Dividend Comparison – Telecom

Telecom companies have become an essential utility over the past few years. Just like essential services such as water and electricity, communication has become the next most important utility for every person. A lot of investors get bogged down with the gadget markers since there is a new shiny toy to talk about every few weeks or months. The arguments between which device is the coolest goes back and forth between Google, Apple and Samsung. The actual winners that provide us with the link to the Internet, the telecom giants, are the real winners no matter which gadget an end-user loves and adores. These telecom providers can be great investments for everyone and in this article, we will compare the dividends of the companies. These companies are cash cows and most of them are mature companies paying out hefty dividends.

US Market

I have filtered telecom service providers in the US which payout dividends on a regular basis (this leaves out some players such as T-Mobil, Sprint etc) and larger than $2B market cap.

Company Name Ticker Quote P/E Yield Payout Ratio 5-yr DGR
CenturyLink Inc CTL $36.27 25.78 5.96% 156.9% 23.03%
Frontier Comm Corp FTR $4.10 26.19 9.76% 250% -16.74%
AT&T Inc T $35.88 28.01 5.02% 138% 2.85%
Verizon Comm Inc VZ $50.28 126.51 4.1% 511.3% 3.67%
Windstream Corp WIN $8.07 30.10 12.39% 270.3% 0%

Canadian Market

With the news of Verizon (VZ) potentially entering the Canadian market, most of the wireless providers had their stock values drop last month. Some of these may have been oversold and potentially at an attractive price to pick up.

Company Name Ticker Quote P/E Yield Payout Ratio 5-yr DGR
BCE Inc BCE $43.82 13.63 5.32% 72% 16%
Rogers Comm Inc RCI.B $42.06 12.49 4.14% 51% 17.22%
Telus Corp T $31.82 15.67 4.27% 67% 8.3%
Shaw Comm Inc SRJ.B $25.50 15.21 4.00% 64% 7.45%

My Thoughts

The US telecom giants have a comical payout ratios and very high P/E ratios. The dividend payouts are simply not sustainable and almost beg for the stock to be shorted. I have decided to stay away from these stocks.

The Canadian providers seem more stable and have a decent payout. The selloff has definitely made them attractive, but if Verizon does enter the market, it means a drop in the market share for each of these. Shaw Communications has been the most resilient of the lot since it is not just a wireless provider and has its business diversified into cable, satellite and programming content. I will be keeping a close eye on the Canadian providers over the next few days and potentially make a move to pick some up.

Disclosure: None

Disclaimer: The information provided here is for educational purposes only. All opinions here are my personal opinions and should not be taken as financial advice. I am not qualified to be a financial advisor. Always consult with your financial advisor before investing in any of the companies mentioned on this blog.

Dividend Comparison – Pharmaceuticals

The pharmaceutical industry is one of the most profitable industries where they have a huge margin on their products. The figure below is taken from Jeff Gundlach’s What in the World is Going On? presentation from Jun 4, showing the relative profitability between various industries.

Profitability by industry

I hold some of my equity in mutual funds which I am planning on selling in the near future. The mutual fund is a globally diversified healthcare fund, which holds equities in medical equipment and pharmaceuticals. Once I sell the mutual fund, I intend to pick up shares of individual companies in the medical equipment and the pharmaceutical industry. This post of dividend comparison gives an overview of the pharmaceutical industry.

Withholding Tax

The foreign company ADRs withhold a tax rate depending on the country of origin. For each of the entries below, I have added a country listing and the withholding tax rate associated. The number in the column indicates the withholding tax rate if the security is held in a RRSP registered account. Note that the withholding tax is zero for all US and UK companies due to the tax treaties between those countries and Canada. The number in the brackets is the withholding tax rate if the security is held in a TFSA or other non-registered accounts.

Drug Manufacturers – Major (Big Pharma)

The following companies are the Big Pharma drug manufacturers with a market cap of $2B+. The list excludes one other major manufacturer (Roche Holdings AG) – excluded due to the fact that it trades in the OTC market.

Company Name Ticker Quote P/E Yield Payout Ratio 5-yr DGR Country Withholding Tax
AbbVie ABBV $43.91 12.95 3.64% 59% USA 0% (15%)
AstraZeneca AZN $48.94 10.83 5.72% 61.9% 8.41% UK 0% (15%)
Bristol-Myers Squibb BMY $44.86 50.98 3.12% 156.8% 2.81% USA 0% (15%)
GlaxoSmithKline GSK $52.29 21.00 4.49% 66.5% 1.55% UK 0% (15%)
Johnson & Johnson JNJ $89.24 24.25 2.96% 64.7% 7.87% USA 0% (15%)
Eli Lilly & Co LLY $51.42 12.33 3.81% 47% 1.83% USA 0% (15%)
Merck & Co MRK $47.96 24.47 3.59% 84.9% 2.38% USA 0% (15%)
Novartis AG NVS $72.30 18.49 3.36% 58.1% 9.56% Switzerland 15% (35%)
Novo Nordisk NVO $161.56 22.69 1.97% 31% 27.26% Denmark 15% (28%)
Pfizer PFE $28.44 20.17 3.38% 38.5% -5.49% USA 0% (15%)
Sanofi SA SNY $50.99 25.50 3.52% 88.3% 1.89% France 15% (25%)

Drug Manufacturers – Other

The pharmaceutical companies listed here are $2B+ drug manufacturers classified as Other. They are either a specialty or generic drug manufacturers.
Company Name Ticker Quote P/E Yield Payout Ratio 5-yr DGR Country Withholding Tax
Allergan Inc AGN $89.32 23.88 0.22% 4.3% 0% USA 0% (15%)
Dr. Reddy Labs RDY $37.49 22.86 0.71% 15.2% 28.03% India 25%
Teva Pharmaceuticals TEVA $38.77 19.39 2.91% 56.1% 20.1% Israel 15% (20%)

My Thoughts

Some of the Big Pharma like BMY ┬áhave their payout ratios completely out of whack and are currently very expensive at a P/E ratio of 50.98. Staying away from that is a no-brainer as a dividend cut is more probable than not. There are some gems in the Big Pharma industry which are attractively valued such as AZN and NVS, and have a decent 5-yr DGR. However, there are few more considerations that need to be accounted for – including the withholding tax rate. Past performance does not guarantee future trends as each company’s drug portfolio needs to be considered. How many profitable drugs are going off patent in the near future resulting in loss in revenue? If there is a blockbuster drug coming off-patent, how much was it contributing towards the previous year’s revenue? How many new drugs are on their way? Pre-clinical vs. clinical trial stage of the drugs etc.

Disclosure: My healthcare mutual fund holds various big pharma stocks. I do not own any individual stock.

Image source: Jeff Gundlach’s What in the World is Going On? presentation from Jun 4, 2013.

Disclaimer: The information provided here is for educational purposes only. All opinions here are my personal opinions and should not be taken as financial advice. I am not qualified to be a financial advisor. Always consult with your financial advisor before investing in any of the companies mentioned on this blog.

Dividend Comparison – Financial Sector

Hey all! I decided to review my holdings in the financial sector and compare them to the rest of the competitors in the sector. The dividend comparisons as listed below gives me a wide picture of the relative value of each company. I use this as a starting point to find value in the sector and drill down from there to find the one to invest in.

US banks

To start off, comparison in the US financial sector has some very wide ranging numbers due to the 2008 crisis. Dividend yields range from 0.08 to 2.8% and there are some dismal numbers when you look at the dividend growth rates over the past 5 years.

Company Name Ticker Quote P/E Yield Payout Ratio 5-yr DGR
Bank of America BAC $13.28 42.67 0.30% 13% -56.47%
Wells Fargo WFC $42.83 12.13 2.80% 26% -4.40%
JPMorgan Chase JPM $54.70 9.77 2.78% 21% -3.38%
Citigroup C $49.52 17.80 0.08% 1% -70.26%
US Bancorp USB $37.05 12.80 2.48% 27% -13.42%
PNC Financial PNC $76.35 13.57 2.31% 28% -8.45%

Canadian banks

Canadian banks look much healthier with most of them on par with each other. All banks have a healthy yield north of 3.5% and all payout ratios in their 40s.

Company Name Ticker Quote P/E Yield Payout Ratio 5-yr DGR
Bank of Montreal BMO $62.02 10.41 4.77% 48% 0.71%
The Bank of Nova Scotia BNS $55.56 10.39 4.32% 43% 4.47%
CIBC CM $74.35 9.24 5.16% 46% 1.67%
National Bank NA $74.41 8.62 4.68% 41% 6.18%
Royal Bank of Canada RY $61.16 11.44 4.12% 45% 4.13%
Toronto Dominion TD $84.19 11.88 3.85% 43% 6.38%

My portfolio holdings of WFC, BNS and FIE.A (a Canadian Financial ETF) have performed well and am happy with the state of affairs. I am considering adding some more financial sector stocks sometime in the future depending on a few things including – opportunities (if and when there is a pullback), rebalancing my portfolio etc. My current weighting in the financial sector is about 10% and am considering some rebalancing at the end of the year.

Disclosure: I own WFC, BNS, FIE.A.

Disclaimer: The information provided here is for educational purposes only. All opinions here are my personal opinions and should not be taken as financial advice. I am not qualified to be a financial advisor. Always consult with your financial advisor before investing in any of the companies mentioned on this blog.

Dividend Comparison – Energy Sector

Energy (oil and natural gas) sector can be a very rewarding holding and should definitely be a part of every portfolio. Energy companies are some of the highest revenue companies in the world. A majority of them pay a healthy dividend and also manage to have a decent dividend growth rate (DGR). Following is a list of some of the largest energy companies with some of their key statistics as of Jul 2013.

Company Name Ticker Quote P/E Yield Payout Ratio 5-yr DGR
BP plc BP $40.78 5.84 5.14% 29% -6.39%
Chevron CVX $119.63 9.04 3.35% 27% 9.13%
ConocoPhillips COP $61.81 10.54 4.27% 43% 8.45%
Husky Energy HSE $27.62 13.86 4.34% 60% -1.74%
PetroChina PTR $112.55 11.9 4.02% 45% -3.91%
Royal Dutch Shell RDS.B $65.48 7.89 5.49% 30% 3.29%
StatOil ASA STO $20.33 6.56 5.7% 27% -7.19%
Suncor Energy SU $29.26 19.75 2.59% 34% 24.16%
Total SA TOT $47.88 9.86 6.33% 51% -0.7%
Exxon Mobil XOM $90.70 9.25 2.78% 23% 10.04%

My thoughts on Husky Energy

My portfolio holding of Husky Energy (HSE) has been paying dividends throughout my holding period (last couple of years), but I have not seen any increases in the dividend yield/payout. Moreover, the payout ratio is becoming dangerously high – currently at 60%. Oil and gas companies are capital intensive where they need to keep a lot of reserves for exploration, production, distribution etc. I am considering selling my position in HSE and picking up something else in the energy sector. I have CVX, COP and SU shortlisted. What do you think?

Disclosure: I own HSE.

Disclaimer: The information provided here is for educational purposes only. All opinions here are my personal opinions and should not be taken as financial advice. I am not qualified to be a financial advisor. Always consult with your financial advisor before investing in any of the companies mentioned on this blog.