Is This The Best Dividend Stock?
Are you the type that looks for the absolute best?
I know tons of people who demand the best.
They only buy the best car, the best watch, the best pasta, and go on the best vacation.
And for those people I have the Best dividend stock.
Here’s a question… what’s the best dividend stock look like?
In my opinion, you look for a few things… First is a great business. That helps provide the foundation for my second hurdle… Growing Revenue, Earnings and Dividends. Third is an appropriate valuation.
Here’s the thing – Some of these things are subjective… a great business is determined by the person looking at the different investments… and it’s all relative.
Here we go… I’ve picked a number of large, diversified companies with great operations and solid dividends for us to take a close look at.
How are we going to separate these businesses?
We’re going to look at the numbers first.
What you’ll see is they all have decent numbers. Great dividend yields, solid payout ratios, and modest P/E Ratios. So we know valuation isn’t going to be an issue.
Then we’ll dive into the different businesses… and we’ll look at their business divisions and how they make money. I think you’ll be surprised at what we find with some of these companies.
Finally, we look at the intangibles… things you won’t find on a balance sheet or income statement. And there we’ll uncover something that tips the scales in favor of one particular business.
So here are the 5 businesses up for review:
General Electric Company (GE)
Icahn Enterprises, L.P. (IEP)
Carlisle Companies Incorporated (CSL)
3M Company (MMM)
Dover Corporation (DOV)
Which do you think is the best?
Ok… Let’s look at the numbers
General Electric Company (GE)
- Mkt Cap $278 B
- P/E “NA” Losing money
- Dividend Yield 3%
- Payout Ratio “NA” Losing money
- Profit Margin “NA” Losing money
Icahn Enterprises, L.P. (IEP)
- Mkt Cap $7 B
- P/E “NA” Losing money
- Dividend Yield 10%
- Payout Ratio “NA” Losing money
- Profit Margin “NA” Losing money
Carlisle Companies Incorporated (CSL)
- Mkt Cap $6.5 B
- P/E 19x
- Dividend Yield 1.1%
- Payout Ratio 21%
- Profit Margin 9.5%
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3M Company (MMM)
- Mkt Cap $101 B
- P/E 21x
- Dividend Yield 2.6%
- Payout Ratio 52%
- Profit Margin 16%
Dover Corporation (DOV)
- Mkt Cap $9 B
- P/E 17x
- Dividend Yield 2.6%
- Payout Ratio 43%
- Profit Margin 11%
As you can see most of these numbers are “In the range” GE and IEP have losses in the last year, which makes some of their metrics “NA” but that won’t last… businesses like these don’t suffer losses long.
If you run into an issue like this, look back a year or two and see what their profit numbers looked like. You’ll see they were healthy and worthy of inclusion on this list.
Next I want to look at the businesses… this is always educational…
General Electric Company (GE)
Do you really need an introduction to GE? Ok, here you go… General Electric provides services ranging from aircraft engines, power generation, water processing & household appliances to medical imaging, business & consumer financing, media content & industrial products.
Icahn Enterprises, L.P. (IEP)
Icahn Enterprises, a master limited partnership, is a diversified holding company engaged in ten primary business segments: Investment, Automotive, Energy, Metals, Railcar, Gaming, Mining, Food Packaging, Real Estate and Home Fashion. They own a number of companies outright including Icahn Capital, an Investment company with $3.4 billion in capital.
Carlisle Companies Incorporated (CSL)
Carlisle Companies is a global diversified company. They make products for industry including, commercial roofing, energy, agriculture, mining, construction, aerospace and defense electronics, medical technology, foodservice, healthcare, sanitary maintenance, transportation, general industrial, protective coating, wood, specialty and auto refinishing.
3M Company (MMM)
Alright… this is a company I hate, just because they make life so complicated. I read press releases, I read investor presentations, I read the website… Would it kill them to give a simple description of what they do? Nope – can’t do it. Apparently they have too many MBA students on payroll who believe in big words.
This is their description… “At 3M, we apply science in collaborative ways to improve lives daily. With $30 billion in sales, our 90,000 employees connect with customers all around the world.”
Thanks! That really clears up what you do…
I checked the CEO presentation – Their business strategy was “Winning with our customers by helping them deliver on their promises.” What Bull S**t.
With a description like this, you don’t know if they make specialty chemicals or engine parts, or run a farm. Plain english people… plain english.
Sorry, I had to vent.
Dover Corporation (DOV)
Dover Corporation manufactures and sells a range of equipment and components, specialty systems, and support services in the United States and internationally. The company operates in four segments: Energy, Engineered Systems, Fluids, and Refrigeration & Food Equipment.
Ok, anything stunning about these businesses… nope.
All great businesses… in great industries with big customers and making money. It’s not like we’re comparing a software company with 80% net margins to a commodity provider with 5% margins.
Dig in, read about the different companies and their businesses. It’s interesting. But one doesn’t really jump out ahead of another… and I thought it would.
So, we’re going to have to look at these businesses based on other things… the intangibles!
Unfortunately…
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