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Cardinal Health,Inc. (CAH) Dividend Stock Analysis *

D4L — Mon, 28 Mar 2011 07:30:51 +0000

This article originally appeared on The DIV-Net March 21, 2011.

Linked here is a detailed quantitative analysis of Cardinal Health,Inc. (CAH). Below are some highlights from the above linked analysis:

Company Description: Cardinal Health Inc. is one of the leading wholesale distributors of pharmaceuticals, medical/surgical supplies and related products to a broad range of health care customers.

Fair Value: In calculating fair value, I consider the NPV MMA Differential Fair Value along with these four calculations of fair value, see page 2 of the linked PDF for a detailed description:

1. Avg. High Yield Price
2. 20-Year DCF Price
3. Avg. P/E Price
4. Graham Number

CAH is trading at a discount to 1.) and 3.) above. The stock is trading at a slight premium to its calculated fair value of $38.81. CAH did not earn any Stars in this section.

Dividend Analytical Data: In this section there are three possible Stars and three key metrics, see page 2 of the linked PDF for a detailed description:

1. Free Cash Flow Payout
2. Debt To Total Capital
3. Key Metrics
4. Dividend Growth Rate
5. Years of Div. Growth
6. Rolling 4-yr Div. > 15%

CAH earned three Stars in this section for 1.), 2.) and 3.) above. A Star was earned since the Free Cash Flow payout ratio was less than 60% and there were no negative Free Cash Flows over the last 10 years. The stock earned a Star as a result of its most recent Debt to Total Capital being less than 45%. CAH earned a Star for having an acceptable score in at least two of the four Key Metrics measured. Rolling 4-yr Div. > 15% means that dividends grew on average in excess of 15% for each consecutive 4 year period over the last 10 years (2001-2004, 2002-2005, 2003-2006, etc.) I consider this a key metric since dividends will double every 5 years if they grow by 15%. The company has paid a cash dividend to shareholders every year since 1983 and has increased its dividend payments for 14 consecutive years.

Dividend Income vs. MMA: Why would you assume the equity risk and invest in a dividend stock if you could earn a better return in a much less risky money market account (MMA)? This section compares the earning ability of this stock with a high yield MMA. Two items are considered in this section, see page 2 of the linked PDF for a detailed description:

1. NPV MMA Diff.
2. Years to > MMA

The NPV MMA Diff. of the $2,080 is below the $2,100 target I look for in a stock that has increased dividends as long as CAH has. If CAH grows its dividend at 15.0% per year, it will take 6 years to equal a MMA yielding an estimated 20-year average rate of 3.9%.

Memberships and Peers: CAH is a member of the S&P 500 a member of the Broad Dividend Achievers™ Index. The company’s peer group includes: AmerisourceBergen Corporation (ABC) with a 1.1% yield, McKesson Corporation (MCK) with a 0.9% yield and Owens & Minor Inc. (OMI) with a 2.6% yield.

Conclusion: CAH did not earn any Stars in the Fair Value section, earned three Stars in the Dividend Analytical Data section and did not earn any Stars in the Dividend Income vs. MMA section for a total of three Stars. This quantitatively ranks CAH as a 3 Star-Hold.

Using my D4L-PreScreen.xls model, I determined the share price would need to decrease to $40.31 before CAH’s NPV MMA Differential increased to the $2,100 minimum that I look for in a stock with 14 years of consecutive dividend increases. At that price the stock would yield 1.94%.

Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the target $2,100 NPV MMA Differential, the calculated rate is 15.0%. This dividend growth rate is equal to the 15.0% used in this analysis, thus providing no margin of safety. CAH has a risk rating of 1.50 which classifies it as a Low risk stock.

CAH offers a diversified line of products and services. It is well-situated, with relationships with two major retail pharmacy chains (CVS Caremark and Walgreen) generating over 40% of its revenues. However, intense competition in the drug distribution market and consolidation among retail pharmacies could squeeze future margins. The company generates strong cash flow, which provides flexibility for expansion, dividends and share buybacks. CAH is currently trading slightly above my fair value price of $38.81. However, its low dividend yield will keep me from giving CAH serious consideration at this time. For additional information, including the stock’s dividend history, please refer to its data page.

Disclaimer: Material presented here is for informational purposes only. The above quantitative stock analysis, including the Star rating, is mechanically calculated and is based on historical information. The analysis assumes the stock will perform in the future as it has in the past. This is generally never true. Before buying or selling any stock you should do your own research and reach your own conclusion. See my Disclaimer for more information.

Full Disclosure: At the time of this writing, I held no position in CAH (0.0% of my Income Portfolio). See a list of all my income holdings here.

13 Dividend Stocks Providing A Growing Income *

D4L — Fri, 12 Nov 2010 07:30:21 +0000

How much money will you need for retirement? This a very difficult question to answer. There are many factors and assumptions that go into estimating the income that will be needed in retirement. However, one certainty is that if you only invest in fixed income instruments, you will need more than if your investments provide you a growing income.

Below are several companies that are providing their shareholders a growing income through higher cash dividends:

Cinemark (CNK) is a motion picture exhibition company that operates in U.S., Canada, Mexico, Argentina, Brazil, Chile, Ecuador, Peru, Honduras, El Salvador, Nicaragua, Costa Rica, Panama and Colombia. November 5th the company increased its quarterly dividend 16.7% to $0.21/share. The dividend is payable on December 7, 2010 to stockholders of record on November 22, 2010. The ex-dividend date is November 18, 2010. The yield based on the new payout is 4.52%.

TELUS (TU) is a Canadian telecommunications company, providing a range of telecommunications products and services. November 5th the company raised its quarterly dividend 5% C$0.525/share. The yield based on the new payout is 4.81%.

Equifax (EFX) is a leading worldwide source of consumer and commercial credit information. November 8th the company increased its quarterly dividend 300% to $0.16/share. The dividend is payable on Dec. 15 to shareholders of record on Nov. 24. The ex-dividend date is Nov. 22. The yield based on the new payout is 1.84%.

Mesa Laboratories (MLAB) designs, manufactures, and markets instruments and disposable products for industrial applications and healthcare. November 8th the company raised its quarterly dividend 9.1% to $0.12/share. The dividend is payable December 15, 2010, to shareholders of record on November 29, 2010. The ex-dividend date is November 25, 2010. The yield based on the new payout is 1.88%.

Baxter Int’l (BAX) is a global medical products and services company provides critical therapies for people with life-threatening conditions. November 9th the company increased its quarterly dividend 7% to $0.31/share. The dividend is payable on January 5, 2011, to shareholders of record as of the close of business on December 10, 2010. The ex-dividend date is December 8, 2010. The yield based on the new payout is 2.40%.

Estée Lauder (EL) is one of the world’s leading manufacturers and marketers of skin care, makeup and fragrance products. November 9th the company raised its annual dividend 36% to $0.75/share. The dividend is payable on December 15, 2010 to stockholders of record at the close of business on November 29, 2010. The ex-dividend date is November 25, 2010. The yield based on the new payout is 1.06%.

Automatic Data Processing (ADP) is one of the world’s largest independent computing services companies and provides a broad range of data processing services. November 9th the company increased its quarterly dividend 6% to $0.36/share. The dividend is payable on January 1, 2011 to shareholders of record at December 10, 2010. The ex-dividend date is December 8, 2010. ADP is a Dividend Aristocrat and has raised its dividend for 35 consecutive years. The yield based on the new payout is 3.2%.

Timken (TKR) manufactures anti-friction bearings and assemblies, alloy steels and aerospace power transmission systems and provides related products and services. November 9th the company raised its quarterly dividend 38% to $0.18/share. The dividend is payable on December 2, 2010, to shareholders of record as of November 22, 2010. The ex-dividend date is November 18, 2010. The yield based on the new payout is 1.67%.

Prudential Financial (PRU) provides a wide range of insurance, investment management and other financial products and services to customers in the U.S. and overseas. November 9th the company increased its annual dividend 64% to $1.15/share. The dividend is payable on December 17, 2010, to shareholders of record at the close of business on November 23, 2010. The ex-dividend date is November 19, 2010. The yield based on the new payout is 2.10%.

Tennant (TNC) designs, manufactures, and markets cleaning solutions. November 9th the company raised its quarterly dividend 21% to $0.17/share. The dividend is payable on Dec. 15 to shareholders of record on Nov. 30. The ex-dividend date is Nov. 26. TNC is a Dividend Achiever and has raised its dividend for 36 consecutive years. The yield based on the new payout is 1.94%.

Equity LifeStyle Props (ELS) trust owns and operates manufactured housing communities throughout the U.S. November 9th the company increased its annual dividend 25% to $1.50 for 2011. Yield on the 2011 dividend is 2.58%.

AmerisourceBergen (ABC) is a distributor of pharmaceutical products and related health care services and was formed via the August 2001 merger of Amerisource Health Corp. and Bergen Brunswig Corp. November 11th the company raised its quarterly dividend 25% to $0.10/share. The dividend is payable December 6, 2010, to stockholders of record at the close of business on November 22, 2010. The ex-dividend date is November 18, 2010. The yield based on the new payout is 1.27%.

MDU Resources (MDU) is involved in electric and natural gas distribution, natural gas storage, gathering and transmission, construction materials and mining, and oil and natural gas production. November 11th the company increased its quarterly dividend 3.2% to $0.1625/share. The dividend is payable January 1, 2011 to stockholders of record December 9, 2010. The ex-dividend date is December 7, 2010. MDU is a Dividend Achiever and has raised its dividend for 20 consecutive years. The yield based on the new payout is 2.06%.

Selecting stocks with increasing dividends is critical for an income growth strategy. The above list contains stocks that recently raised their dividends; it is not a list of recommend buys. As always, due diligence should be performed before buying or selling any stock. For a list of stocks with a long string of consecutive cash dividend increases, see this list.

Full Disclosure: Long ADP. See a list of all my income holdings here.

(Photo Credit)

Cardinal Health, Inc. (CAH) Dividend Stock Analysis *

D4L — Mon, 20 Sep 2010 07:30:03 +0000

This article originally appeared on The DIV-Net September 13, 2010.

Linked here is a detailed quantitative analysis of Cardinal Health, Inc. (CAH). Below are some highlights from the above linked analysis:

Company Description: Cardinal Health Inc. is one of the leading wholesale distributors of pharmaceuticals, medical/surgical supplies and related products to a broad range of health care customers.

Fair Value: I consider four calculations of fair value, see page 2 of the linked PDF for a detailed description:

1. Avg. High Yield Price
2. 20-Year DCF Price
3. Avg. P/E Price
4. Graham Number

CAH is trading at a discount to only 1.) above. The stock is trading at a slight premium to its calculated fair value of $30.95. CAH did not earn any Stars in this section.

Dividend Analytical Data: In this section there are three possible Stars and three key metrics, see page 2 of the linked PDF for a detailed description:

1. Free Cash Flow Payout
2. Debt To Total Capital
3. Key Metrics
4. Dividend Growth Rate
5. Years of Div. Growth
6. Rolling 4-yr Div. > 15%

1. NPV MMA Diff.
2. Years to > MMA

CAH earned a Star in this section for its NPV MMA Diff. of the $4,212. This amount is in excess of the $2,100 target I look for in a stock that has increased dividends as long as CAH has. If CAH grows its dividend at 15.0% per year, it will take 4 years to equal a MMA yielding an estimated 20-year average rate of 3.71%. CAH earned a check for the Key Metric ‘Years to >MMA’ since its 4 years is less than the 5 year target.

Memberships and Peers: CAH is a member of the S&P 500 and a member of the Broad Dividend Achievers™ Index. CAH’s peer group includes: McKesson Corp. (MCK) with a 1.2% yield, AmerisourceBergen Corporation (ABC) with a 1.1% yield, Emergent Group, Inc. (LZR) with a 8.0% yield and Owens & Minor Inc. (OMI) with a 2.6% yield.

Conclusion: CAH did not earn any Stars in the Fair Value section, earned three Stars in the Dividend Analytical Data section and earned one Star in the Dividend Income vs. MMA section for a total of four Stars. This quantitatively ranks CAH as a 4 Star-Buy.

Using my D4L-PreScreen.xls model, I determined the share price would need to increase to $41.17 before CAH’s NPV MMA Differential decreased to the $2,100 minimum that I look for in a stock with 14 years of consecutive dividend increases. At that price the stock would yield 1.89%.

Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the target $2,100 NPV MMA Differential, the calculated rate is 12.6%. This dividend growth rate is well below the 15.0% used in this analysis, thus providing a margin of safety. CAH has a risk rating of 1.50 which classifies it as a low risk stock.

CAH offers a diversified line of products and services. It is well-situated, with relationships with two major retail pharmacy
chains (CVS Caremark and Walgreen) generating over 40% of its revenues. However, intense competition in the drug distribution market and consolidation among retail pharmacies could squeeze future margins. The company generates strong cash flow, which provides flexibility for expansion, dividends and share buybacks. CAH is currently trading slightly above my fair value price of $30.95. This is an interesting company, but I am not quite ready to buy. For additional information, including the stock’s dividend history, please refer to its data page.

Full Disclosure: At the time of this writing, I held no position in CAH (0.0% of my Income Portfolio). See a list of all my income holdings here.

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9 Dividend Stocks Sending More Cash To Shareholders

D4L — Fri, 13 Nov 2009 10:30:17 +0000

We all are looking for the perfect dividend stock. In an utopian world, the perfect dividend stock would be one that is both high-yield and provide a high dividend growth rate. Its share price would appreciate ratable with its increasing dividend. All of this would be driven by increasing earnings and cash flow.

Though they are not perfect, the stocks below did recently reward their investors with higher cash dividends:

Wynn Resorts (WYNN) is involved in the design, development, financing and construction of gaming projects in Las Vegas and Macau. November 9th the company declared a special cash dividend of $4.00/share. This dividend will be payable on December 3, 2009, to stockholders of record on November 19, 2009. The stock will begin to trade ex-dividend on November 17, 2009. The company’s Board of Directors also approved the commencement of a regular cash dividend program, beginning in 2010. This regular cash dividend will be $0.20 per share of common stock for the first quarter of 2010. The yield based on the new payout is 1.22%.

Baxter (BAX) is a global medical products and services company. November 10th the company increased its quarterly dividend 12% to $0.29/share. The dividend is payable on January 5, 2010, to shareholders of record as of the close of business on December 10, 2009. The ex-dividend date is December 8. The yield based on the new payout is 2.02%.

ADP (ADP) provides a broad range of data processing services. November 10th the company increased its quarterly dividend 3% to $0.34/share. The dividend is payable on January 1, 2010 to shareholders of record at December 11, 2009. The ex-dividend date is December 9. ADP is a Dividend Aristocrat and has increased its dividend for 34 years. The yield based on the new payout is 3.15%.

Tennant (TNC) designs, manufactures, and markets cleaning solutions. November 10th the company raised its quarterly dividend 8% to $0.14/share. The dividend is payable on December 15, 2009, to shareholders of record November 30, 2009. The ex-dividend date is November 26. The yield based on the new payout is 1.90%.

Cliffs Natural Resources (CLF) is a mining company produces iron ore pellets and supplies metallurgical coal to the steelmaking industry primarily in North America. November 10th the company boosted its quarterly dividend more than 100% to $0.0875/share. The dividend is payable on Dec. 1, 2009, to shareholders of record as of the close of business on Nov. 20, 2009. The yield based on the new payout is 0.90%.

DeVry (DV) offers career-oriented degree programs, preparatory coursework for the CPA and CFA exams, and medical, veterinary, and nursing education. November 11th the company increased its dividend 25% to $0.20/share. Payable semi-annually, the next dividend payment of $0.10/share will be made on Jan. 7, 2010, to common stockholders of record as of Dec. 11, 2009. DV also announced that its board of directors authorized a third share repurchase program of $50 million to commence upon completion of the existing $50 million program. The yield based on the new payout is 0.37%.

Span-America Medical (SPAN) manufactures and distributes a variety of polyurethane foam products for the medical and custom products markets. November 11th the company raised its quarterly dividend 11% to $0.10/share. The dividend is payable December 4, 2009, to shareholders of record on November 20, 2009. The yield based on the new payout is 2.47%.

MDU Resources (MDU) is involved in electric and natural gas distribution, natural gas storage, gathering and transmission, construction materials and mining, and oil and natural gas production. November 12th the company increased the quarterly dividend to $0.1575/share. The dividends are payable January 1, 2010 to stockholders of record December 10, 2009. The ex-dividend date is December 4, 2009. MDU is a Dividend Achiever and has increased its dividend for 18 consecutive years. The yield based on the new payout is 2.87%.

AmerisourceBergen (ABC) is a distributor of pharmaceutical products and related health care services. November 12 the company raised it’s quarterly dividend 33% to $0.08/share. The dividend will be payable December 7, 2009, to stockholders of record at the close of business on November 23, 2009. The yield based on the new payout is 1.33%.

The first step for a stock to become a perfect dividend stock is to raise its dividends each and every year. For a list of stocks with a long string of consecutive dividend increases, see this list.

Full Disclosure: Long ADP. See a list of all my income holdings here.

(Photo Credit)

Eight Companies Secure In Raising Their Dividends *

D4L — Fri, 22 May 2009 10:30:14 +0000

People want to feel secure. National security and the military provide assurance that a country’s citizens will be protected, thus allowing them to focus their attention on other interests and endeavors. National security is so large that no government can do it all alone. They all partner with companies like Northrop Grumman Corp (NOC) to provide the best defense products at the lowest price.

NOC this week helped their shareholders feel secure by raising its quarterly dividend 3.6% to $0.43/share. The company has increased its quarterly dividend in each of the last five years, and it has more than doubled since 2003. The dividend is payable June 13, 2009, to shareholders of record as of the close of business June 1, 2009. The ex-dividend date is May 28. The current yield based on the new dividend is 3.6%.

Below are several other companies making their shareholders feel a little more secure this week by increasing their cash dividends paid:

Assurant (AIZ) increases its quarterly dividend 7% to $0.15, yielding 2.66%
AmerisourceBergen (ABC) raises its quarterly dividend 20% to $0.06, yielding 0.65%
Airgas (ARG) boosts its quarterly dividend 12.5% to $0.18, yielding 1.66%
AAON (AAON) jumps its semi-annual dividend 13%, yielding 1.72%
ACE Limited (ACE) increases its quarterly dividend 7% to $0.31/share, yielding 2.58%
Xcel Energy (XEL) raises its quarterly dividend 3.2% to $0.245/share, yielding 5.75%
Raven Industries (RAVN) boosts its quarterly dividend 8% to $0.14/share, yielding 1.92%

One sign of a safe and secure dividend is longevity. For companies with a long string of consecutive dividend increases, see this list.

Full Disclosure: No position in the aforementioned companies. See a list of all my income holdings here.