E I Du Pont De Nemours And Co (DD), Monsanto Company (MON), Syngenta AG (ADR) (SYT): This Company Loves You…Should You Love It Back?

Page 1 of 2

E I Du Pont De Nemours And Co (NYSE:DD) CEO Ellen Kullman affirmed, “We love all our investors,” during a CNBC Squawk Box interview when asked about billionaire investor Nelson Peltz’s big stake in the company.

Although Peltz hasn’t confirmed his stake, CNBC’s Andrew Ross Sorkin said he had confirmed that Peltz was continuing to buy a large stake in the chemicals giant. Peltz, head of Trian Fund Management, reportedly wants the company to split off tje Performance Chemicals division. Kullman confirmed the company is already seeking to sell the division.

The stock is trading near 52-week highs, rising almost 5% since its second quarter results in July. E I Du Pont De Nemours And Co (NYSE:DD) offers a 3% yield, and several analysts prefer it as an agricultural play to Monsanto Company (NYSE:MON). Last week, UBS added it to its acronymic mouthful QGARP list (quality growth at a reasonable price) with a price target of $64.00.

E I Du Pont De Nemours And Co (NYSE:DD)

Break up and we’ll love you more

The market seems to love the idea of a sale, and short interest has been declining. Return on investment is at 18.8%, more than twice that of the industry, and higher than the company’s five-year average of 14.3%.

If, and this is a big if, the company can jettison the Performance Chemicals business, that would leave the agriculture segment contributing over 75% of revenue. E I Du Pont De Nemours And Co (NYSE:DD)’s estimated growth rate of over 13.99% for the rest of the fiscal year would be extremely profitable without the drag of performance chemicals. Gross margin is at 33.9%, higher than the industry average at 27.20%, and could expand dramatically. This segment also has competition from Huntsman and Dow Chemical.

DuPont operates in several divisions besides Performance Chemicals. The others are: Agriculture, Electronics and Communications, Industrial Biosciences, Nutrition and Health, Performance Materials, Safety and Protection, and Pharmaceuticals.

The company has already started sloughing off weaker divisions with the sale of Performance Coatings to the Carlyle Group for $5 billion. And E I Du Pont De Nemours And Co (NYSE:DD) is focusing more on its Chemical and Seed division with a recent 80% stake in Pannar Seed of South Africa. Aside from Agriculture, the only divisions that posted income growth in the first quarter were Performance Materials and Industrial Biosciences, both at 5%.

How much do ya’ love shareholders, DuPont?

The company consistently raises dividends and easily covers with a payout ratio of 36%. The dividend for 2010 and 2011 was $1.64, raised to $1.70 in 2012, and $1.76 for 2013. One would hope Peltz would agitate for a significant dividend hike after the sale of Performance Chemicals.

Since 2010, Monsanto Company (NYSE:MON) has raised its yield four times including a 14.7% increase (announced August 6). Monsanto is also a Dividend Aristocrat, having raised the dividend for 25 or more consecutive years. Assuming a E I Du Pont De Nemours And Co (NYSE:DD) divestment of Performance Chemicals, Monsanto Company (NYSE:MON) and Syngenta AG (ADR) (NYSE:SYT) would become its most direct competitors.

While E I Du Pont De Nemours And Co (NYSE:DD)’s price to sales isn’t bad at 1.47, you are paying more than the chemicals industry average of a $1.26 for a dollar’s worth of the company’s sales but less than Monsanto Company (NYSE:MON)’s 3.43 price to sales – higher than its agricultural product industry average of 2.35. You’ll pay $2.60 for $1.00 of Syngenta AG (ADR) (NYSE:SYT) sales. Jettisoning E I Du Pont De Nemours And Co (NYSE:DD)’s Performance Chemicals would have a DuPont price to sales at lower than the ag industry average

While Monsanto Company (NYSE:MON)’s yield may not be as high, its payout ratio at 31% is lower. It is also buying back $2 billion worth of shares over the next three years. DuPont announced last December it would buy back $1 billion worth of stock in 2013. DuPont has the lowest corporate governance risk rating with a shareholders rights of 1 (very good) according to Institutional Shareholder Services.

Page 1 of 2

Biotech Insider Alert - $6 Stock To Hit $40

$200 Million Dollar Healthcare Hedge Fund's #1 Best Idea Right Now

The best healthcare hedge fund out there right now is one of the largest shareholders in this biotech stock. The fund returned more than 20% in each of the last 2 years with a virtually fully hedged portfolio, and it's sending out a BUY signal on this biotech stock. Get your FREE REPORT today (retail value of $300)

This is a FREE report from Insider Monkey. Credit Card is NOT required.
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The World’s Most Famous Circuses

Best Hair Stylists

Most Popular NASCAR Drivers

The Best Romance Movies of all Time

The Most Wanted Drug Lords

The Oldest Money Managers

The Greatest Directors in the World

Largest Animals in the World

World’s Most Expensive Desserts

Best Selling Comic Books of All Time

A-list Actors who Sabotaged Their Career

Rappers With a College Degree

The Best Jazz Albums of all Time

The Most Influential Jazz Musicians

The World’s Most Famous Photographers

The Best Oscar-Winning Songs

Most Influential Choreographers Ever

Most Expensive Department Stores in the World

The Most Expensive Stolen Paintings in the World

The World’s Most Expensive Teas

Top Oscar Record Holders

The Most Expensive Flowers in the World

Countries With a Booming Film Industry

Most Expensive Cupcakes in the World

Uncommon European Escapes

The Most Stolen Artists in History

Best Travel Destinations in Australia

World’s Most Expensive Musical Instruments

World’s Most Famous Animals

Most Expensive Cakes in the World

Most Expensive Kosher Champagne in the World

Most Expensive Kosher Wine in the World

The Most Surprisingly Dark Fairy Tales

Most Popular Travel Destinations in Asia

The 10 Most Expensive Dresses Ever Worn to the Oscars

World’s Most Visited Art Museums

Best Countries for Photographers to Work in

Best Paid Jobs in the Film Industry

The Most Renowned Recovered Paintings Ever

Child Stars That Turned out Just Fine

Books That Were Banned in the Past Century

World’s Richest Dancers

Best Remedies against Bad Breath

Foods That Improve Your Skin Texture

Best-Selling Children’s Books of all Time

Foods That Boost Your Libido

Best-Selling Books of all Time

The Most Expensive Academy Awards Jewelry in History

Most Expensive Japanese Restaurant In New York City

The Best B-Boy Movies

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 129% in 2.5 years!! Wondering How?

Download a complete edition of our newsletter for free!