Tag Archives: NYSE:IBM

Warren Buffett’s Top Dividend Stocks Priced at a Value

Are you looking for top dividend stocks for your portfolio? Why not look at what the Oracle of Omaha holds and see which ones are priced at a value? Well, I’ve done the work for you already. They include American Express Company (NYSE:AXP) and International Business Machines Corp. (NYSE:IBM). I will outline why they’re good values for a dividend portfolio today.

Here are Warren Buffett’s top dividend stocks that are priced at a value, when I cross-referenced with a couple fundamental analysis sources.

Is American Express Company Your Dividend Stock?

American Express Company is Berkshire Hathaway’s fifth largest holding worth over $11.6 billion that equates to 15% ownership in the company.

Business Overview

American Express is a global services company. Its main products include charge and credit cards, and travel services that are enjoyed by consumers and businesses around the world. As of March 1, 2015, American Express brought in annual revenue of $34.3 billion and net income of $5.9 billion.

Valuation

At $77 per share, American Express is priced roughly at a multiple of 12.6 with estimated earnings growth of 13%. Using a multiple of 15, American Express shares would be worth roughly $94. This implies American Express is priced at a discount of 18%. This margin of safety is more conservative than Morningstar’s fair value estimation of $95.

American Express Company fundamental analysis graph Read More

Berkshire Hathaway’s Most Undervalued Dividend Stalwarts

Both Procter & Gamble and International Business Machines are experiencing multi-year transformations. It is exactly for that reason that both are trading at historically high yields, and patient investors can start dollar-cost averaging into these dividend stalwarts with at least 20 years of dividend growth history.

Introduction

On reviewing Berkshire Hathaway’s top 15 holdings listed in its 2014 letter to shareholders, I found out the two most undervalued companies are actually a couple of my core holdings. They are Procter & Gamble Co (NYSE:PG) and International Business Machines Corp (NYSE:IBM). They are cheap for a reason though. Both are experiencing multi-year transformations.

Procter & Gamble’s Transformation

Transformation is a slow process. Especially for a huge company such as P&G, it could take several years to unfold. Procter & Gamble intends to shed off roughly 100 non-core brands, over half of its existing brand portfolio, in an attempt to focus on its core brands, such as the 23 brands that generate over $1 billion in annual revenue.

For example, in July 2015, Procter & Gamble accepted an offer of $12.5 billion from Coty to merge 43 P&G products with Coty. This transaction is tax-efficient in nature, and P&G estimates the one-time gain to be from $5 to $7 billion depending on the final deal value when it closes.

Due to this transaction and the Duracell sale to Warren Buffett for around $4.7 billion, Procter & Gamble intends to return $70 billion to shareholders from fiscal year 2016 to 2019 in dividends and share retirement, while maintaining its current credit ratings.

You can learn more about the Coty transaction.

Procter & Gamble’s Valuation

In today’s market, it’s rare to find Morningstar rating a company 5 stars indicating extreme undervaluation. Well, Procter & Gamble gained that status.

Cross-checking with F.A.S.T. Graphs, Procter & Gamble is also undervalued based on the price-to-cash-flow ratio. The graph indicates the shares are at least 7% undervalued.

PG valuation graph

Procter & Gamble: A Dividend Stalwart of 59 Years

Around $70 per share, its yield of 3.77% is historically high for the company. The chart below shows the fiscal year-end yields, and the highest yield shown is 3.5%. Read More

Growth Has Finally Dawned On IBM As It Continues To Transform

I recently took another look at International Business Machines Corp. (NYSE:IBM). Some people thinks it’s done for as after it reached a high of $215 in 2013, it has since gone down to the $150 area and now it’s back up to the $170 area. Is IBM still a valid investment?

Here’s why I believe IBM is turning a new leaf with proof of growth.

Summary

  1. IBM is transforming its business, just like its many enterprise clients who want to extract value with new technologies such as the cloud, Big Data, analytics, social, and mobile.
  2. IBM is innovating, moving towards high value products and services, as well as developing open ecosystems and forming strategic partnerships with leading companies including Apple, Facebook, Twitter, SAP, and Tencent.
  3. Other than its Hybrid Cloud, IBM’s customizable POWER microprocessor, and Watson Analytics are also showing promising growth potential.
  4. The company is undervalued and at a high yield of 3%, its shares are attractive.

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