Investing

Investing Idea - Dividend Growth

  • Last Updated:
  • Nov 19th, 2017 11:46 pm
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Sr. Member
Oct 21, 2014
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Burlington, ON
rodbarc wrote:
Nov 10th, 2017 11:27 pm
I posted the analysis of these companies on my latest website post.


Rod

Hi Rod,

What did you think about Cardinal Health? It has been selling off rapidly since it's Q3 and at first blush it looks like panic selling, what do you think?
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Jan 20, 2016
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zobi123 wrote:
Nov 14th, 2017 5:35 pm
Enbridge dropped 99 cents on top of the ex dividend date adjustment (61 cents), because on Ex-Dividend date the stock price gets adjusted before the open so it doesn't get factored into the intra day price swings.
ah, my bad, forgot that drop is shown AFTER dividend deducted...

well, let's panic then...
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Nov 9, 2013
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jerryhung wrote:
Nov 14th, 2017 1:41 pm
Falling knives do keep falling

ENB -1.5% to $44.x
CJR.B -2% $11.40 to almost 52w low of $11.29

IPL is flat. TRP is green, CHR new high daily, $9.8 today +2%
CJR.B is always cheap but man is it ever cheap - P/FCF of ~ 9 (i.e. 11% free cash flow yield); EV/EBITDA of 4.25!
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Gungnir wrote:
Nov 14th, 2017 5:40 pm
Hi Rod,

What did you think about Cardinal Health? It has been selling off rapidly since it's Q3 and at first blush it looks like panic selling, what do you think?
I think it's undervalued now and the current price is not aligned with the fundamentals, which remain solid:

Image

They reported a bad quarter, but dividends are safe, estimated to continue to grow, and cash flow is estimated to return to normal levels starting next year:

Image

I see these price swings as an opportunity to add more of a strong business in its niche: Cardinal is one of three major pharmaceutical distributors in the US, with close to $100 billion in annual revenue. It's a volatile stock since their profit margin is very thin, so any price pressure affects the stock. As a result, Cardinal has partnered with CVS Health to enhance its negotiating power and fixed-cost scale, becoming the main supplier to CVS Health's retail pharmacy network. It's this margin thin approach associated with the enormous amount of capital needed to build a top-tier global drug wholesaling/distribution operation have formed a solid competitive foundation for Cardinal that has largely kept new entrants at bay. So I don't see these numbers as a "struggling to be profitable" number, but as a strategic approach to remain the top 3. Another strategic direction is the agreement with CVS Caremark, where the 2 firms will combine generic sourcing operations. This should allow it an opportunity to enhance profitability, as the combined sourcing entity will be able to garner greater pricing discounts from generic manufacturers.

However, many analysts see Cardinal's diversification into medical equipment manufacturing and distribution and a "diworsification" approach, given that these segments have very low growth and therefore, it is expected to impact ROIC, if compared to Cardinal simply keeping their drug distribution operations. There is also a management change with the CEO leaving and the CFO taking over, although the market is confident in that choice. The main attribution of Cardinal underperforming their peers this quarter was somewhat expected, since over the last year, many independent pharmacy clients have demanded lower generic pricing from their respective pharmaceutical wholesalers and the other top 2 companies (Amerisource and McKesson) had to reprice a material portion of their group purchasing contracts as a result - Cardinal did it recently and it just reflected in this quarter.

There is a decent market consensus covering this company, which doesn't appear to indicate a structural problem:

Image

The street seems to have a fair understanding of this business, and like other occasions before, I see this as an opportunity to add more:

Image


Rod
Everything about my Investing and automated Trading strategies to boost your income: https://boostyourincome.ca
Sr. Member
Oct 21, 2014
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Burlington, ON
Thanks Rod.. Going to see what happens today and tomorrow, the stock is in panic mode and will probably present a better entry in a few days.
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Apr 23, 2009
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what the hell is going on with ENB? Sky is not falling down on Enbridge.
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Feb 26, 2017
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ruchir wrote:
Nov 15th, 2017 11:40 am
what the hell is going on with ENB? Sky is not falling down on Enbridge.
ENB didn't re-affirm their dividend growth guidance of 10-12% a year when they were asked about it on their earnings call last week. ENB has said they would give more clarity at their investors meeting on December 12th.

ENB and ENF is likely to stay low or go down further until after ENB provides more guidance on the rate that they will grow their dividend.
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Sep 19, 2004
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Chance7652 wrote:
Nov 15th, 2017 11:55 am
ENB didn't re-affirm their dividend growth guidance of 10-12% a year when they were asked about it on their earnings call last week. ENB has said they would give more clarity at their investors meeting on December 12th.

ENB and ENF is likely to stay low or go down further until after ENB provides more guidance on the rate that they will grow their dividend.
At this rate, no dividend is enough
ENB. Nov 1 $50, today $44, -12%
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Nov 9, 2013
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Chance7652 wrote:
Nov 15th, 2017 11:55 am
ENB didn't re-affirm their dividend growth guidance of 10-12% a year when they were asked about it on their earnings call last week. ENB has said they would give more clarity at their investors meeting on December 12th.

ENB and ENF is likely to stay low or go down further until after ENB provides more guidance on the rate that they will grow their dividend.
In the conference call they did re-affirm that ENF would target a 10% distribution growth to 2019 but you are right in that they are coy with ENB. I think the credit downgrade to ENF hasn't helped either.

In the coming weeks I'm probably going to add to my ENB / ENF positions in my non reg account but I'm happy to wait it out to see how low it will go.
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Feb 26, 2017
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jerryhung wrote:
Nov 15th, 2017 12:25 pm
At this rate, no dividend is enough
ENB. Nov 1 $50, today $44, -12%
This reminds me a lot of when IPL was trading below $23. Its not really logical but in both cases the dividend has been safe. With the trend being down for ENB the most likely scenario is that it keeps going down until there is some positive news (good quarter, something positive on the Minnesota line 3 approval, guidance on the dividend/dividend raise).
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Jan 20, 2016
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jerryhung wrote:
Nov 15th, 2017 12:25 pm
At this rate, no dividend is enough
ENB. Nov 1 $50, today $44, -12%
Until you're going to sell them it's rather good news taking to account 20% div hike. Good for top-up or DRIP either (look on this as 30% discount - you're getting 5.5% yield while it should be 4%). Once price will follow the earnings, you'd get the huge boost in total return as well.

Well, nobody should completely exclude Nortel/Enron scenario, but I do not see really objective reasons for Enbridge to fall dramatically like Valeant...

To put my money where my mouth is, I'm buying 100 shares on ENB to add to my DI portfolio
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May 31, 2007
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Seems ENB needs some capital for projects/spectra merger- I don't think they will cut dividend, but might have to stall some dividend growth and find some capital..maybe equity offering, I'm not sure if they want to increase debt or issue bonds.

Really have no room for this but hope price stays cheap for TFSA purchase next year.
Newbie
Sep 18, 2016
86 posts
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if ENB slows div growth, thats fine. But they should make a statement before the share price hits 35.
Last edited by 1Ogiku2 on Nov 15th, 2017 5:21 pm, edited 1 time in total.
"Just because it's illogical doesn't mean it can't continue to move up"
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Dec 14, 2010
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Nice results from Walmart. It shows great response from management adapting to the digital age, and that patience is very important when a ship this big needs to turn.

The next big ship that will start its long and painful turn is GE. Management makes a big difference and hopefully the new one can fix years of neglect from the previous one. The dividend cut was expected and necessary. Let's see how their strong base, better managed now, will evolve.


Rod
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