Sunday, 21 April 2013

Portfolio Update

I'm on the train heading to Toronto for a couple weeks. My analysis of CAT was posted a few days ago; Deere will have to wait :(

I've been playing in Excel, trying to organize a view of my portfolio that will quickly summarize performance. You can have a look at my latest attempt under the Portfolio tab. A few tweaks and I should be done.

Thursday, 18 April 2013

A Look at Caterpillar


I’ve been looking to beef up my exposure to industrials for some time. With the addition of CAT and DE earlier this week, my portfolio is now 16.7% industrials.

Below is my analysis of CAT. I think it is neither expensive nor cheap, but probably close to fair value. 

Average Dividend Yield Analysis*

CAT-N
Year
High Price
Low Price
1Q
div.
2Q
div.
3Q
div.
4Q
div.
Annual Dividend
High Yield
Low Yield
2002
$30.00
$16.88
$0.175
$0.175
$0.175
$0.175
$0.70
4.15%
2.33%
2003
$42.48
$20.62
$0.175
$0.175
$0.175
$0.185
$0.71
3.44%
1.67%
2004
$49.36
$34.25
$0.185
$0.185
$0.205
$0.205
$0.78
2.28%
1.58%
2005
$59.88
$41.31
$0.205
$0.205
$0.25
$0.25
$0.91
2.20%
1.52%
2006
$82.03
$57.05
$0.25
$0.25
$0.30
$0.30
$1.10
1.93%
1.34%
2007
$87.00
$57.98
$0.30
$0.30
$0.36
$0.36
$1.32
2.28%
1.52%
2008
$85.96
$31.95
$0.36
$0.36
$0.42
$0.42
$1.56
4.88%
1.81%
2009
$61.28
$21.71
$0.42
$0.42
$0.42
$0.42
$1.68
7.74%
2.74%
2010
$94.89
$50.50
$0.42
$0.42
$0.44
$0.44
$1.72
3.41%
1.81%
2011
$116.55
$67.54
$0.44
$0.44
$0.46
$0.46
$1.80
2.67%
1.54%
2012
$116.95
$78.25
$0.46
$0.46
$0.52
$0.52
$1.96
2.50%
1.68%
2013


$0.52
$0.52
$0.52
$0.52
$2.08


Stock prices are per calendar year.
11y ave
3.41%
1.78%
Dividends are recorded in the quarter they were paid.
5y ave
4.24%
1.92%







3y ave
2.86%
1.68%







5y
$49.06
$108.45







3y
$72.76
$123.98






Super Cheap
$26.88



The table shows the 3 year average dividend yield to be 2.86% ((3.41% + 2.67% + 2.50%)/3). I use the numbers in the “High Yield” column for obvious reasons.

Using the current annual dividend of $2.08, one would have to pay $72.76 for a 2.86% dividend yield.

Buying the stock at its low in 2009 would have earned you an initial yield of 7.74%. Using the current annual dividend, that corresponds to a stock price of $26.88 today (see “super cheap” price in the table above).

Graham Price

CAT’s 2010, 2011 and 2012 EPS were $4.15, $7.40 and $8.48. 3Y Ave EPS = $6.68.
CAT’s BV is $26.76.
Graham Price = SQRT (3Y Ave EPS * BV * 22.5) = $63.40

Cyclically Adjusted Price to Earnings Ratio

CAT’s 10Y Ave EPS = $4.62
CAPE = Stock Price / 10Y Ave EPS = $80.46 / $4.62 = 17.4
A CAPE below 20 is good.

Conclusion

Based on the Average Dividend Yield and Graham Price, CAT is “expensive”. A relatively low CAPE indicates otherwise.

CAT increased EPS from $1.15 in 2002 to $8.48 in 2012. That’s an increase of 7.4 times over 10 years. 2013 and 2014 EPS are estimated at $9.05 and $10.15 respectively.

I plan on adding to CAT if it reaches the mid $70’s (roughly 10% below my purchase price).


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


Wednesday, 17 April 2013

CSX Increases Dividend


Today, CSX increased its dividend from $0.56 to $0.60 per year, or 7%. My yield on cost is now 2.92%.

I was pleased to read the following statement in the press release:

At the same time, the company expects to produce average annual earnings-per-share growth of 10-15 percent through 2015 off of the 2013 base, which is expected to be flat to down from prior-year levels.

As of today, my dividend increases for 2013 are:

Company
2013 Div Increase
$$$ Increase
CSX
7%
$6.00
Enbridge
11.5%
$34.19
JP Morgan*
26.7%
$64.00
North West Co
7.7%
$32.00
SNC Lavalin
4.5%
$14.00
Teva
15%
$59.00
Vodafone
7%
$27.12

My forward 12-month dividends stand at $4,219.18.