Nike – Fiscal 2017 Fourth Quarter and Full Year Results

Nike (NKE) reported fiscal 2017 fourth quarter and full year results yesterday. The company presented really good growth.

• Fourth quarter revenues up 5 percent to $8.7 billion; 7 percent growth on a currency-neutral basis*
• Fourth quarter diluted earnings per share increased 22 percent to $0.60
• Fiscal 2017 revenues up 6 percent to $34.4 billion; 8 percent growth on a currency-neutral basis*
• Fiscal 2017 diluted earnings per share increased 16 percent to $2.51

Nike closed at $53.17 yesterday. If I calculate with the newly reported diluted earnings per share, it has a 21.18 P/E ratio.

As I'm looking at these growth numbers, I'm seeing a wonderful company, so I happily hold my shares and collect my dividends.

Disclosure: Long Nike.

Related Posts:

• Nike - A Fairly Valued Share

Archer Daniels Midland – A Fairly Valued Dividend Growth Stock

The company founded in 1902 as Daniels Linseed Co. in Minneapolis, and changed name to Archer Daniels Midland Company in 1923. Today, they are one of the world's largest agricultural processors and food ingredient providers, with more than 32,000 employees in more than 160 countries. The company's primary business segments are Agricultural Services, Corn Processing, Oilseeds Processing and Wild Flacors and Specialty Ingredients.

Archer Daniels Midland (ADM) is a dividend aristocrat, which increased it's dividend in the last 41 years. So I think it has really good track record to look at it's numbers.

ADM increased it's revenue from $44.018 billion to $62.346 billion over the period spanning fiscal years 2007 to 2016. That's a compound annual growth rate (CAGR) of 3.94%. 

 

Over the same 10-year period, the company's diluted earnings per share decreased from $3.30 to $2.16, which is a CAGR of -4.60%.

It's not so impressive, but take a look at a little longer period. ADM increased it's diluted EPS from $0.76 to $2.16 over the period spanning fiscal years 2004 to 2016. That's a compound annual growth rate (CAGR) of 9.09%. I saw that the company's EPS showing great changing from one year to another.

Despite of the changing EPS, the company is paying out a much more predictable dividend. As I mentioned earlier the company increased it's dividend in the last 41 years, with a ten year CAGR 12.08%. The dividend yield is 3.11% with the last closing price. ($41.14) It's higher than the ADM's five year average. (2.4%)

The payout ratio is 51.20% now, which is managable.

Because of the decreasing EPS and increasing dividend the payout ratio increased constantly in the last 10 years. (In the fiscal year 2007 the payout ratio was only 13.03%.)

The Debt/Equity ratio is 0.42, which is really good.

ADM has a 17.4 P/E ratio, which is slightly lower than the ADM's five year average (18.1) and it's below the stock market's P/E ratio. The forward P/E ratio is 13.92, so the company is expecting a better financial performance in fiscal year 2017, than in 2016.

What is the value of ADM?

I valued shares using the dividend discount model. I factored in a 10% discount rate and a long-term dividend growth rate of 7%.

That growth rate is roughly on par with the company’s long-term EPS growth rate, and I think it’s reasonable when also looking at the recent dividend growth or payout ratio. The DDM analysis gives me a fair value of $42.67.

Disclosure: I have no position in ADM.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Dividend Increase - Kroger

Kroger (NYSE: KR) announced that its Board approved a dividend increase from 48¢ to 50¢ per year. The next quarterly dividend of 12.5 cents per share will be paid on September 1, 2017, to shareholders of record on the close of business on August 15, 2017.

This means, that my YOC increased from 2.27% to 2.37%.

I think that today's prices offer a great opportunity for the management to repurchase the shares of the company. That's why I'm really satisfied with the announced $1 billion share repurchase program.

Related Posts:

• Recent Buy - Kroger

Disclosure: Long KR.

Coca-Cola – An Overvalued Dividend Aristocrat

Coca-Cola (KO) is a wonderful company and made many investor rich. KO has been increasing it's dividend since 1963. Everybody knows it's powerful brands and I think that it will be in the business in the next decades.

Because of the low interest rates more and more investors are looking for safe investments with a small, but stable yield. My opinion, that this reflects in the valuation of Coca-Cola. The dividend yield of KO is 3.27%, which is much higher than the yield of a bank account. But will it be a good investment?

KO has a 31.8 P/E ratio, which is much higher than the KO's five year average. (22.7)

The company's revenue decreased in the last five years from $48,017 million to $41,863 million. The diluted EPS decreased at the same time frame from $1.97 to $1.49. If this decreasing is not changing it will be more and more difficult to pay out such a high dividend. 

KO pays out $1.40 in the last financial year. The payout ratio of the company is 83.6%, so I think there is only a small space to increase it's dividend.

I think that the valuation is not reflecting the growth characteristics of Coca-Cola, so I won't buy it at today's prices.

Full disclosure: Long PEP.

Recent Buy – Kroger

The Kroger Company (KR) operates supermarkets, multi-department stores, jewelry stores, pharmacies, fuel centers and convenience stores in the United States.

This week was really interesting. On Thuesday Kroger decreased the earnings guidance, on Friday Amazon (AMZN) announced to buy Whole Foods (WFM) for $13.7 billion. What was the reaction? The price of the Kroger shares was falling as a stone. It made me curious, so I looked through the company's financials.

Kroger Co. increased it's revenue from $70.235 billion to $115.337 billion over the period spanning fiscal years 2007 to 2016. That's a compound annual growth rate (CAGR) of 5.67%.

Over the same 10-year period, the company's diluted earnings per share grew from $0.84 to $2.05, which is a CAGR of 10.42%. I think that it's really impressive from such a large company, so take a look at it's dividend.

The company increased it's dividend in the last 11 years, with a ten year CAGR 13.85%. The dividend yield is 2.15% with the Friday's closing price. ($22.29) The payout ratio is really low, it's only 21.60%.

What is the valuation of Kroger Co.?

It has a TTM P/E 10.81, which is greatly below the stock market's P/E ratio. The Debt/Equity ratio is 2.10, which is not so great, but I think it's managable.

I think that the stock market overreacted the Amazon's transaction, and the Kroger Co. proved in the last 10 years that it can improve it's business. The company is buying back it's shares, so the recent decrease of the stock price is not just a good opportunity to buy the shares of this really good company, but it's a good opportunity for the company to buy back it's own shares to improve the shareholder's return.

On Friday I bought a few shares of Kroger Co. at $21.10 which gives me a 2.27% dividend yield.

Full disclosure: Long Kroger.

How to Predict the Next Stock Market Crisis?

I have terribble news. You can't predict the next stock market crisis. Warren Buffett is one of the wealthiest men who ever lived on the Earth and made his fortune from investing, but he wrote this in the 2016 Annual Report of Berkshire Hathaway:

"Moreover, the years ahead will occasionally deliver major market declines - even panics - that will affect virtually all stocks. No one can tell you when these traumas will occur - not me, not Charlie, not economists, not the media."

Nike – A Fairly Valued Share

It's really hard to find a good investment at today's overvalued financial markets. The S&P 500 is at a 24.08 TTM P/E ratio, which is historicaly really high. Nike (NKE) has a TTM P/E 22.32, while it presented a really inpressive growth in the last ten years. Nike's revenues increased 8.03% annually in the last ten years. (CAGR, 2006-2016) At the same time frame, the EPS increased 12.59% and the annual dividend increased 15.44%.

As I'm looking at these growth numbers, I'm seeing a wonderful company, so I bought a few Nike shares last week. Nike has 1.35% dividend yield, which is really low, but I like it's growth prospects and I believe that my yield on cost will increase significantly in the next few years.

How to Analyse a Dividend Growth Stock - Video

Jason Fieber (Mr. Free At 33) made a really good video about how to analyse a dividend growth stock. I think it can be really usefull for every investor.

GlaxoSmithKline - A Potential Dividend Cut

A few years ago I bought a few shares of GlaxoSmithKline (GSK) because of it's good dividend yield and dividend-paying track record. I felt myself really good while I was receiving the dividends. But a few month ago, I read the company’s 2016 Annual Report. I saw that the EPS was £0,19 and the dividend was £0,80, so the EPS didn’t cover the dividend. It was not a good news for me, so I read more to see the chairman’s words about it. I found this:

“Ordinary dividends of 80p per share have been declared for 2016, the same level as 2015. The company expects to maintain the same payment in 2017, in accordance with the statements made in 2015. This level of distribution still exceeds the free cash flow generated by the business despite the material improvement in cash generated in 2016 referred to above. Given that 2017 is the last year of the three year dividend commitment made in 2015, the Board will be considering the appropriate dividend policy for 2018 and beyond during the course of the year. ”

(Source: Annual Report 2016 – GSK, 04.p.)

I think that the Board will cut the dividend in 2018. The GSK needs a really good financial performance in 2017 to avoid the dividend cut. The first quater of 2017 was a good beginning, but I sold my shares, because I'm more relaxed to watch it from a little distance.

Full disclosure: I have no position in GlaxoSmithKline.

My First Shares – Hungarian Telekom (MATÁV)

Now I'm an investor, who is looking for long term investments, but when I started, I was trading actively. I used to learn more from my investing mistakes, than my successful trades, so I share my first trade on the stock market.

In May, 2000 I bought a few shares of the Hungarian Telekom company at a 2000 HUF per share. That time was almost the top of the tech bubble, but I didn't know it. As many other inexperienced investor, I entered into the market with terribble timing.

(Source: https://bet.hu/oldalak/ceg_adatlap/$security/MTELEKOM)

After my bought the price of the share went down, and I was waiting for a little correction to close the deal. I was really lucky, that I could sell them in a few month with 1% gain. Yes, I was lucky, because I bought it at a very high valuation.

Two investment lessons, that I learned:

• Never buy shares with high valuation.
  • The share was after a large price increase and the fundamentals didn't follow it.
• Most of the beginner investors starts investing when the market has a high valuation.
  • More and more new investor comes to the stock market, because of the low interest rates and the good yields of the past 8 years, while the markets have really high valuation.

A Few Words About Me

Today is a great day for me. I have decided to make a blog and write about my financial journey. As a frugal man I put aside at least half of my salary, and I made a few investments over the last two decades. I bought my first shares in 2000. I saw the collapse of the tech bubble and the 2008-2009 crisis. I collected some valuable expreience about investing while I bought and sold shares. I would like to share my thoughts and my experience with my readers on this blog. 

In the last two years I read a lot about dividend growth investing, which greatly inspired me. Nowadays I have an investing style which is the mixture of dividend growth investing and value investing.