Three dividend champions (25+ years of consecutive dividend raises) took a beating yesterday (7/22) after they announced results that didn’t meet expectations. Is this a buying opportunity? Let’s have a closer look at each one.
MCD – McDonalds profits slip with a 1% YoY drop in earnings. It also came in below analyst expectations. Main reasons include lower sales/revenues in US/Europe and Asia revenues increases below expectations. The stock fell to an intra-day low of $95.10 before recovering and closing at $96.27 (-1.31%) on Tuesday. This follows a drop of another 1+% on Monday. Overall the stock has dropped by more than 5% in the last month.
MCD has raised dividends for 38 consecutive years and with the current quarterly dividend of $0.81/share, the yield stands at about 3.36%. The stock is having a P/E of little over 17 against its 5 year average of 17.0. From that perspective, the stock is not overly expensive. Morningstar has a fair value of $105.00 for the stock and has rated it 4 stars.
I would rate the stock as a buy at this price and the stock has room to grow once MCD has addressed its needs. I just purchased MCD on 7/21/2014 (before the latest results) and I am still optimistic on the stock. I have more information on the stock here.
KO – Coca-Cola also reported results below expectations. EPS was $0.64 beat expectations by $0.01, but revenue went down by -1.4% YoY to 12.57B. Main reasons include declining revenue in North America. The stock closed at $41.19 on Tuesday down -2.85%. This is a 1 month low for the stock.
KO has increased dividends for 52 consecutive years and with the current quarterly dividend of $0.31/share, the yield stands at about 2.96%. The stock is having a P/E of about 22 which is higher than its 5 year average of 18.3. Morningstar has a fair value of $44.00 for the stock and has rated it 4 stars.
KO is on my list of stocks to initiate position in and looking to get in pretty soon.
KMB – Kimberly Clark, while not as popular as MCD or KO among dividend investors is still a dividend champion that has managed to increase dividends for 42 consecutive years. While revenue increased 1.3% YoY, it missed out on EPS compared to expectations. The company also narrowed its full year guidance. The stock took the most hit among the three dropping more than 3% closing at $108.84.
KMB has increased dividends for 42 consecutive years and with the current quarterly dividend of $0.84/share, the yield stands at about 3.08%. The stock is having a P/E of about 20 which is higher than its 5 year average of 16.9. Morningstar has a fair value of $94.00 for the stock and has rated it 2 stars.
I believe the stock is overvalued at this time and looking to wait a bit for the stock to correct a bit more. But the spin-off slated for this year might unlock more value onto the respective stocks.
Disclosure: Long of MCD. I plan to initiate positions in KO/KMB in the near future.
Image Courtesy: mcdonalds.com, coca-cola.com, kimberly-clark.com