Nokia Is A Bargain Dividend Stock – NOK

What company manufactures the largest number of cell phones in the world? It’s not Apple, Research in Motion, Motorola, or Palm. The answer is Nokia. Nokia Communications (NOK) makes more mobile phones than any other device maker in the world. The telecommunications maker controls over one third of the mobile phone market selling its devices in North America, Latin America, Europe, Africa, Asia, and the Middle East.

Nokia is a Finnish company that has been around since 1865. The company employs over 123,000 individuals across the globe. The company has its hand in just about every area of the technology sector. Nokia manufactures and sells mobile devices, such as mobile phones, smartphones, and mobile computers. The company offers a wide array of services, applications, and content.

Last quarter Nokia saw its earnings drop 40% and the company has been losing market share to rivals. Although Nokia has seen its earnings drop over the past three years, the company is still an earnings giant. Nokia has consistently earned over $40 billion euro dollars in revenue each of the past five years. The company had $41 billion in revenue and an operating profit of $1.2 billion euro dollars last year alone. That’s a pretty good year during a global slowdown.

The company has a fantastic balance sheet with over $8.8 billion euro dollars in cash and just $4.4 billion in debt. The company has generated huge amounts of cash over the past few years. Nokia has been able to generate over $3 billion euro dollars in cash from operating activities each of the past 2 years.

The mobile phone market is an extremely competitive market. Apple and Google are the biggest threats to Nokia since both companies are aggressively going after the high end smartphone user. Nokia’s market share has dropped from 35% to 33% due to aggressive campaigns from its rivals. Even if the company continues to lose market share, the smartphone market is large enough for Nokia to create a nice niche for itself.

Shares of Nokia currently trade at $8.60 per share with the company projected to earn 72 cents per share for the current year. The current P/E for 2010 is 11.5, which is right in line with the industry average. Competitors Motorola and Alcatel-Lucent trade at significantly higher valuations. Nokia’s stock is currently yielding 4.7% which is an attractive yield. The current 40 cent payout is greater than last year’s EPS of 33 cents. The company was able to maintain the dividend due to the large amount of cash on its balance sheet. Fortunately for Nokia, earnings are on pace to more than double for the current year. The current year’s payout is projected to drop to 55% of EPS.

The stock appears to have bottomed out trading at levels not seen since the late 90’s. Nokia is a solid rebound play for value investors.

The Perfect Stock For The Defensive Investor

Proctor & Gamble is one of the oldest surviving companies in the United States. The company was founded by William Procter and James Gamble in 1873. There are only four companies larger than Proctor & Gamble in the United States. The company boasts about how its market cap is larger than the gross domestic product of nearly 200 countries. Today, the company services over 4 billion customers throughout the world.

The company netted over $13 billion dollars in net income last year alone. That surpasses the revenue of the majority of American companies. The company is an earnings giant grossing nearly $80 billion dollars in revenue last year. Proctor & Gamble has 22 brands that each generate over a billion dollars a year for the conglomerate. These brands include Gillette, Pringles, Duracell, Olay, Old Spice, Tide, Pampers, Head & Shoulders, Crest, and Dawn.

Proctor & Gamble is a recession proof stock because of the company’s huge array of defensive products. The company operates in the consumer goods industry. P& G is divided into the following segments: Household Care, Beauty Care, Health and Well Being. Proctor & Gamble manufactures detergents, deodorants, shampoos, soaps, lotions, razors, and more. All of these products are must owns. Customers buy these products during economic booms and troughs.

Shares currently trade at 15 times this year’s earnings and 13 times next year’s earnings estimates. This is in line with competitors Johnson & Johnson and Kimberly Clark. The company’s operating margins and profit margins are higher than most competitors. Only Johnson & Johnson has higher margins. Proctor & Gamble has a history of stable earnings and is a stock that investors run to during market drops. This is a low risk investment.

While other companies were cutting dividends over the past few years, Proctor & Gamble was increasing their dividend. P&G has increased its dividend for a remarkable 54 consecutive years. That’s no small feat at a time when stalwarts like General Electric and Bank of America were forced to cut their dividends. Proctor & Gamble raised its dividend 10% recently and has a 10 year annual dividend growth rate of 11%.

Right now investors are getting a 3.2% dividend for buying shares of Proctor & Gamble. This is only slightly above the historical dividend payout of 2.8%. The company will have no trouble covering its dividend with the payout being only 44% of earnings. With the company’s huge earnings power and solid free cash flow, Proctor & Gamble is one of the strongest dividend paying stocks in the market.

How to Enroll in a DRIP Program

A dividend reinvestment plan has the well-deserved acronym of DRIP. When an investor utilizes a DRIP, the dividends earned on their stock investment will periodically “drip” into their stock portfolio. Instead of receiving monthly or quarterly checks for their dividend payments, the funds are reinvested into the original stock. If the payment doesn’t cover an even number of stocks, which it rarely does, a fraction of a stock is purchased.

If the investor does not need the dividend payment to cover expenses, a DRIP program is a pain-free way to build a more robust stock portfolio over time. Each time dividends are reinvested, the investor will receive increasingly larger dividend payments that will purchase slightly more stock during the next cycle. Most investors will find that their return on investment (ROI) dramatically increases as this process compounds their investment. A DRIP strategy can be a smart way to prepare for retirement. With a little planning, some investors may find that their periodic DRIP payments are large enough to provide a healthy income after they quit working.

If one is offered, the company or fund that represents the investment should be able to provide information on how to establish a DRIP. When a DRIP is set up directly with the company, it may be completely free or offered for a nominal fee. This allows the investor to bypass stock brokers and expensive commissions. A few companies will even discount the stock price when it is purchased through their DRIP program.

Once it is determined that the dividend stock’s parent company offers a DRIP program, the investor should verify that they are the shareholder of record. Sometimes, stock brokers will record their own name on stocks that they manage for their customers. If this is the case, instruct them to transfer the registration. The next step is to contact the company directly to request a DRIP application and a prospectus. If the stock’s parent company does not offer a DRIP program, many stock brokers can set up a similar plan to reinvest your dividend payments.

Applying for a DRIP plan is simple and easy, but the investor should be aware of the details of the company’s specific plan. Most companies do not charge anything, but there is a trend toward implementing DRIP plan fees. It is usually small, but it must be compared against the dividend payment to ensure that it doesn’t consume a high percentage of the funds. For example, a small portfolio that only receives a dividend payment of $10 each month would not be a good choice to include in a DRIP plan that charges a $5 fee for each monthly reinvestment

Big GE And It’s Big Dividend

One of America’s oldest and most prestigious companies has become an accidental high yielder. General Electric (GE) was founded by Thomas Edison back in 1892. The company has been a fixture on the Dow Jones Industrial Average since 1896. Today, the industrial conglomerate is a $165 billion dollar company with nearly $157 billion dollars in revenue.

GE has over 300,000 employees and is the second largest company in the United States. General Electric has its hand in just about every area of the U.S. economy. It is one of the most diversified companies in the world. General Electric owns GE Capital, GE Energy, GE Technology Infrastructure, GE Home & Business Solutions, and NBC Universal.

Despite its iconic status, the stock has been a terrible investment since CEO Jeff Immelt took over. The company became too big and bloated suffering through its worst performance ever. General Electric shares have declined 55% over the past 5 years. General Electric even cut its dividend last year for the first time since 1938. The dividend cut was prompted by a move to conserve cash and maintain its AAA credit rating. The company lost its AAA credit rating anyway and things were darkest at GE in the spring of 2009.

But things finally appear to be changing at GE. General Electric is seeking to become a much leaner company. The company has been making moves to divest itself of its industrial and consumer businesses over the past two years. The company is turning its focus towards energy and healthcare. GE is still awaiting regulatory approval of its sale of NBC Universal to Comcast Corporation. GE has also been cutting the size of GE Capital by selling off assets and reducing the unit’s leverage. The financial arm of GE almost brought about the company’s collapse during the crash of 2009.

GE has done an excellent job of writing down the bad loans in it portfolio and increasing its cash reserves. The company expects to have a $25 billion dollar war chest on hand by the end of the year. GE recently increased its dividend last month to 48 cents per share and the company is so flush with cash that it is re-instituting its $15 billion dollar share buyback campaign.

GE is often compared with other financial companies due to the size of GE Capital. However, the market appears to be making a big mistake. GE is more than your typical finance company. The company has great growth opportunities domestically and internationally in the energy, healthcare, and industrial sectors. The conglomerate is investing heavily in renewable resources, turbine technology, appliances, and aircraft engines.

The stock now sells for $15 per share and is currently yielding 3.1%. The stock currently trades at 13.5 times this year’s earnings of $1.11. The company’s earnings declined 13.5% over the past 5 years. The good news is that earnings are expected to grow 10.5% over the next 5 years. Dividend Investors are getting a chance to buy an American classic at a bargain price.

General Mills Dividend – GIS

General Mills is a well known fixture in American business. The company is the sixth largest food manufacturer in the world and has been around since 1866. General Mills is responsible for the Cheerios, Pillsbury, Betty Crocker, Haagen-Daaz, Hamburger Helper, Bisquick, Green Giant, and Yoplait branda. That’s not even all of their brands! The company makes over 100 of the leading brands in the United States.

The company’s sales have been stable averaging over $14 billion dollars in sales the last 2 years. General Mills generated over $1 billion dollars in net income over the last three years. Sales have grown at a 9.6% clip the last 5 years. The company is on pace to go over $15 billion dollars in sales this year and $15.7 billion for next year. Earnings per share are projected to come in at $2.48 for this year and $2.71 for next year.

General Mills operates in a recession proof industry. People have to eat regardless of whether the economy is good or bad which is a huge competitive advantage in these turbulent economic times. Investors flock to defensive industries like these during market swoons. General Mills chief competitor is Kellogg Company in the breakfast goods and cereals industry. These two companies dominate the market. They are comparable in size, revenue, and net income. Kraft and ConAgra Foods are competitors in the baked goods industry.

General Mills is a highly levered company with $6.6 billion in debt and under $660 million in cash. The large amount of debt should not be a problem for General Mills however since the company generated over $2.1 billion in free cash flow last year. General Mills has more than enough money to service its debt. The company has a healthy operating margin of 17% and a profit margin of 10%.

Shares are currently selling for $33.50. The stock has been trading between $28.55 and $38.98 for the year. Shares currently trade at a price to earnings ratio of 13.5 times this year’s earnings and 12.2 times next year’s earnings. Both of these P/E’s are below the industry average of 14.7.

General Mills is an attractive buy due to its low valuation and solid dividend yield. The company is paying a $1.12 dividend to shareholders, which is a yield of 3.3%. This is higher than the 5 year historical average yield of 2.7%. The current dividend payout ratio is 45% which is slightly higher than the historical payout rate of 43%.

General Mills is a good stock for fixed income investors looking to add some income to their portfolio and value investors looking for a bargain stock. Investors should feel comfortable buying shares in the low $30’s.

Getting Paid With Paychex

You have almost certainly heard of Paychex (NASDAQ: PAYX). Paychex is the second largest payroll processing company in the United States. Paychex offers business process solutions to companies looking to outsource many human resource department functions. The company provides payroll functions, tax payment services, retirement benefits, human resource services, and health insurance. It’s a one stop shop for both small businesses and large companies. Paychex grew from a small company with a few employees into a Fortune 500 company with over 100 locations. Paychex now services over half a million business customers in the United States alone.

Paychex is an earnings juggernaut producing over $2 billion dollars in revenue each of the past three years. Paychex’s growth was affected by the struggling economy over the past few years. The payroll processing industry has been affected by the high unemployment rate and the bankruptcy of many businesses. Some businesses have scaled back on benefits in attempt at cost reduction. All of these factors lead to lower check volumes. The biggest competitor in the industry is ADP. ADP is the largest payroll processor in the industry with revenues over $8.8 billion dollars.

Despite all of these issues, Paychex still managed to have profitable sales growth. Growth came in at 3.2%. Paychex should benefit from an improving economic outlook. The unemployment rate may still be high but it is decreasing. Continued job creation will lead to more clients seeking payroll services. Paychex stands to benefit from any recovery in the job market and its bottom line should increase as well.

Paychex has been able to withstand the poor economy due to its great balance sheet. The company’s balance sheet is one of the best in the industry. Paychex has $366 million dollars and cash and no long term debt obligations. The payroll company generated $610 million dollars in free cash flow this year. Paychex is able to generate interest income in the mid teens off of money held for clients.

Shares currently trade just south of $26. Analysts are looking for earnings of $1.37 this year and $1.48 next year. That would place a price to earnings ratio of 19 on the stock for this year and 17.5 for next year. Both are higher than the industry average. Earnings are expected to rebound with the company growing at an 11% rate over the next 5 years. The earnings growth drivers will be human resource services and investment income. Payroll processing growth is expected to be flat for the near future.

Paychex currently has one of the best yields in the market for a blue chip company. The stock is yielding 4.77%. The dividend payout rate is alarmingly high at 83% of next yea’s earnings. However, the company should be able to sustain it due to the company’s balance sheet and expected earnings growth. Shares may not be cheap based on its P/E and book value but income seeking investors may find the shares worth buying for the juicy dividend.

What do you think about Paychex?