Altria Treats Its Dividend Investors Right – MO

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The Altria Group (MO) is one of the largest tobacco companies in the world. The company has been around for 25 years and operated under its former name Phillip Morris USA. The company was founded by Phillip Morris, Kraft, and Nabisco back in 1985. Altria currently owns John Middleton Company, UST Inc, and a 28% interest in SABMiller PLC. The company has recently branched out into the smokeless tobacco market and wine industry.


Altria manufactures and markets several different brands of cigarettes. The company spends marketing and lobbying to create a favorable environment for its products. Altria has long been a favorite of CNBC Mad Money host Jim Cramer. He considers the stock best of breed and has owned the stock for its impressive dividend.

The tobacco industry is an extremely competitive marketplace. The biggest competitors to Altria are Lorillard and Reynolds American. Altria is the industry king as the company is much lower than its two biggest competitors combined. Tobacco companies are always the subject of civil lawsuits and in the crosshairs of federal regulators. Tobacco companies also face rising taxes from city and state governments to meet revenue shortfalls. These tax increases do affect sales volume.

The last few years have been rough for the Altria Group. The company has seen its revenue decline 26% over the past five years. Sales are on pace to grow 8% this year and 6% the next. Altria’s revenue will be just over $17 billion dollars for this year. Altria has a terrible balance sheet with under $1 billion dollars in cash and over $12 billion dollars in debt. Fortunately, the company has $3.6 billion dollars in cash flow to service its debts and return cash to shareholders.

Shares of Altria are not cheap on a fundamental basis. The company’s stock trades at 13 times earnings which is right in line with the industry average. The company’s 6.7% growth rate is nearly half the industry average of 11%. This means that Altria’s shares trade at nearly 2 times the company’s earning growth. Shares trade at 11 times book value. That’s a high valuation even for a company of Altria’s size.

The primary reason to invest in Altria is its big fat dividend. Altria’s stock is currently yielding over 6%. This is actually lower than the 5 year dividend yield of 12%. My concern would be Altria’s dividend rate. The dividend payout rate is alarmingly high at 83% of earnings. The company’s management team is committed to maintaining the dividend despite its high payout. Altria has increased its dividend 43 consecutive times.

Dividend investors looking for a stock with a great dividend yield can do much worse than Altria.

Clorox Dividend Investors Are Cleaning Up – CLX

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Everyone has heard of Clorox (CLX) products. You can find the company’s products at Walmart, Target, or your local grocery store. The company has been manufacturing chemical and cleaning products since 1913. Clorox is famous for its best selling bleach that can whiten everything from clothes to floors.

Clorox also makes cleaning wipes, spray cleaners, stain removers, mopping pads, and cleaning tools. Clorox owns numerous brands including Brita’s, Burt’s Bees, Glad, Formula 409, Hidden Valley Ranch, Kingsford, and Liquid Plumr. The company recently divested itself of it STP and Armor All brands.


All of these brands help to add value to the common stock. The company is on pace to earn nearly $5.7 billion dollars which gives the company four straight years of revenue increases. The top line growth numbers are very impressive especially considering the difficult macro environment of the past few years. Net income has increased each year as well. Clorox now has a market cap of $9.5 billion dollars.

Clorox competes in the competitive consumer goods sector against Proctor & Gamble, Colgate Palmolive, and Kimberly Clark. Proctor & Gamble is the industry giant with a $175 billion dollar market cap and nearly $80 billion dollars in revenue. Proctor & Gamble has the best revenue growth, profit margin, and operating margin. Clorox has been able to compete in the sector because the company has successfully carved out a nice niche for itself due to name recognition.

Clorox’s common stock has a market price of $68.15. The stock trades at 14.6 times this year’s earnings and 13.5 times next year’s earnings. Earnings have grown at an 8% clip which is excellent for a company of Clorox’s size. Margins are respectable and revenue increased 1.1% last quarter. Shares are selling for 1.5 times projected earnings growth and 1.7 times sales. Book value is not a useful metric for measuring Clorox’s value since the firm’s book value is 60 cents per share.

Clorox has a high debt load on its balance sheet at $2.8 billion dollars. The company only has $87 million dollars in cash on hand. Clorox earns $819 million in free cash flow which helps service the massive debt load. The STP and Armor All sales should help the company raise needed cash. The deal will net Clorox $780 million dollars in cash.

Clorox currently sports a 3.2% yield. The current yield is slightly higher than the historical yield of 2.7%. Clorox has a long history of paying dividends to investors. The company has increased its dividend for 35 consecutive years. The current dividend payout is just 47% of earnings which means that the company will be able to keep dividend increases coming for years to come. Clorox should be able to continually grow earnings since the company’s products are necessities for everyday life.

The stock is selling at a bit of a premium currently. Investors should feel comfortable buying shares at $62.

WD-40 Bumps Up It’s Dividend Yield

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Everyone is probably familiar with WD-40. The product comes in a variety of forms including Smart Straw, Big Blast Can, Trigger Pro, No Mess Pen, Handy Can, and Gallon size. WD-40 is very helpful for loosening rusted parts. The product is useful for everything from cleaning tools to silencing squeaky hinges. WD-40 has over 2,000 different uses.

The company behind WD-40 started out as Rocket Chemical Corporation. The company changed its name in 1969 to WD-40 Company (WDFC). That’s pretty easy to remember. The name comes from Water Displacement – 40th try. The company has been around for over 50 years and is still a small cap stock. The company has a market value of $630 million dollars.


WD-40 is more than just its namesake product. The WD-40 Company is responsible for Carpet Fresh, Blue Works, 3 In One, Lava, X14, 2000 Flushes, and Spot Shot. All of these brands have turned WD-40 into a company that generates over $300 million dollars a year. Sales are up 8% for the current year and are expected to grow in the double figures over the next few years. Revenue was up 20% last quarter and earnings were up 32%.

The balance sheet is great at WD-40. The company has just $21 million dollars in long term debt and $59 million dollars in cash. That’s nearly three times the amount of cash to debt. WD-40 has $51.2 million dollars in free cash flow. Shares currently trade just under $38 per share. The company is on pace to earn $2.13 for the current year. That means that shares are trading at 17.7 times earnings. That’s higher than the industry average of 12. The company’s earnings are growing at a faster rate than competitors.

WD-40’s chief competitors are Clorox, Church & Dwight, and Dupont. These companies are some of the largest heavyweights in the industry. Despite their size, WD-40 has higher margins and revenue growth than its larger competitors. WD-40 is an attractive company. There have been rumors that Clorox and other competitors should acquire WD-40.

Should you buy the stock now? The stock is a bit more expensive than its peers. WD-40 is trading at 1.4 times earnings growth and 3 times book value. Dividend Investors should feel comfortable buying shares around $30. The P/E ratio would be more in line with the growth rate.

Dividend stocks will like WD-40 for its nice dividend. The company’s dividend payout is 47% of earnings. This is clearly sustainable considering that WD-40 just increased its dividend this past week. The company’s dividend is increasing 8% to $1.08 per year. That bumps the stock up to a 2.85% yield.

Microsoft Is Showing Dividend Investors The Money – MSFT

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Today’s dividend stock is a household name that everyone has heard of. The company that I would like to look at is Microsoft Corporation (MSFT). The brainchild of Bill Gates is the king of the software market. Microsoft’s Windows operating system has over 90% of the market for client operating systems. The company has been around since 1975 and is valued at just under $215 billion dollars.

Microsoft makes money on everything related to technology. If you want to use technology for educational purposes, then Microsoft offers Microsoft Word, Excel, Powerpoint, and Tools. If you prefer to use technology for fun and gaming then Microsoft has the Xbox 360 and the Zune. Microsoft has successfully entered into the search market with its Bing search engine and the company is planning to enter the smartphone market with its Windows Live.


Microsoft’s chief competitors are Apple and Google. Apple has developed its own operating system and is trying to steal market share from Microsoft. Apple owns the MP3 market with its wildly popular iPod. Google is the king of search and has lost market share to Microsoft’s Bing. Google’s Android smartphone operating system is one of Windows Live chief competitors.

The tech firm is on pace to earn over $60 billion dollars for the year. The company expects to earn $24 billion dollars in operating profit and $18 billion dollars in net income. Revenue grew 22% over the past quarter. Microsoft has turned many of its early shareholders ad employees into multimillionaires.

Like other technology companies, Microsoft has an incredible balance sheet. The company is flush with cash wit $36.5 billion dollars on the balance sheet and $24 billion dollars in cash. Microsoft has just $6 billion dollars in debt. The company has impressive margins. Microsoft has a 40% operating margin and 30% profit margin. Return on equity is 43.75% and return on assets is 18.8%.

Mr. Softy is finally raising its dividend. Microsoft announced that the company will be increasing its dividend 23% to 64 cents per share. The software giant has finally found something to do with its nearly $37 billion dollar cash hoard. Microsoft is currently yielding 2.60%. This is substantially above the average 5 year historical yield of 1.80%.

The stock looks like a reasonable value. Shares currently trade for 9 times earnings and the company has been able to grow earnings at an 11% clip over the past five years. This is below the industry average P/E ratio of 14. The stock trades at just 1 times price to earnings growth. Microsoft is making the transformation from a company that belongs in the portfolio of a growth investor to an income investor’s core holding

An Energy Stock With A Juicy Dividend

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There was a time that the financial industry offered some of the best dividends around. Sine the banking crisis of the past three years, dividend yields have gone kaput in the finance industry. You can still however find some solid dividends in one industry. How would you like to invest in a company that operates in a stable industry and pays great dividend? Utility companies are known for their consistent revenue streams and growing dividends. Let’s take a look at one company in this sector.

Entergy Corp (ETR) is a Fortune 500 company that operates in the electric power production industry. Entergy is a diversified energy company that primarily operates in the Midwest with locations in Arkansas, Louisiana, Mississippi, and Texas. The company has nearly 3 million customers that rely on its 30,000 megawatts of electricity. Entergy is the second largest nuclear power generator in the United States.


Entergy is making a lot of smart moves. The company owns a number of attractive assets including its nuclear power plants. Entergy is considering spinning these assets off into another company. The company is investing $5 billion dollars in share repurchases and dividends over the next few years. All of these moves should provide value for shareholders.

One of the primary advantages that energy companies have is their pricing power. They have the ability to raise rates on customers due to few competitors in most markets. The energy industry is extremely capital intensive and takes years to become a viable presence in a new market. It is also a heavily regulated industry by states and the federal government.

So, what kind of shape is Entergy in? The company has earned $3.3 billion in free cash flow and has $1.3 billion in cash on the balance sheet. The company has a huge debt burden of $11.85 billion. This is not uncommon since most energy companies have large amounts of debt on their balance sheets. Entergy has seen its earnings grow 9.7% over the past five years. The company had over $1.3 billion dollars in net income last year and has brought in over $1 billion dollars in net income over the past three years.

Shares of Entergy currently trade at 11.6 times the current year’s earnings. Utility companies are known for their low P/E ratios. Entergy’s P/E ratio is slightly lower than the sector’s average. Shares trade at 2.2 times projected earnings growth which may be high but is still below the industry average of 2.7. The stock is trading at 1.6 times book value.

The company recently boosted its dividend 11% to $3.32 per share. The current dividend payout is 4.2% which is higher than the 5 year average yield of 3.1%. Entergy currently pays out 46% of earnings via dividends.

I think that Entergy is an attractive buy right now. The stock is not expensive and dividend investors are getting a juicy dividend yield. The company should conservatively be able to generate 5% earnings growth over the next few years. It’s a nice defensive play that will help you ride out a turbulent market.

A Small Cap Stock That Pays Big Dividends

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Who knew that there was money in trash? Chances are good that you have never heard of US Ecology (ECOL). US Ecology is a small cap waste management company that disposes of radioactive and hazardous waste materials.  The company has been around providing its waste treatment services since 1952. US Ecology has a market cap of $240 million dollars and an enterprise value of $207 million dollars.

US Ecology has a solid balance sheet for a small cap stock. The company has $32 million dollars in cash and has just $15,000 in long term debt. US Ecology generates nearly $30 million dollars in free cash flow. The company has a profit margin of 10.8% and an operating margin of 17.4%. The company has a return on equity of 11.8% and an 8.6% return on assets.


The company was affected by the economic recession and the expiration of a large Honeywell contract. The Honeywell project contributed nearly 10 cents to the company’s bottom line. The company saw revenues drop from $175 million dollars to $132million dollars from 2008 to 2009. Sales have declined 6.6% over the past years.  Earnings declined 34% over the last quarter. There is however good news for the company. Sales are projected to grow for the first time in awhile. Sales growth is estimated at 33% for the current quarter. The company has seen 7% sequential growth in its base business.

Shares are valued pretty reasonably. The stock currently trades at 22 times the current year’s earnings. This is higher than industry competitors whose stocks trade at a P/E ratio in the mid teens. That’s not a high P/E ratio for a stock with an expected growth rate of 20% over the next five years. AT $13.20 per share, the company trades at a price to earnings growth of 1. The stock trades at 2.3 times sales and 2.6 times book value.

US Ecology has fallen into the range of a high yielder. The stock is barely above its 52 week low of $12.98. The company pays a 72 cent dividend which is a 5.5% dividend yield. The current yield is substantially higher than its 5 year average dividend yield of 3.6%. The only concern would be the dividend payout rate. The current dividend payout rate is 118% of this year’s projected earnings and 100% of next year’s earnings. This is obviously unsustainable. Either the company will have to meet its 20% growth rate forecast or will have to cut its dividend.

While I like the long term growth prospects of US Ecology, a dividend cut does appear more and more likely.

Dividend List Update – Sept 8th

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The dividend lists have been updated for September. All stock data is current as of September 7th. The premium content is available to members only.

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Nokia Is A Bargain Dividend Stock – NOK

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What company manufactures the largest number of cell phones in the world? It’s not Apple, Research in Motion, Motorola, or Palm. The answer is Nokia. Nokia Communications (NOK) makes more mobile phones than any other device maker in the world. The telecommunications maker controls over one third of the mobile phone market selling its devices in North America, Latin America, Europe, Africa, Asia, and the Middle East.

Nokia is a Finnish company that has been around since 1865. The company employs over 123,000 individuals across the globe. The company has its hand in just about every area of the technology sector. Nokia manufactures and sells mobile devices, such as mobile phones, smartphones, and mobile computers. The company offers a wide array of services, applications, and content.


Last quarter Nokia saw its earnings drop 40% and the company has been losing market share to rivals. Although Nokia has seen its earnings drop over the past three years, the company is still an earnings giant. Nokia has consistently earned over $40 billion euro dollars in revenue each of the past five years. The company had $41 billion in revenue and an operating profit of $1.2 billion euro dollars last year alone. That’s a pretty good year during a global slowdown.

The company has a fantastic balance sheet with over $8.8 billion euro dollars in cash and just $4.4 billion in debt. The company has generated huge amounts of cash over the past few years. Nokia has been able to generate over $3 billion euro dollars in cash from operating activities each of the past 2 years.

The mobile phone market is an extremely competitive market. Apple and Google are the biggest threats to Nokia since both companies are aggressively going after the high end smartphone user. Nokia’s market share has dropped from 35% to 33% due to aggressive campaigns from its rivals. Even if the company continues to lose market share, the smartphone market is large enough for Nokia to create a nice niche for itself.

Shares of Nokia currently trade at $8.60 per share with the company projected to earn 72 cents per share for the current year. The current P/E for 2010 is 11.5, which is right in line with the industry average. Competitors Motorola and Alcatel-Lucent trade at significantly higher valuations. Nokia’s stock is currently yielding 4.7% which is an attractive yield. The current 40 cent payout is greater than last year’s EPS of 33 cents. The company was able to maintain the dividend due to the large amount of cash on its balance sheet. Fortunately for Nokia, earnings are on pace to more than double for the current year. The current year’s payout is projected to drop to 55% of EPS.

The stock appears to have bottomed out trading at levels not seen since the late 90’s. Nokia is a solid rebound play for value investors.

The Perfect Stock For The Defensive Investor

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Proctor & Gamble is one of the oldest surviving companies in the United States. The company was founded by William Procter and James Gamble in 1873. There are only four companies larger than Proctor & Gamble in the United States. The company boasts about how its market cap is larger than the gross domestic product of nearly 200 countries. Today, the company services over 4 billion customers throughout the world.

The company netted over $13 billion dollars in net income last year alone. That surpasses the revenue of the majority of American companies. The company is an earnings giant grossing nearly $80 billion dollars in revenue last year. Proctor & Gamble has 22 brands that each generate over a billion dollars a year for the conglomerate. These brands include Gillette, Pringles, Duracell, Olay, Old Spice, Tide, Pampers, Head & Shoulders, Crest, and Dawn.


Proctor & Gamble is a recession proof stock because of the company’s huge array of defensive products. The company operates in the consumer goods industry. P& G is divided into the following segments: Household Care, Beauty Care, Health and Well Being. Proctor & Gamble manufactures detergents, deodorants, shampoos, soaps, lotions, razors, and more. All of these products are must owns. Customers buy these products during economic booms and troughs.

Shares currently trade at 15 times this year’s earnings and 13 times next year’s earnings estimates. This is in line with competitors Johnson & Johnson and Kimberly Clark. The company’s operating margins and profit margins are higher than most competitors. Only Johnson & Johnson has higher margins. Proctor & Gamble has a history of stable earnings and is a stock that investors run to during market drops. This is a low risk investment.

While other companies were cutting dividends over the past few years, Proctor & Gamble was increasing their dividend. P&G has increased its dividend for a remarkable 54 consecutive years. That’s no small feat at a time when stalwarts like General Electric and Bank of America were forced to cut their dividends. Proctor & Gamble raised its dividend 10% recently and has a 10 year annual dividend growth rate of 11%.

Right now investors are getting a 3.2% dividend for buying shares of Proctor & Gamble. This is only slightly above the historical dividend payout of 2.8%. The company will have no trouble covering its dividend with the payout being only 44% of earnings. With the company’s huge earnings power and solid free cash flow, Proctor & Gamble is one of the strongest dividend paying stocks in the market.

How to Enroll in a DRIP Program

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A dividend reinvestment plan has the well-deserved acronym of DRIP. When an investor utilizes a DRIP, the dividends earned on their stock investment will periodically “drip” into their stock portfolio. Instead of receiving monthly or quarterly checks for their dividend payments, the funds are reinvested into the original stock. If the payment doesn’t cover an even number of stocks, which it rarely does, a fraction of a stock is purchased.

If the investor does not need the dividend payment to cover expenses, a DRIP program is a pain-free way to build a more robust stock portfolio over time. Each time dividends are reinvested, the investor will receive increasingly larger dividend payments that will purchase slightly more stock during the next cycle. Most investors will find that their return on investment (ROI) dramatically increases as this process compounds their investment. A DRIP strategy can be a smart way to prepare for retirement. With a little planning, some investors may find that their periodic DRIP payments are large enough to provide a healthy income after they quit working.


If one is offered, the company or fund that represents the investment should be able to provide information on how to establish a DRIP. When a DRIP is set up directly with the company, it may be completely free or offered for a nominal fee. This allows the investor to bypass stock brokers and expensive commissions. A few companies will even discount the stock price when it is purchased through their DRIP program.

Once it is determined that the dividend stock’s parent company offers a DRIP program, the investor should verify that they are the shareholder of record. Sometimes, stock brokers will record their own name on stocks that they manage for their customers. If this is the case, instruct them to transfer the registration. The next step is to contact the company directly to request a DRIP application and a prospectus. If the stock’s parent company does not offer a DRIP program, many stock brokers can set up a similar plan to reinvest your dividend payments.

Applying for a DRIP plan is simple and easy, but the investor should be aware of the details of the company’s specific plan. Most companies do not charge anything, but there is a trend toward implementing DRIP plan fees. It is usually small, but it must be compared against the dividend payment to ensure that it doesn’t consume a high percentage of the funds. For example, a small portfolio that only receives a dividend payment of $10 each month would not be a good choice to include in a DRIP plan that charges a $5 fee for each monthly reinvestment