In my previous post on Friday discusses a couple of positions I sold, which you can read more about here. The proceeds from the equity positions sold was used to purchase 3 separate stocks on the same day: KHC, KMB, and CPB. Of the three, KHC is new position for the PIV portfolio. I have included details on each of the purchases below.
----- The Kraft Heinz Co -----
Purchased: 50 shares x $57.70 = $2,885 (+$0 trade commission)
Dividend Income: $125 ($2.50/annually; paid quarterly in Mar, Jun, Sep, and Dec)
P/E ratio: 6.7 vs. S&P 24.98
Debt to capital < 50%: Yes, 28.2%
Interest coverage ratio of at least 3:1: Yes, 6.0x
S&P and/or Moody's credit rating of BBB+/Baa1 or better: No, BBB
Current dividend yield > 1.5x S&P yield: Yes, 4.3% vs. S&P 1.95%
Payout ratio < 60% (or <85% for utilities): Yes, 26.3%
Dividend King or CCC classification: Challenger (5+ years of annual dividend increases)
Commentary: This company has seen a significant, nearly 40%, decline in it valuations in the past year. The street seems to be mostly concerned with the lack of sales growth at the moment. This past month, S&P improved the credit rating for KHC from BBB- to BBB. I hope to see a continued improvement in this area. The largest owners of KHC are 3G Capital and Warren Buffett's Berkshire Hathaway. 3G Captial was the activist shareholder who brought the two companies Kraft and Heinz together and they have not been shy about their desire to continue on with another big acquisition. The company recently made a failed attempt to acquire Unilever this past year. With recent decline in valuations nearly across all consumer staple stocks I believe we'll see acquisition sooner than later.
----- Kimberly-Clark Corp -----
Purchased: 10 shares x $99.889 = $998.89 (+$0 commission)
Dividend Income: $40 ($4.00/sh annually; paid quarterly in Jan, Apr, Jul, and Oct)
P/E ratio: 15.54 vs. S&P 24.98
Debt to capital < 50%: No, 87.3%
Interest coverage ratio of at least 3:1: Yes, 10.4x
S&P and/or Moody's credit rating of BBB+/Baa1 or better: Yes, A
Current dividend yield > 1.5x S&P yield: Yes, 4.0% vs. S&P 1.95%
Payout ratio < 60% (or <85% for utilities): Yes, 59.7%
Dividend King or CCC classification: Champion (45+ years of dividend increases)
Commentary: Now, if you could own a company where each day, 1 in 4 people globally touch one of your essential brands, would you want a buy a piece of that business? My answer of course is a resounding yes, especially if I could purchase this company at recent valuation, which is why I continue to accumulate shares of this company. This morning, KMB released Q1 results that you can read here. KMB is in the midst of a restructuring in 2018 so GAAP earnings came in very low at $0.26 vs. adjusted EPS at $1.71; adjusted earnings experienced a +9% YoY. For full year 2018, management expects organic sales growth of 1% and an adjusted EPS of $6.90 to $7.20, a year-on-year increase of 11 to 16 percent.
----- Campbell Soup Co -----
Purchased: 16 shares x $40.35 = $645.60 (+$0 commission)
Dividend Income: $22.40 ($1.40/sh annually; paid quarterly in Jan, Apr, Jul, and Oct)
P/E ratio: 11.74 vs. S&P 24.98
Debt to capital < 50%: No, 62.7%
Interest coverage ratio of at least 3:1: Yes, 13.5x
S&P and/or Moody's credit rating of BBB+/Baa1 or better: No, BBB
Current dividend yield > 1.5x S&P yield: Yes, 3.30% vs. S&P 1.95%
Payout ratio < 60% (or <85% for utilities): Yes, 47.4%
Dividend King or CCC classification: No
Commentary: CPB recently completed its acquisition of Snyder's-Lance in March 2018 in an all-cash transaction valued at ~$6.1B. The acquired company will be consolidated into the snacks products portfolio which will now account for 47% of Campbell's net sales vs. 32% prior to the acquisition. The company plans to discuss the impact of Snyder’s-Lance to its fiscal 2018 guidance when the company reports third-quarter earnings on May 18, 2018. Back in February when management was reporting on close of fiscal Q2, the revised sales guidance for the full fiscal year 2018 was expected to range from -1% to +1% and adjusted EPS was expected to increase +2% to +$4% ($3.10 - $3.17). In regards to the dividend, CPB has consistently paid a dividend since 1980 as can be found here, there was a dividend cut in the September 2001 (reduced from $0.225 to $0.158) before climbing to the present quarterly rate of $0.35. Also, although CPB does raise its dividend periodically, it does not do so consistently (i.e. once or more every 12 months) which is why it does not show up on David Fish's CCC list found here.
----- The Kraft Heinz Co -----
Purchased: 50 shares x $57.70 = $2,885 (+$0 trade commission)
Dividend Income: $125 ($2.50/annually; paid quarterly in Mar, Jun, Sep, and Dec)
P/E ratio: 6.7 vs. S&P 24.98
Debt to capital < 50%: Yes, 28.2%
Interest coverage ratio of at least 3:1: Yes, 6.0x
S&P and/or Moody's credit rating of BBB+/Baa1 or better: No, BBB
Current dividend yield > 1.5x S&P yield: Yes, 4.3% vs. S&P 1.95%
Payout ratio < 60% (or <85% for utilities): Yes, 26.3%
Dividend King or CCC classification: Challenger (5+ years of annual dividend increases)
Commentary: This company has seen a significant, nearly 40%, decline in it valuations in the past year. The street seems to be mostly concerned with the lack of sales growth at the moment. This past month, S&P improved the credit rating for KHC from BBB- to BBB. I hope to see a continued improvement in this area. The largest owners of KHC are 3G Capital and Warren Buffett's Berkshire Hathaway. 3G Captial was the activist shareholder who brought the two companies Kraft and Heinz together and they have not been shy about their desire to continue on with another big acquisition. The company recently made a failed attempt to acquire Unilever this past year. With recent decline in valuations nearly across all consumer staple stocks I believe we'll see acquisition sooner than later.
----- Kimberly-Clark Corp -----
Purchased: 10 shares x $99.889 = $998.89 (+$0 commission)
Dividend Income: $40 ($4.00/sh annually; paid quarterly in Jan, Apr, Jul, and Oct)
P/E ratio: 15.54 vs. S&P 24.98
Debt to capital < 50%: No, 87.3%
Interest coverage ratio of at least 3:1: Yes, 10.4x
S&P and/or Moody's credit rating of BBB+/Baa1 or better: Yes, A
Current dividend yield > 1.5x S&P yield: Yes, 4.0% vs. S&P 1.95%
Payout ratio < 60% (or <85% for utilities): Yes, 59.7%
Dividend King or CCC classification: Champion (45+ years of dividend increases)
Commentary: Now, if you could own a company where each day, 1 in 4 people globally touch one of your essential brands, would you want a buy a piece of that business? My answer of course is a resounding yes, especially if I could purchase this company at recent valuation, which is why I continue to accumulate shares of this company. This morning, KMB released Q1 results that you can read here. KMB is in the midst of a restructuring in 2018 so GAAP earnings came in very low at $0.26 vs. adjusted EPS at $1.71; adjusted earnings experienced a +9% YoY. For full year 2018, management expects organic sales growth of 1% and an adjusted EPS of $6.90 to $7.20, a year-on-year increase of 11 to 16 percent.
----- Campbell Soup Co -----
Purchased: 16 shares x $40.35 = $645.60 (+$0 commission)
Dividend Income: $22.40 ($1.40/sh annually; paid quarterly in Jan, Apr, Jul, and Oct)
P/E ratio: 11.74 vs. S&P 24.98
Debt to capital < 50%: No, 62.7%
Interest coverage ratio of at least 3:1: Yes, 13.5x
S&P and/or Moody's credit rating of BBB+/Baa1 or better: No, BBB
Current dividend yield > 1.5x S&P yield: Yes, 3.30% vs. S&P 1.95%
Payout ratio < 60% (or <85% for utilities): Yes, 47.4%
Dividend King or CCC classification: No
Commentary: CPB recently completed its acquisition of Snyder's-Lance in March 2018 in an all-cash transaction valued at ~$6.1B. The acquired company will be consolidated into the snacks products portfolio which will now account for 47% of Campbell's net sales vs. 32% prior to the acquisition. The company plans to discuss the impact of Snyder’s-Lance to its fiscal 2018 guidance when the company reports third-quarter earnings on May 18, 2018. Back in February when management was reporting on close of fiscal Q2, the revised sales guidance for the full fiscal year 2018 was expected to range from -1% to +1% and adjusted EPS was expected to increase +2% to +$4% ($3.10 - $3.17). In regards to the dividend, CPB has consistently paid a dividend since 1980 as can be found here, there was a dividend cut in the September 2001 (reduced from $0.225 to $0.158) before climbing to the present quarterly rate of $0.35. Also, although CPB does raise its dividend periodically, it does not do so consistently (i.e. once or more every 12 months) which is why it does not show up on David Fish's CCC list found here.
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