Stock On Watch: AT&T (T)

On 10/12/17, AT&T stock saw almost its largest drop in price in 9 years. Dropping by over 5.5% in one trade day. This seems quite exaggerated, but the reasoning is justified. The massive hurricanes that have hit the US lately have utterly destroyed most of AT&T infrastructure in the affected areas. Because of this, they will have to spend big cash to get everything up and running again. On top of that, they will be waiving fees that would be typically passed onto the consumer to help rebuilding efforts.

So, there are some rough waters coming in the next quarter for T, but I am a long-term holder and will try to find some capital to buy more T while it’s still in the over-sold territory. Buying at ~$35-36/share locks in a juicy 5% yield. Well above the market average.

The P/E ratio for AT&T (T) is now at 16.91, meaning it’s still cheap compared to the overall market.

A basic, yet typical, way to measure how expensive a stock is, is by it’s P/E ratio. (Price/Earnings) You can compare most stocks to the current P/E ratio of the entire S&P for instance, which is currently around 24.6. So theoretically if a stock’s P/E is below 24.6, it could be considered cheap. 

 

The current payout ratio for it’s dividend is at 41%, meaning it still has room to grow the dividend in the future without affecting much on their bottom line. 

Current Dividend Yield: 5.13%    Payout Ratio: 83%

*I currently own 25 shares of T

Stock on Watch: DIS (Disney)

If you’ve been following the news lately, you’ve probably already heard the news that Disney has planned to exit its agreement with NFLX (Netflix) by the end of 2019, saying they will be starting their own streaming service by 2020.

THIS IS HUGE NEWS. 

Recent Earnings: Following the earnings report yesterday, Disney showed that is growth was generally flat to slightly down from the same quarter last year. Revenue from Parks came in 12% higher, but it’s studio segment, its third largest source of revenue, dropped 16% off-setting gains from their Parks. But, with the recent decision to pull its content from Netflix, this should become a huge opportunity for Disney to scoop up even more market share.

The possibilities for Disney moving forward are looking as good as ever though as they move to secure even more exclusive rights for their content. Imagine receiving a 10% discount to all parks if you’re a subscriber to their streaming service, or earning a free year of streaming after taking a Disney Cruise. There are many ways that Disney can pull even more subscribers/visitors into their all encompassing universe.

Couple all of this with the fact that Disney just dropped nearly 5% after its recent earnings quarter and it’s in a very desirable price to start a new position. The stock may suffer more over the short term, but as always with Disney, it will recover and should grow its earnings substantially more as it continues to expand its parks and gets its first taste in the content streaming business.

Though DIS doesn’t pay a mouth-watering dividend, it only pays out 25% of its earnings back to shareholders, meaning it has PLENTY of room to increase its dividend in the future.

P/E Ratio: 18.9                              Payout Ratio: 25%.                 Dividend Yield:  1.46%

 

 

Stock On Watch: HRL (Hormel Foods)

One of the stocks I’ve been watching over the past few weeks is Hormel Foods. $33.66/Share as of 8/8/17. The main reason this stock is on my radar is because its a member of the Dividend Aristocrats group. A Dividend Aristocrat is any company listed on the S&P 500, that has paid AND raised their dividends for 25+ consecutive years. In-fact, Hormel has increased their dividend for 50 years, since 1967. On top of that, their dividend has more than doubled in just the last 5 years. 

When a company shows that is has interest in increasing its dividend, (cash paid back to shareholders for holding shares.) it means they are dedicated to and care about their investors. 

Right now, the shares of Hormel aren’t exactly cheap. Hormel Foods (HRL) has a P/E ratio of 20.8. Which is the “cheapest” it’s been in 4 years. 

A basic, yet typical, way to measure how expensive a stock is, is by it’s P/E ratio. (Price/Earnings) You can compare most stocks to the current P/E ratio of the entire S&P for instance, which is currently around 24.6. So theoretically if a stock’s P/E is below 24.6, it could be considered cheap. 

Another reason I’ve added this pick to my watch list is the fact that it’s also  -6.00% below its price 52 months ago. It looks like this stock has found a bottom finally, but obviously only time will tell. No one ever knows when the bottom will be reached, but 

A third reason for keeping an eye on HRL, its long-term debt levels are low enough to be handled over the long term. Hormel only has $250 million in long term debt with over 1 billion in revenue per year, so unless a cataclysmic event occurs or people stop going to grocery stores, I expect this debt to be completely manageable. 

A forth reason, GIS (General Mills) saw a large drop after reports that consumers are shifting away from yogurts and cereals in search of “healthier” options. I believe that this uncertainty also hurt HRL as they have a strong focus on canned & pre-packaged foods. But, on the other side of the coin. Hormel has been aggressively acquiring smaller start-up type companies such as; Wholly Guacamole, Applegate deli meats, MuscleMilk, Skippy’s Peanut Butter and as of last year, Justin’s, an organic nut-butter company. The ability to acquire these companies all while maintaining healthy debt levels shows very good management at the helm of this ship and I expect it to be steered to higher highs in the next 2-5 years if it can maintain low debt and continue to acquire companies to build a wider moat and shift with new consumer trends. 

The current payout ratio for it’s dividend is at 41%, meaning it still has room to grow the dividend in the future without affecting much on their bottom line. 

Current Dividend Yield: 2.02%    Payout Ratio: 41%

 

*I do not currently own any shares of HRL.