Sunday, 17 February 2013

A Look at Omnicom


I have been watching Omnicom Group for some time now, and almost picked some up when it traded below $46 in November 2012. In hind site, I should have; they just increased the dividend by 33%. They are by no means a consistent dividend grower, but I focus on the fact that the dividend has increased 4 fold over the last 10 years.

So let’s have a look at the numbers…

Average Dividend Yield Analysis*

OMC-N
Year
High Price
Low Price
1Q
div.
2Q
div.
3Q
div.
4Q
div.
Annual Dividend
High Yield
Low Yield
2001
$49.10
$29.55
$0.0875
$0.0875
$0.10
$0.10
$0.38
1.27%
0.76%
2002
$48.68
$18.25
$0.10
$0.10
$0.10
$0.10
$0.40
2.19%
0.82%
2003
$43.80
$23.25
$0.10
$0.10
$0.10
$0.10
$0.40
1.72%
0.91%
2004
$44.41
$33.22
$0.10
$0.1125
$0.1125
$0.1125
$0.44
1.32%
0.99%
2005
$45.74
$37.88
$0.1125
$0.1125
$0.1125
$0.1125
$0.45
1.19%
0.98%
2006
$53.03
$39.38
$0.125
$0.125
$0.125
$0.125
$0.50
1.27%
0.94%
2007
$55.45
$45.82
$0.125
$0.125
$0.15
$0.15
$0.55
1.20%
0.99%
2008
$50.16
$22.02
$0.15
$0.15
$0.15
$0.15
$0.60
2.72%
1.20%
2009
$39.99
$20.09
$0.15
$0.15
$0.15
$0.15
$0.60
2.99%
1.50%
2010
$47.88
$33.50
$0.15
$0.20
$0.20
$0.20
$0.75
2.24%
1.57%
2011
$51.25
$35.27
$0.20
$0.25
$0.25
$0.25
$0.95
2.69%
1.85%
2012
$54.76
$43.83
$0.25
$0.30
$0.30
$0.30
$1.15
2.62%
2.10%
2013


$0.30
$0.40
$0.40
$0.40
$1.50


2014


$0.40
$0.40
$0.40
$0.40
$1.60


Stock prices and dividends are per calendar year.
12y ave
1.95%
1.22%
Dividends are recorded in the quarter they were paid
5y ave
2.65%
1.64%







3y ave
2.52%
1.84%







5y
$60.30
$69.98







3y
$63.52
$62.50






Super Cheap
$53.57



The table shows the 3 year average dividend yield to be 2.52% ((2.24% + 2.69% + 2.62%)/3). I use the numbers in the “High Yield” column for obvious reasons.

Using the current annual dividend of $1.60, one would have to pay $63.52 for a 2.52% dividend yield.

Buying the stock at its low in 2009 would have earned you an initial yield of 2.99%. Using the current annual dividend, that corresponds to a stock price of $53.57 today (see “super cheap” price in the table above).

Graham Price

OMC’s 2010, 2011 and 2012 EPS were $2.70, $3.33 and $3.61. 3Y Ave EPS = $3.21.
OMC’s BV is $12.71 (another source says BV = $27.47).
Graham Price = SQRT (3Y Ave EPS * BV * 22.5) = $30.31

Cyclically Adjusted Price to Earnings Ratio

OMC’s 10Y Ave EPS = $2.67
CAPE = Stock Price / 10Y Ave EPS = $57.71 / $2.67 = 21.6
A CAPE below 20 is good.

Conclusion

OMC increased EPS from $1.35 in 2001 to $3.61 in 2012. That’s an increase of 2.67 times over 11 years. 2013 & 2014 EPS are estimated at $4.03 $ 4.46, respectively. That’s pretty good for the current economic environment.

I’ll consider becoming part owner of OMC around $55-$56/share.

Do any of you follow OMC? What are your thoughts?


*My method is not perfect as the stocks low price may have occurred before the annual dividend increase.



2 comments:

  1. To be honest I've never heard of them. I pulled up the stock and see it's an advertising agency. Very interesting. Not the typical company I buy, but I'll take a look. Thanks!

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  2. I searched the internet before my post trying to find some sort of stock analysis or relevant articles on OMC. After a while, I came to the conclusion that this is not a well known company among bloggers: I couldn't find anything of interest. Please share if you find anything worthy.

    ReplyDelete