Friday, 10 May 2013

A Look at Deere


As promised several weeks ago, below is my analysis of Deere.

Since purchasing 25 shares on April 15th, the price has shot up about 10%. Makes me wonder if I should have bought more…

Average Dividend Yield Analysis*

DE-N
Year
High Price
Low Price
1Q
div.
2Q
div.
3Q
div.
4Q
div.
Annual Dividend
High Yield
Low Yield
2001
$23.06
$16.75
$0.110
$0.110
$0.110
$0.110
$0.44
2.63%
1.91%
2002
$25.80
$18.75
$0.110
$0.110
$0.110
$0.110
$0.44
2.35%
1.71%
2003
$33.71
$18.78
$0.110
$0.110
$0.110
$0.110
$0.44
2.34%
1.31%
2004
$37.47
$28.36
$0.110
$0.140
$0.140
$0.140
$0.53
1.87%
1.41%
2005
$37.21
$28.50
$0.140
$0.155
$0.155
$0.155
$0.605
2.12%
1.63%
2006
$50.70
$33.45
$0.195
$0.195
$0.195
$0.195
$0.78
2.33%
1.54%
2007
$93.74
$45.12
$0.220
$0.220
$0.220
$0.250
$0.91
2.02%
0.97%
2008
$94.89
$28.50
$0.250
$0.250
$0.280
$0.280
$1.06
3.72%
1.12%
2009
$56.87
$24.51
$0.280
$0.280
$0.280
$0.280
$1.12
4.57%
1.97%
2010
$84.85
$48.33
$0.280
$0.280
$0.300
$0.300
$1.16
2.40%
1.37%
2011
$99.80
$59.92
$0.350
$0.350
$0.410
$0.410
$1.52
2.54%
1.52%
2012
$89.70
$80.88
$0.410
$0.460
$0.460
$0.460
$1.79
2.21%
2.00%
2013


$0.460
$0.510
$0.510
$0.510
$1.99


2014


$0.510
$0.510
$0.510
$0.510
$2.04


Stock prices are per calendar year.
12y ave
2.59%
1.54%
Dividends are recorded in the quarter they were paid.
5y ave
3.09%
1.59%







3y ave
2.38%
1.63%







5y
$66.07
$127.94







3y
$85.59
$125.26






Super Cheap
$44.64


The table shows the 3 year average dividend yield to be 2.38% ((2.40% + 2.54% + 2.21%)/3). I use the numbers in the “High Yield” column for obvious reasons.

Using the current annual dividend of $2.04, one would have to pay $85.59 for a 2.38% dividend yield.

Buying the stock at its low in 2009 would have earned you an initial yield of 4.57%. Using the current annual dividend, that corresponds to a stock price of $44.64 today (see “super cheap” price in the table above).

Graham Price

DE’s 2010, 2011 and 2012 EPS were $4.35, $6.63 and $7.63. 3Y Ave EPS = $6.20.
DE’s BV is $19.21.
Graham Price = SQRT (3Y Ave EPS * BV * 22.5) = $51.78

Cyclically Adjusted Price to Earnings Ratio

DE’s 10Y Ave EPS = $3.95
CAPE = Stock Price / 10Y Ave EPS = $92.30 / $3.95 = 23.3
A CAPE below 20 is good.

Conclusion

My three metrics show that DE is currently “expensive”. I bought at $84.14, slightly below the 3 year Average Dividend Yield.

DE increased EPS from $0.67 in 2002 to $7.63 in 2012. That’s an increase of 11.4 times over 10 years. 2013 and 2014 EPS are estimated at $8.50 and $9.15, respectively.


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

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