Having built these portfolios around November last year, I’m getting to that point where it’s time to dig deeper into my holdings and review possible candidates. My rules stipulate that I track holdings for sudden changes, but yearly reviews include candidate comparisons and dividend distributions.
Before I get to the reviews including a a look at performance, I have to share this gem from Motley Fools –
Imagine you pick 1 million random people from around the world every day,” said Toby McDade, chief investment officer of Momentum Fee Capital Management. “Some days, 51% would be in a good mood, 49% in a bad mood. The next day maybe it’s the opposite. Other days, random chance could mean 8% of people are really pissed off for no real reason. This is basically what the market is on a day-to-day basis,” he said.
Asked what his clients thought of this view, Mr. McDade laughed. “Oh my God, you think I could tell my clients that? How could I justify my salary?” Clients were told Monday’s gain was caused by a mix of reversing geopolitical instability, shifting uncertainty patterns, a risk-on atmosphere, and a perfect storm of beta meeting sigma. Noone knew what those words meant.
On Tuesday, Walgreen, one of my core holdings based on it’s dividend growth record, reported second quarter results with record sales, falling short of expectations by $0.01.
From their announcement,
・Company reports adjusted second quarter earnings per diluted share of 91 cents, compared with adjusted earnings per diluted share of 96 cents in year-ago quarter; GAAP earnings per diluted share of 78 cents compared with 79 cents in last year’s second quarter
・Second-quarter sales increase 5.1 percent to record $19.6 billion as total sales in comparable stores increase 4.3 percent
・Walgreens delivers second-quarter operating cash flow of $1.1 billion
TTM earnings of $2.84 represent an increase of 27%, year over year, and a trailing PE of 23x.
Dividend payout as a function of free cash flow remained stable at 34% – well below my 65% barrier – and 44% for the year.
Total return for the 5 year period came in at 26%; clearly WAG will remain in my US portfolio for the foreseeable future.
Walgreen, one of my core holdings based on it’s dividend growth record, reported first quarter results today, in line with analysts’ expectations.
From their report:
・Adjusted first quarter earnings per diluted share increase 24.1 percent to 72 cents, compared with adjusted earnings per diluted share of 58 cents in year-ago quarter; GAAP earnings per diluted share increase 66.1 percent to 72 cents compared with 43 cents in last year’s first quarter
・GAAP and adjusted net earnings in this year’s quarter include the positive impact of 7 cents per diluted share attributable to a deferred tax adjustment applicable to Alliance Boots
・Adjusted first quarter earnings increase 24.4 percent to $688 million, compared with adjusted earnings of $553 million in year-ago quarter; GAAP earnings increase 68.3 percent to $695 million compared with $413 million in last year’s first quarter
・First-quarter sales reach record $18.3 billion as comparable store front-end sales increase 2.4 percent and retail prescription market share increases 50 basis points compared with year-ago quarter to 19.4 percent
・Strong focus on cost management limits adjusted selling, general and administrative expense dollar growth to 0.4 percent compared with the year-ago quarter; GAAP SG&A dollar growth decreases 0.4 percent compared with last year’s first quarter
These numbers raise TTM earnings to $2.85, a year-over-year increase of almost 28%, for a trailing PE of 21x.
Noteworthy to the Dividend Growth investor is the negative free cash flow per share of $0.21. Payout ratio is measured against a company’s FCF, and any decreases there could lead to decreases in growth, if not, in a worst-case scenario, actual decreases in dividend payouts. That said, Walgreen has a record of dividend increases stretching 38 years.
Since first implementing my DOGS strategy in 2002, I can honestly say that this has been the toughest time that I’ve had in the markets. Back then, I was trying to recover from a foreign ownership problem that had developed in my RRSP Continue reading →