Three Smart Money Dividend Companies: Johnson & Johnson (JNJ), Archer Daniels Midland Company (ADM), Chesapeake Energy Corporation (CHK)

Page 1 of 2

I’ve been developing my own Perfect Dividend Portfolio over the past 4 months, and I actually am quite pleased with how it has been going.

I still have two more companies to select, however, and I have been having a difficult time finding ones that meet my admittedly overly-strict criteria. Today I am looking at three companies that are being accumulated by the so-called smart money, to see if I agree with any of them.

In my examination, I review the companies on seven different criteria: yield, number of years paying and raising dividends, 5-year Dividend Growth Rate (DGR), 5-year projected Earnings Growth Rate (EGR), total return for the past twelve months, PE and payout ratio. I feel that this selection covers the past dividend-paying history, the potential future earnings growth, and the valuation of the company.

I constructed a rating system that awards points for each of the previous named criteria. A “perfect” score would be 28 points, with 4 points awarded in all seven categories.

The first company, which is a new addition to Warren Buffett’s portfolio, is Archer Daniels Midland Company (NYSE:ADM), a food processing company. Buffett reportedly bought into the company in December, and Jim Cramer recently called the stock a Buy.

The company is currently trading at approximately $32 and yields 2.3%. It has raised dividends every year for 38 years, its 5-year DGR is 8.5%, and it has returned 6.6% over the past twelve months.

Other metrics that I use when calculating a rating for a dividend company include the analysts’ 5-year annual growth estimate (10.0%), the company’s PE (15.6) and its dividend-payout ratio (50%).

Archer Daniels Midland Company (NYSE:ADM) scores a 15 on my ratings system, which is too low to make it into my portfolio. I like the company’s DGR and EGR, its payout ratio and PE are both reasonable, but its yield is too low for me.

The second company is Chesapeake Energy Corporation (NYSE:CHK), a natural gas company. I have several energy companies in my portfolio, but they are pipeline MLPs. Natural gas has been a good market, but Chesapeake has been a bad company to invest in.

It has a terribly scandalous recent history, but Mohnish Pabrai has now put 17% of his portfolio into Chesapeake, so obviously he thinks it’s a good investment.

The company is currently trading at approximately $21 and yields 1.6%. It has raised dividends every year for only 2 years, its 5-year DGR is 6.0%, and it has lost 11.6% over the past twelve months.

The analysts’ 5-year annual growth estimate is a staggering 45%, the company’s forward PE is 17.4 and its dividend-payout ratio is 23%.

I don’t even consider Chesapeake Energy Corporation (NYSE:CHK) a dividend company, but its forward growth estimate is intriguing. Maybe Mr. Pabrai will be proved right.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

Qihoo 360 Technology Co Ltd (QIHU), Actavis plc (ACT), Yahoo! Inc. (YHOO) Among 20 Long Ideas from Sohn Canada

The 10 Laziest Countries in the World

The 10 Most Polluted Countries in the World

The 10 Most Dangerous Cities in America 2014

The Top 10 Gold Producing Countries in the World

The 10 Tallest Buildings in the World

The 10 Richest Stand Up Comedians in the World

The 10 Fattest Countries in the World

The 5 Best Summer Jobs for Teens

The 10 Most Religious Countries in the World Keeping the Faith

The 10 Most Educated Countries in the World

The 10 Most Popular Cell Phones in the World

The 10 Drunkest Countries in the World

The 10 Most Expensive Private Schools in the World

The 10 Smallest Countries in the World

Walking Dead Season 5 Spoilers You’ll Wish You Didn’t Know

The 10 Poorest Countries in the World

The 10 Greenest Countries in the World

The Top 10 Countries with the Highest Population in the World

The 10 Most Visited Countries in the World

The Top 10 Star Wars Characters in the Iconic Series

The 10 Most Expensive Android Phones in the World

5 Reasons Why The Illuminati Is Real and a Threat to Society

The 6 Scariest Halloween Costumes Ever Screamed At

The 4 Biggest Hedge Fund Managers in the World Today

The 15 Most Densely Populated Countries in the World

The 10 Biggest Tea Drinking Countries in the World

Top 6 Ways to Improve Your Checkout Process and Close Sales

The 5 Most Profitable Online Businesses You Can Start Today

The 20 Most Profitable Hospitals in the US

The 5 Most Profitable Home Businesses to Start

The 7 Teams that Will Win the Stanley Cup in 2015

The Top 10 Most Expensive Digital Cameras to Snap Stunning Shots With

The 10 Highest Quality Fast Food Restaurants In America Today

The 8 Best Halloween Decorating Ideas to Spook Up Your House

10 Marvel Women that Should Get a Movie Right Now

The 20 Best Remixes of Popular Songs that Will Make You Forget the Originals

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

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 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!