-utility). Steady cash-flow businesses with very high capital requirements and (mostly) higher dividends. These companies tend to operate with higher debt levels and lower credit ratings, yet due to the stability of their revenues it isn’t clear that their operations are any riskier. You could reasonably argue that this metric treats them unfairly – or you could suggest that they might be riskier than people are recognizing?

CVS is my only position with a 2.5%+ portfolio rating and a Quality score of 16 or lower.

Please keep in mind that Valuation and Growth are represented elsewhere in the system. This number is not intended to reflect either one.

8 Likes

Acerca de las caídas de estas semanas:

"Let’s put this in perspective, people…

First, this isn’t merely a media scare. Politicians who dismiss it as such are sticking their heads in the sand. This has a lot in common with influenza (albeit a different family of virus), which kills hundreds of thousands of people each year. It might end up being less widespread, or might end up being deadlier, but it is clearly a big deal. That said, it isn’t the first deadly virus that the human race has encountered. There is no fundamental reason we can’t figure this one out given time. Time… That’s what all these quarantines and such are trying to buy us.

Second, the market is far from being cheap. The S&P500 remains 40% higher than it was in 2015, and while the global economy has progressed somewhat since then, there is no reason to believe it is undervalued here. Even after this decline, we are at similar levels to September 2018 and 10% above the levels of December 2018. Another 10% decline from here, across the board, and the market might be starting to look tempting. Another 30% or 40% decline from here and we would be seeing some REALLY good deals. I’ve covered my outstanding call trades, but have not otherwise bought anything yet. Plenty of cash available if those good deals come to pass.

Third, there is nothing YET that fundamentally threatens sound businesses. Earnings will be down over the first half of this year, perhaps longer, but we’ve hit recessions before and these Dividend Aristocrats have soldiered through. Expect they will do the same here as well.

Finally, the action this week appears to be irrational. I see no particular pattern in WHICH stocks are declining, which suggests to me that it is broad institutional deleveraging rather than actual concerns that are driving the market. So specific opportunities may arise even if the overall market is still fully valued."

2 Likes

5 de marzo:

"Over the first two months of the year, our only moves were to shed positions in WEC and WTR (now WTRG) while putting part of the proceeds into D and DUK. But with new cash coming in, we made two purchases today in our taxable account and one in an IRA:

Taxable account: 100 sh. JPM and 100 sh. DEO
JPM is a new position for us. Likely not a timely buy, but I’m comfortable initiating here. DEO is a long-time holding that we are rebuilding now that it has come down from the lofty heights.

IRA: 100 sh. WTRG
Was time to put a little more into Utilities, and while I don’t LOVE the value, the quality appears to be pretty solid. Time at least to start dipping the toe in the water again.

Mostly just ignoring the accounts and the crazy market action, but good values are beginning to emerge after a long winter’s nap."

Y esta url las ordena por yield.

https://finviz.com/screener.ashx?v=161&t=NJ,AAPL,MSFT,PG,BRK-B,NSRGY,INTC,OF,CSCO,MRK,HON,MDT,GOOG,HRL,DEO,ITW,PEP,KMB,HD,SYY,UTX,UL,MMM,UNH,UNP,GWW,NEE,DIS,AMGN,PFE,ETN,NVS,VFC,CVS,WEC,ALL,WTR&o=-dividendyield

5 Likes

“Our investment plan was written to fund our retirement without equity sales, and with a large margin of safety. We are going to see dividend cuts in this market. What we are seeing now in the REIT and energy market is just the tip of the iceberg. But that’s okay, dividend cuts are not the end of the world. That’s why we have a large margin of safety built in! I’m not going to dump DIS or SYY just because they suspend or reduce the dividend for a couple years.
In normal times you own quality because quality companies don’t cut their dividends. In times like this (which we haven’t seen for 100 years), you own quality because those companies will survive the mess. At least they have the best chance of surviving the mess. That will be enough.
I will likely reallocate some of that cash into equities at some point for the simple reason that fixed income returns are now permanently in the toilet at the same time that equity yields are up sharply. Of course I’ll be shopping for the safest dividends, likely in the 3% to 4% range, not necessarily the biggest bargains. A safe dividend paying 3% does the job for me.
But we don’t NEED to make these shifts. That takes a lot of the pressure off. So what if we miss an opportunity? We already have enough in place, with an appropriate balance to weather any storm that doesn’t knock us back to the Stone Age.”

3 Likes

“Stocks are simply not bonds! I suspect this correction/recession/depression will wash out a lot of the nonsense surrounding DGI. What is left, as always, will be a solid core of high quality stocks – with a largely defensive focus.”

1 Like

Visión pesimista o realista de lo que nos viene encima:

I am hopeful that things will return to normal (perhaps a “new normal”) within two years. Between your two years of cash and ongoing dividends, you should be okay. At the very least I wouldn’t worry about it yet.”

"I would assume little/no DGR (aumento de dividendos) for the next few years. Depending on your mix, you could see a reduction in dividend income. Right now the goal is survival. Once we are done with this, and work our way through the recession, then we can think about growth again.
This has the potential to push your retirement date back a couple years. I definitely wouldn’t assume the ability to draw 4% based on last year’s asset values.

3 Likes

El ciclo del dinero según él, centrado en el aumento de déficit del país.

“My take on the Federal Deficit, Federal Debt, and QE…
Think of cash like water. It rains, it waters plants, flows into rivers, evaporates, rains again, and perhaps eventually ends up in the ocean – where again it evaporates and rains. If any part of the process “dries up” then you need to inject additional cash to keep the “plants” watered and growing.
Our present economic system concentrates wealth in the hands of a few. I’ve heard that the richest 1% own 44% of all global assets, a proportion that has steadily been rising over the last 20 years. In the US, the richest 1% own 40% of all assets. Perhaps more meaningfully, the richest 10% own 80% of all assets. Again, both of these numbers have tended to rise.
In my opinion, the top 10% generally have more money than they know what to do with. They spend some, splurge a little, and then… THEY INVEST. That investment tends to be shuffled back and forth from one wealthy individual to another, but it doesn’t actually cycle through goods/services until it is spent. And as a group, the top 10% are cash-flow positive. More cash makes its way into their hands than is being spent.
Thus the economy repeatedly requires injections of “new cash”. During periods of growth, enough of that money gets spent to keep things flowing, but in a recession that stops (or slows) and the only way to start it again is to “print more cash”. The Treasury boosts borrowing and the Fed boosts its book, with the end result of more debt and more cash in the system.
If the wealthy as a group (and I’m probably talking about the top 10% here, which might include myself) were to ever try to spend their accumulated wealth, that would likely result in inflation. But as long as they are content to sit on the wealth, it just continues to grow – fed by continued borrowing. The actual economic production isn’t growing nearly that rapidly, so this implies ever-decreasing returns on that wealth.
I don’t think this can continue forever, but the way it breaks is heavily dependent on public policy.”

4 Likes

Chowder has a reasonable approach to this. Ignore the volatile earnings, ignore the volatile share price, and focus on the strength of the dividend. If the company has sufficient confidence in the future earnings stream to declare a 6% dividend increase, and has earned our confidence through their past management practices, then we can trust that. It is certainly more meaningful than their Q2 outlook.But personally I’m taking it a step farther in this environment (partly because I am less dividend-focused than most people here). Forget earnings. Forget P/E. Forget share price. Forget dividends.

I’ll go with what Scootrd said above: "Investment in corporations with cleanest balance sheets, no / low short term debt, and FCF is first and foremost my metrics of greatest importance at present."Quality, quality, quality, and cash flow. Buy that and the rest will figure itself out."

6 Likes

No se puede decir más claro.

5 Likes

Y además predica con el ejemplo. Su cartera hasta hace no mucho

19+ JNJ, AAPL, MSFT, PG, BRK.B, NSRGY, INTC
18 NKE, CSCO, MRK, HON, MDT, GOOG, HRL, DEO, ITW, PEP, KMB, HD, SYY, UTX, UL, MMM
17 UNH, UNP, GWW, NEE, DIS, AMGN, PFE
16 ETN, NVS, VFC, CVS, WEC, DUK, WTR
15 T, D
14 SO

7 Likes

Este me parece un debate falaz en estos momentos.

¿Es peor empresa Amadeus que Dia? No lo creo ¿cual va mejor en 2020?

Hablar de la calidad de las empresas cuando ahora mismo lo unico que importa es que empresa puede abrir y cual no …

2 Likes

"You talk about growth rates, about P/E ratios, and about what is or is not an appropriate price to pay for a given stock. In this environment I am seeing several problems with that approach.

(1) I have very little earnings visibility for 2020-2021 and low confidence in my long-term estimates. It seems to me like we will see major structural changes in the economy over the next few years, and I’m not smart enough to know how they will all play out.

(2) One of the many possibilities on the table is a Great Depression. This wouldn’t necessarily be caused by the virus? I believe the economy has been vulnerable for a while. (How this plays out depends in part on our politicians, on the President and on Congress, and they may have wildly different ideas on how to proceed.) If this brief Recession extends into a Depression, a simple 2% earnings growth could be “best of class”. I know that I’m not expecting better than that for most of my portfolio this year.

(3) One of the key elements in the political response is massive fiscal stimulus (the COVID checks) and monetary stimulus (from the Fed opening the firehose). Over the course of barely a month, the Fed book has increased by $2T, literally 50%!!! That money has to go somewhere? If it gets spent on goods and services, then the economy will recover but we will see rampant inflation. If it gets invested, then asset prices will be forced higher – and the markets may reset to a higher “new normal” P/E, just as they did in the last QE.

Thus I see valuation in this market as an exercise in navigating through dense fog, in stormy seas, based on charts that are a decade old. Perhaps we can do so skillfully and avoid the shoals? But I’m placing my greater faith in the strength of my ship."

2 Likes