Gannett Co (GCI) Dividend Analysis

Gannett Co., Inc. operates as a news and information company in the United States and the United Kingdom. It operates in two segments, Newspaper Publishing and Broadcasting.
Gannett Co is a dividend aristocrat as well as a component in S&P 500 index. Gannett has been increasing its dividends for the past 39 consecutive years. The next increase will be in July, based on the past several years.

Over the past 10 years the company has delivered a negative average total return of 2.70 % annually to its shareholders.

At the same time the company has managed to deliver a meager 2.00 % average annual increase in its EPS.
The ROE has been in a steep downtrend from its 1998 highs at 25% to less than 11% in 2007. The decline in the newspaper business is the main driver behind the deterioration in fundamentals.

Annual dividend payments have increased over the past 10 years by an average of 6.70% annually, which is above the growth in EPS. A 6.70% growth in dividends translates into the dividend payment doubling every eleven years. If we look at historical data, going as far back as 1985, GCI has indeed managed to double its dividend payments every eleven years. If the company does not increase its EPS over time, any future dividend increases would be unsustainable.

If we invested $100,000 in GCI on December 31, 1997 we would have bought 1662 shares. Your first quarterly check would have been $315.78 in March 1998. If you kept reinvesting the dividends though instead of spending them, your quarterly payment would have risen to $770 by December 2007. For a period of 10 years, your quarterly dividend has increased by 110.50 %. If you reinvested it though, your quarterly dividend would have increased by 143.90%.
The dividend payout has remained below 35% during our study period. A lower payout is always a plus, since it leaves room for consistent dividend growth minimizing the impact of short-term fluctuations in earnings. Even with the small growth in earnings, it could take several years of positive dividend growth and flat earnings for this ratio to cross 50%. I think that GCI is attractively valued with its low price/earnings multiple of 6.50 and low DPR. The company also boasts an above average dividend yield at 5.50%.

GCI does seem to have troubles selling advertising for its newspapers. The growth of the internet represents a threat to the newspaper industry. I do believe though that the newspaper industry will survive. It survived the radio, TV so it will survive the internet. This stock is not for everyone as it is a true contrarian play, which has its place in a diversified dividend portfolio. I would consider initiating a position by spreading my purchases over a 12 month period.

Full Disclosure: I do not own GCI

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The friendliest states for dividend investors

I usually spend several hours per week researching dividend investing. I go through hundreds of stocks and stock strategies in order to learn something new and get an edge over other investors in the marketplace. Over time I have started to notice that most companies from the state of Ohio look promising as dividend stocks and seem to be shareholder friendly. Thus, I conducted a short research in order to check which states were the friendliest for dividend aristocrats investors. By doing that, I could then isolate some specific trait for those states which might have escaped my attention, had I not focused on it.

I simply took the 59 aristocrats in the index and checked to see where they are headquartered. And the winner was Illinois, with 7 dividend companies located there. The number two spot is held by three competing states – North Carolina, New York and Ohio. New Jersey holds the third spot for most dividend aristocrats located there.

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Valspar Corporation (VAL) Dividend Analysis

The Valspar Corporation manufactures and distributes coatings, paints, and related products primarily in the United States and internationally. Its coatings include decorative and protective coatings for metal, wood, plastic, and glass, primarily for sale to original equipment manufacturer customers.

Valspar Corp is a dividend aristocrat as well as a component in S&P 500 index. It has been increasing its dividends for the past 27 consecutive years. Over the past 10 years the company has delivered an average total return of 5.40 % annually to its loyal shareholders.

At the same time the company has managed to deliver an impressive 7.00 % average annual increase in its EPS.

The ROE declined from a high of 21% in 1998 to a low of 8% in 2001, before recovering to 13% in 2007.

Annual dividend payments have increased over the past 10 years by an average of 11% annually, which is above the growth in EPS. An 11% growth in dividends translates into the dividend payment doubling every six and a half years. If we look at historical data, going as far back as 1994, VAL has indeed managed to double its dividend payments every six and a half years.

If we invested $100,000 in VAL on December 31, 1997 we would have bought 6435 shares (adjusted for a 2:1 split in September 2005). Your first quarterly check would have been $337.84 in March 1998. If you kept reinvesting the dividends though instead of spending them, your quarterly payment would have risen to $1045.80 by December 2007. For a period of 10 years, your quarterly dividend has increased by 166.67 %. If you reinvested it though, your quarterly dividend would have increased by 209.60%.

The dividend payout has remained below 50% during our study period. A lower payout is always a plus, since it leaves room for consistent dividend growth minimizing the impact of short-term fluctuations in earnings.

I think that VAL is attractively valued with its low price/earnings multiple of 14.60 and low DPR. The company also boasts an above average dividend yield at 2.50%.

Disclosure: None

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Dover Corp (DOV) Dividend Analysis

Dover Corporation, together with its subsidiaries, manufactures industrial products and components, as well as provides related services and consumables in the United States and internationally. It operates in four segments: Industrial Products, Engineered Systems, Fluid Management, and Electronic Technologies.
Dover Corp is a dividend aristocrat as well as a component in S&P 500 index. It has been increasing its dividends for the past 52 consecutive years. Over the past 10 years the company has delivered an average total return of 3.95 % annually to its loyal shareholders.

At the same time the company has managed to deliver an impressive 9.30 % average annual increase in its EPS.

The ROE declined from a high of 45% in 1999 to a low of 9% in 2002, before rising to 17% in 2007.

Annual dividend payments have increased over the past 10 years by an average of 7.9% annually, which is slightly below the growth in EPS. An 8% growth in dividends translates into the dividend payment doubling every 9 years. If we look at historical data, going as far back as 1984, DOV has indeed managed to double its dividend payments every eight years.

If we invested $100,000 in DOV on December 31, 1997 we would have bought 2768 shares (adjusted for a 2:1 split in December 1997). Your first quarterly check would have been $263 in February 1998. If you kept reinvesting the dividends though instead of spending them, your quarterly payment would have risen to $637 by November 2007. For a period of 10 years, your quarterly dividend has increased by 110.50 %. If you reinvested it though, your quarterly dividend would have increased by 142.17%.

The dividend payout has remained below 30% for the majority of our study period with the exception of a brief spike during 2001-2003. A lower payout is always a plus, since it leaves room for consistent dividend growth minimizing the impact of short-term fluctuations in earnings.

I think that DOV is attractively valued with its low price/earnings multiple of 15 and low DPR. The company however boasts a below average dividend yield. I would consider initiating a position below $40.

Disclosure: I do not own shares of DOV

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Leveraged Investments

I have always been intrigued by the power of leverage. Using leverage means borrowing money to invest in something for the purpose of magnifying your profit potential.
When you are right, leverage works in your favor. When you are wrong though, leverage could result in disastrous results and bankruptcy.
An interesting leveraged instrument is SSO, which generates double the daily return of the S&P 500 through investments in stock index futures. If the S&P 500 rises by 1 %, SSO will increase by about 2%. The changes are never EXACTLY twice the rate of change for S&P 500 due to tracking errors.
I gathered daily data for S&P 500 going back to 1950. I then calculated the returns for the 58 year period for twice the daily changes in the index. I didn’t account for taxes, commissions, dividends and interest for simplicity purposes. The results are truly astonishing.
Investors who could have stomached the extra volatility from the increased exposure to the S&P 500 could have enjoyed average annual returns of almost 14.33% annually. The worst drawdown in annual returns occurred from 1972-1974 -68.60%, and 69.50% during the 2000 - 2003 bear markets. In addition to that, investors who bought the back tested index at the end of 1999 are still underwater by 37%.Here are the results per decade:

Year $1 invested at the beginning of the decade grows to: at the end of the decade
1950's $ 11.32
1960's $ 2.13
1970's $ 1.14
1980's $ 7.77
1990's $ 14.14
2000's $ 0.78

For example if you invested $1 in the SSO at the end of 1980, your investment would have grown to $55 by the end of 2007. On the other hand, the same $1 investment in an S&P index fund would have grown to $22.50.
So how should investors incorporate leverage in their portfolios? I believe that a 5% to 10% of ones portfolio could be invested in a leveraged instrument like SSO as a long-term investment. Over time this investment should boost your profitability overall.

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