Monday, January 31, 2011

The DIV-Net: Stock Analysis: Johnson & Johnson

The DIV-Net: Stock Analysis: Johnson & Johnson

Friday, January 28, 2011

Stock Analysis: Johnson & Johnson

Johnson & Johnson (JNJ) engages in the research and development, manufacture, and sale of various products in the health care field worldwide. The company operates in three segments: Consumer, Pharmaceutical, and Medical Devices and Diagnostics. The company is a dividend aristocrat which has increased distributions for 48 years in a row. One of the company’s largest investors is no other than Warren Buffett’s Berkshire Hathaway.

Over the past decade this dividend stock has delivered an annualized total return of 4.10% to its loyal shareholders.

The company has managed to deliver an average increase in EPS of 11.10% per year since 2000. Analysts expect Johnson & Johnson to earn $4.75 per share in 2010 and $4.99 per share in 2011. This would be a nice increase from the $4.40/share the company earned in 2009.

The company’s return on equity has remained above 25%, with the exception of a brief decrease in 2006 and 2007. Rather than focus on absolute values for this indicator, I generally want to see at least a stable return on equity over time.

The annual dividend payment in US dollars has increased by 13.40% per year since 2000. A 13% growth in distributions translates into the dividend payment doubling every five and a half. If we look at historical data, going as far back as 1972, we see that Johnson & Johnson has actually managed to double its dividend every five years on average.

Over the past decade the dividend payout ratio has increased from 37% in 2000 to 44% in 2009. A lower payout is always a plus, since it leaves room for consistent dividend growth minimizing the impact of short-term fluctuations in earnings.

Currently, Johnson & Johnson is attractively valued at 12.80 times earnings, yields 3.50% and has a sustainable dividend payout. In comparison Abbott Laboratories (ABT) yields 3.60% and trades at a P/E of 15.60. I would continue monitoring Johnson & Johnson and will consider adding to a position in the stock on dips.

Full Disclosure: Long JNJ

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More on this topic (What's this?)Read more on JOHNSON & JOHNSON at Wikinvest

The DIV-Net: Canadian Imperial Bank of Commerce (TSE:CM, NYSE:CM) Dividend Analysis

The DIV-Net: Canadian Imperial Bank of Commerce (TSE:CM, NYSE:CM) Dividend Analysis

Thursday, January 27, 2011

Canadian Imperial Bank of Commerce (TSE:CM, NYSE:CM) Dividend Analysis

Canadian Imperial Bank of Commerce, also known as CIBC, is the 5th largest bank in Canada.

CIBC provides a full range of financial service products and services to 11 million individual, small business, commercial, corporate and institutional clients in Canada and around the world.
Historically, CIBC is the merger of the Canadian Bank of Commerce (Established in 1867) and the Imperial Bank of Canada (Established in 1875) which took place in 1961. It represents 144 years of banking business.

CIBC is not currently in a leading positions compared to the other top banks and is working hard on growing and competing with the other big boys. It's targeting to be #3 while eyeing #1 or #2 spot. I have to say that it's not a small target to reach the top 3 when you consider that all the other banks are aggressively expending.

They target a 40%-50% dividend payout with a shareholder return greater than the S&P/TSX Composite Banks Index (dividends reinvested) on a rolling five-year basis. In short, they are saying that you, as an investor, will do better with CIBC than half of the other financial institutions involved in retail banking (could be a life insurance company). That's quite a bold statement.

Fact Sheet

Some quick facts on CIBC.
  • Stock Ticker: CM on both TSX and NYSE
  • Market Cap.: 29.89B$
  • P/E: 12.95
  • EPS: 5.88$
  • Dividend Yield: 4.57%
  • 52-Week Low: 62.60$
  • 52-Week High: 81.37$
  • 52-Week Range: 71.98%
The one year graph shows a decent 19.43% growth in value. It's on par with the S&P TSX index but it doesn't include the 4.57% dividend yield though. That would give a 24% return on investment for 2010.

Dividend Growth

CIBC's dividend growth is decent but not an aristocrats. For the banks, I am willing to forgive not increasing dividends through 2009 and 2010 due to the Basel III rules but CIBC happens to have held its dividend back in 1998 and 1999.

The dividend growth graph may look decent but CIBC's 5 year dividend growth average is at 5.67% while the other banks exhibit a much higher average growth. Here is the 5 year dividend growth average for the top 5 banks.

  • CM - 5.67%
  • BNS - 8.41%
  • TD - 9.33%
  • BMO - 9.08%
  • RY - 11.75%
3 of the 5 banks held their dividend rate fixed for 2009 and 2010 while the other 2 held it for 2010 only and they still managed to have a nice dividend growth average for the past 5 years and CIBC is lagging behind.

The dividend payout ratio is a little erratic as you can see with 4 of the last 9 years paying above 100%. 3 of these 4 years are due to CIBC having negative earnings. I decided to represent them at 100% since it clearly paid more than it earned. In 2002, the payout was actually 117%. The 5 year average dividend payout is 65.86% and out of range of their 40%-50% target at the moment.


I took a snapshot of the last 6 months and CIBC performed quite well on the market. The erratic dividend payout ratio and the lack luster dividend growth don't seem to be holding it back. The high yield may be what is keeping the value up.

The P/E for CM is definitely attractive at 12.95 and below average of the other top banks. It's interesting to see the premium investors are willing to pay for the top 5 banks while National Bank and Laurentian Bank are staying just about below 12.

CompetitorsTickerPriceMarket Cap.YieldP/E
Toronto DominionTD.TO$75.11$65.983.25%14.71
Bank of MontrealBMO.TO$59.30$33.594.72%12.49
Royal BankRY.TO$52.90$75.393.78%15.28
Bank of Nova ScotiaBNS.TO$56.15$58.563.49%14.38
National BankNA.TO$69.95$11.373.77%11.77
Laurentian BankLB.TO$53.01$1.272.94%11.45

Even with a decent P/E based on today's data, the earnings per share for CIBC have not been as consistent over the past decade which is concerning. The delta is pretty wide in some cases which should be a cause for concern. I have not read further as to why it hit rock bottom in 2 occasions but it should be researched to understand management better.


If you do business with President Choice Financial, you're essentially generating revenue for CIBC through the partnership CIBC has with Loblaws. The erratic payout ratio and earnings is making me cautious. I may need a couple more years to see it steer away from the wild swings. The yield is definitely attractive but there are other options. I feel that management has worked hard to not reduce the dividends but any future challenges may require a reduction.

Readers: Do you own CIBC? What do you like about it?

Full Disclosure: I am long with BMO and BNS.

Disclaimer: The material presented should not be considered a recommendation. You should always do your own research and reach your own conclusion.

This article was written by The Passive Income Earner. If you enjoyed this article, please consider subscribing to my feed.

Top 5 Dividend Stocks Near a New Low - Seeking Alpha

Top 5 Dividend Stocks Near a New Low - Seeking Alpha
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The Dow hit 12,000 intra-week but closed decisively lower at 11,823. The S&P 500 was flat for the week. Our watch list has 16 companies that are within 10% of their 52-week low. The complete list of companies can be found here.

January 28, 2011 Watch List

SymbolNamePrice% Yr LowP/EEPSDividendYieldPayout Ratio
ABTAbbott Labs45.492.02%
WEYSWeyco Group22.783.03%19.641.160.642.81%55%
SHENShenandoah Tel.16.314.82%17.920.910.332.02%36%

Watch List Summary

Abbott (ABT) topped our list this week after falling 5%. Wall Street wasn't happy with the company's short-term outlook, even after being given guidance for double digit growth in the coming year. With Abbott trading close to its historically high dividend yield range, we couldn't help but accumulate some on its way down. Given an estimated double digit growth, we estimate that the company could easily raise its dividend from $0.44 to $0.48 (9% increase) in the coming months. At the current price, estimated dividend yield will be north of 4%.

The majority of the companies on our watchlist have dividend yields that are higher than 7-year T-Bill and are trading near their historical high yield. According to the book, Dividends Don't Lie by Geraldine Weiss, this marks great value propositions for long-term holder.

Top Five Performance Review

In our ongoing review of the NLO Dividend Watch List, we have taken the top five stocks on our list from January 29, 2010 and have check their performance one year later. The top five companies on that list can be seen in the table below.

NameSymbol20102011% change
First FinancialTHFF27.631.4613.99%
Exxon MobileXOM64.4378.9922.60%
Shenandoah Tel.SHEN17.216.31-5.17%
Aqua AmericaWTR16.5923.1839.72%
California WaterCWT36.3236.580.72%


DJ IndustrialsDJI10,067.3311,823.7017.45%
S&P 500SPX1,073.871,276.3418.85%

Our top five under performed both the Dow and S&P. Only Exxon (XOM) and Aqua America (WTR) beat those two indices. Although Shenandoah (SHEN) fell 5% over one-year, it rose above 15% in less than two months, giving investors an opportunity to take some profit off the table.

Disclaimer: On our current list, we excluded companies that have no earnings. Stocks that appear on our watch lists are not recommendations to buy. Instead, they are the starting point for doing your research and determining the best company to buy. Ideally, a stock that is purchased from this list is done after a considerable decline in the price and extensive due diligence. We suggest that readers use the March 2009 low (or the companies' most distressed level in the last 2 years) as the downside projection for investing. Our view is to embrace the worse case scenario prior to investing. A minimum of 50% decline or the November 2008 to March 2009 low, whichever is lower, would fit that description. It is important to place these companies on your own watch list so that when the opportunity arises, you can purchase them with a greater margin of safety. It is our expectation that, at the most, only 1/3 of the companies that are part of our list will outperform the market over a one-year period.

Disclosure: I am long ABT.