Stock screeners can be misleading. In the case of this company, in 2012 it introduced a variable dividend component to its dividend policy. This variable dividend is not picked up by stock screeners which likely results in many investors completely overlooking this company as a worthwhile long-term investment.
On August 5, 2018 I wrote this article (the subscriber version of the article can be found here) in which I indicated that relying solely on stock screeners to identify investment opportunities has its shortcomings.
At the time of that article this company’s stock was trading just shy of ~$162 and stock screeners reflected a dividend yield of ~1.73%. Fast forward to December 5 and the stock price is ~$189 and stock screeners reflect a sub 1.50% dividend yield.
Well….on December 5 this company issued a News Release in which it indicated the Board of Directors had approved a $1.75/share variable dividend payable January 16, 2019 to shareholders of record on December 28, 2018.
When this company adopted its annual variable dividend structure in February 2012 the intention was to ‘determine the excess cash available at the end of each year, with the level to increase or decrease from year to year based on operating results, potential investment activity and other forms of capital return’.
Including the $1.75/share variable dividend and the $0.70/share Q4 2018 dividend declared November 7 which will be payable December 27 to shareholders of record as of December 10, the total dividends announced during 2018 amount to $4.55/share. This provides investors with a ~2.7% yield based on the average YTD closing stock price; the yield based on the current stock price is ~2.40%.
The variable dividend is somewhat lower than I was anticipating in that subsequent to instituting the variable dividend policy in 2012, this company had distributed a ‘variable dividend’ of $1.9, $2.6, $2.00, $2.9, $3.25, and $3.5 per share (FY2012 – 2017).
I was anticipating a variable dividend of $3+/share but I strongly suspect the level at which the Board approved this variable dividend was determined to be in the best interest of the company and its shareholders.
In my August 5 article I indicated I would be acquiring shares for the FFJ Portfolio within 72 hours of publishing my article; I ended up acquiring 300 shares.
I intend to acquire additional shares in 2019 but I currently view the shares to be somewhat expensive after the run up subsequent to my early August purchase. I will patiently bide my time in the hope that this company’s shares return to a more favorable valuation.
I wish you much success on your journey to financial freedom.
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Disclaimer: I have no knowledge of your individual circumstances and am not providing individualized advice or recommendations. I encourage you not to make any investment decision without conducting your own research and due diligence. You should also consult your financial advisor about your specific situation.
Disclosure: I am long shares in this company.
I wrote this article myself and it expresses my own opinions. I am not receiving compensation for it and have no business relationship with any company whose stock is mentioned in this article.